Chainalysis Sues U.S. Over $94.6M ICE Contract

Chainalysis has filed a lawsuit in federal court challenging a $94.6 million contract that U.S. Immigration and Customs Enforcement awarded to TRM Labs. The complaint asks a judge to set aside the award and halt performance under the contract.

The company says the contract is intended to provide blockchain analysis and investigative tools for ICE’s cryptocurrency-related enforcement work and covers a multi-year period. Chainalysis alleges the agency used a procurement process that did not comply with applicable contracting rules and failed to properly evaluate offerors.

The complaint contends ICE misapplied evaluation criteria and ignored documents that Chainalysis says demonstrate its technical capabilities and prior performance. Chainalysis asked the court to review the award record and either require the agency to re-evaluate proposals or to re-solicit the work.

Chainalysis and TRM Labs both sell software and services that trace cryptocurrency transactions for law enforcement and financial institutions. Chainalysis, founded in 2014, has supplied U.S. and international agencies. TRM Labs is a newer competitor that has won several government and private-sector contracts in recent years.

Representatives for TRM Labs and ICE did not respond to requests for comment. Procurement lawyers note that bid protests can lead courts to suspend contract performance while they review whether an agency followed procurement rules. Courts sometimes order agencies to re-run evaluations or reopen competition when the process is found flawed.

Federal agencies, including the Department of Homeland Security and the Department of Justice, have increased their use of crypto-tracing tools as cryptocurrencies have been linked to fraud, ransomware, sanctions evasion and other crimes. Vendors offer transaction-graphing tools, proprietary data sets and investigative services that aim to connect wallet addresses to real-world entities.

Past procurements in the sector have drawn scrutiny over evaluation methods, data practices and potential privacy concerns. The case will proceed through the federal court process, where judges will review whether the agency’s decisions were arbitrary, capricious or contrary to law. Remedies could include re-evaluation of proposals, cancellation of the award or other orders from the court.