The Tax Times: IRS Levy Trumps Bid to Recover Seized Bitcoin

A recent Colorado federal district court decision underscores a critical point for taxpayers with seized digital assets: once the IRS levies on the property to satisfy assessed tax, a motion for return of property under the criminal rules is effectively dead on arrival.

In Weeks v. United States, 2026 WL 2263139 (D. Colo. 8/6/2026), the court denied a taxpayer’s request for the return of approximately 8.7 bitcoin seized in an IRS Criminal Investigation search, holding that a later IRS tax levy on those same assets cut off his claim.

Background: Bitcoin Seized, Then Indicted

· IRS Criminal Investigation agents seized 8.7 bitcoin from Jobadiah Sinclair Weeks during a December 10, 2019 search of his Arvada, Colorado residence.

· Ten days later, the government indicted Weeks (in a New Jersey case) for conspiracy to commit wire fraud and conspiracy to offer or sell unregistered securities.

· In March 2026, Weeks moved for return of the bitcoin under Fed. R. Crim. P. 41(g), arguing:

o The indictment contained only boilerplate forfeiture language and did not specifically list the bitcoin, and

o An AUSA had allegedly told him his “personal property” would be returned (the email did not mention bitcoin).

· Weeks also asked the court to order a sworn accounting and reconciliation of all seized digital assets.

Weeks’ position was simple: because the indictment did not specifically forfeit the bitcoin, he was entitled to have it back.

Rule 41(g): An Equitable Safety Valve, Not a Back Door

Judge Philip A. Brimmer began by emphasizing that Rule 41(g) is an equitable remedy, not an automatic right. Citing United States v. Bacon, 900 F.3d 1234 (10th Cir.), the court reiterated that a movant must show:

· Irreparable harm, and

· No adequate remedy at law.

The Tenth Circuit has long characterized the court’s exercise of jurisdiction under Rule 41 (and its predecessor, Rule 41(e)) as one that should be undertaken with “caution and restraint,” per Matter of Search of Kitty’s E., 905 F.2d 1367 (10th Cir.).

In practice, this makes Rule 41(g) a narrow, discretionary safety valve, especially once other statutory regimes—like the tax levy provisions—come into play.

IRS Levy Changes Everything

The key fact was what happened after the seizure:

· The IRS served a notice of levy on the FBI, which was still holding the bitcoin, to collect Weeks’ unpaid federal income taxes under IRC § 6331(a).

· Section 6331 authorizes the Service to levy upon “all property and rights to property” of a taxpayer who neglects or refuses to pay an assessed tax.

Judge Brimmer relied on a consistent line of authority holding that a valid IRS levy forecloses relief under Rule 41(g):

· United States v. Kahre, 737 F.3d 554 (9th Cir. 2013): Rule 41 offers no relief when seized funds have been applied to tax liabilities pursuant to a notice of levy.

· United States v. Fitzen, 80 F.3d 387 (9th Cir. 1996): An IRS tax levy defeats a Rule 41(e) motion (the predecessor to Rule 41(g)).

Applying those decisions, the court held that once the IRS properly levied the bitcoin, Weeks no longer had a viable claim to have the property returned under Rule 41(g). Any challenge would need to proceed, if at all, through tax-specific remedies (e.g., contesting the underlying assessment, wrongful levy actions, or refund routes), not via a criminal procedural motion.

No Accounting Remedy Under Rule 41(g)

Weeks also asked the court to compel an accounting and reconciliation of all seized digital assets. The court rejected that request as beyond the scope of Rule 41(g), citing United States v. Riccardi, 857 F. App’x 472 (10th Cir. 2021), which limits Rule 41(g) relief to the return of property.

With no viable Rule 41(g) claim and no authority to order ancillary relief, the court denied the motion and closed the case.

Practical Takeaways for Taxpayers and Advisers

· Timing matters: Once the IRS levies on seized assets—even crypto held by another agency—the taxpayer’s remedy shifts out of the criminal rules and into the tax collection framework.

· Rule 41(g) is not a collection defense: It cannot be used to unwind a levy or reroute the IRS’s application of seized assets to tax liabilities.

· Crypto is just “property” for levy purposes: This case confirms what many practitioners assumed—digital assets held by federal agencies are fully subject to IRC § 6331 levy.

· Use the right forum: Challenges to the validity of the assessment, the levy, or the IRS’s collection actions belong in the Tax Court (pre-payment), district court (refund or wrongful levy), or through CDP and administrative channels—not Rule 41(g).

For practitioners advising clients whose crypto or other assets have been seized in a criminal investigation, this case is a reminder to coordinate early with both criminal counsel and tax counsel. If there is an existing or looming tax assessment, expect the IRS to use its levy power, and plan your strategy accordingly.

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