Some early crypto investors struck it rich beyond their wildest dreams, allowing them to retire early, buy yachts, and wax philosophical on Twitter about why the rest of us mere Index Fund investors are suckers. But for every Crypto Bro driving a Lamborghini and partying with super-models, there are probably thousands of others who did just well enough to buy themselves a headache.

I guess Notorious had it right all along: “mo’ money, mo’ problems.” Those crypto investors who fall somewhere in the vast middle – between destitute and obscenely rich – have this past year been forced to contend with a newly aggressive IRS, wild swings in the Crypto market, and a series of successful hacking thefts. And that’s assuming they didn’t have the great misfortune of investing in FTX.

But perhaps no sub-group of early crypto investors have faced a bigger headache than those who didn’t make enough to retire early and who require a security clearance to maintain their day job in the meantime. As a result of obscure 2021 Department of Defense guidance, crypto investors with a DoD clearance are now required to self-report to security officials ownership of foreign state-backed, hosted, or managed cryptocurrency and ownership of cryptocurrency wallets hosted by foreign exchanges.[1] Depending on the values involved, some clearance holders have been “advised” (i.e., instructed) by security officials to sell their foreign holdings and repatriate the money to a U.S.-based exchange, even if that meant taking a loss. Suffice it to say, these folks were not happy campers.

I’m unaware of any similar guidance for non-DoD clearance holders, but it is possible that other agency-specific guidance exists. When in doubt, ask your security manager. Regardless, all clearance holders should be aware that unexplained affluence is one of the potentially disqualifying conditions outlined in the National Adjudicative Guidelines for Security Clearances.

Up until a couple years ago, this was never really an issue I encountered in my law practice. On the rare occasion that a clearance holder came into significant funds, it was something like an inheritance or a legal settlement that came with an easily verifiable paper trail. Early crypto – a time when taxes, regulations, and general record-keeping were apparently an afterthought at best – has completely changed the game. Now, years later, questions about unexplained affluence pose a very real problem for some early cleared crypto investors, especially those who are required to file financial disclosures.

The good news is that early Crypto investors who did play by the rules when no one was watching and kept a paper trail have little to worry about. Short of asking you to repatriate funds from foreign exchanges to U.S-based ones, there isn’t much the government is likely to do with explainable crypto affluence besides record the pertinent details.

If this sounds like you, continue to keep good records, don’t try to do your taxes yourself, and get used to the idea of extra scrutiny. If, on the other hand, your situation is more, shall we say, complicated, it may be past time for an intervention and aggressive financial house-cleaning by a tax attorney or Certified Public Accountant. That may not entirely eliminate the risk of security clearance problems, but it can help mitigate them if done before the government makes it an issue.


This article is intended as general information only and should not be construed as legal advice. Although the information is believed to be accurate as of the publication date, no guarantee or warranty is offered or implied. Laws and government policies are subject to change, and the information provided herein may not provide a complete or current analysis of the topic or other pertinent considerations. Consult an attorney regarding your specific situation. 


[1] No reporting is required if the covered individual holds cryptocurrency, but is NOT aware that any such holdings are backed, hosted, or managed by a foreign state, or that a cryptocurrency wallet is hosted by a foreign exchange. Similarly, no reporting is required if the covered individual’s investments in cryptocurrency are held in a widely diversified fund (e.g., index funds), unless the investment instrument is entirely composed of holdings in cryptocurrency that is backed, hosted, or managed by a foreign state.

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Sean M. Bigley retired from the practice of law in 2023, after a decade representing clients in the security clearance process. He was previously an investigator for the Defense Counterintelligence and Security Agency (then-U.S. Office of Personnel Management) and served from 2020-2024 as a presidentially-appointed member of the National Security Education Board. For security clearance assistance, readers may wish to consider Attorney John Berry, who is available to advise and represent clients in all phases of the security clearance process, including pre-application counseling, denials, revocations, and appeals. Mr. Berry can be found at