Your scenarios smells wrong to me. Why would anyone pay USD for these seized BTC, then turn around immediately and sell them for USD again? The government is

Your scenarios smells wrong to me. Why would anyone pay USD for these seized BTC, then turn around immediately and sell them for USD again? The government is the party dumping BTC on the market. The buyer presumably intends to profit. They would profit by holding until the price goes up, and selling into the market at rates that don't dominate the marketplace.