[scohesc]

I'm fairly ignorant of the situation but from what I understand, wasn't the primary reason for these wallets being seized was because the wallets were on exchanges which need to follow federal crypto/banking rules and regulations?

If the people who had their wallets seized kept them off exchange, or sent their coins to an off-exchange wallet, could this not have happened?

[Arnt]

Indeed, but it's not a solution, just a choice of what problem to have.

This is a classic problem of many a swiss bank account, "I have illicit money there and want to spend it here but the state detects transfers across the border". The border may be between countries, between legal entities, between currencies, or the border between a saleable asset and legal tender.

As long as you don't transfer the money/asset to the place where you want to spend it, the state may not detect what you have, but you get no benefit from your money either. So you get to choose which problem you have: Will you lack money because it's inaccessible to you, or because the state confiscates it?

[hndamien]

This is only partially true. Some were identified on chain and they knew the custodian (person and not exchange). The said if it moved, there would be legal consequences, so it was effectively frozen, but not technically.