eXch had their own liquidity, just because they let the hackers use their exchange, does not mean the seized funds belong to the Bybit exchange or the victims. I don't believe eXch ever froze them, did they?
Given that it's the goverment, they won't have any issues selling it OTC or through an exchange whether they're tainted or not.
Yes but eXch funds where mainly accumulated through fees and i believe that was seized but if you look at blockchair they call it high risk funds:
https://blockchair.com/bitcoin/address/bc1qcatv4gxq24z8hwt67sftjlnlm6dxnk04saz5zwSo you mean Govt can do anything, no risk no AML ?