US Prisoner Allegedly Drained $290K From Forfeited Kraken Account

The earlier conviction also included a restitution order of $2,642,297.43. The new charges carry a maximum of 25 years, to be served consecutively to the 111-month term he is already serving.

Kraken froze the account after the original forfeiture order. Prosecutors allege Iossifov and his associates regained access and transferred funds over roughly 11 months without detection. The mechanics of that access are not detailed in the charging document. Whether through compromised credentials, social engineering, or a flaw in Kraken's compliance workflow remains unclear.

The case tests how well an exchange can enforce a court order against a determined account holder. For custody clients, the risk is not limited to Kraken. Any exchange holding assets subject to forfeiture or litigation must maintain a process that survives active resistance. Three of the DOJ's cases against crypto firms in the past year have involved seizure orders that exchange compliance teams said were properly executed but still circumvented, according to two former federal prosecutors who spoke on condition of anonymity because they were not authorized to comment on active investigations.

The investigation was led by the U.S. Secret Service, with support from the DOJ's Office of International Affairs. Iossifov has not entered a plea to the new charges. The original fraud victims are still owed more than $2.6 million in restitution. At current prices, the $290,000 Iossifov allegedly moved represents just over 2.8 BTC.