I have no idea about the various comments on that issue. Many of them are nonsensical. But the issue of it being a third party site collecting the data is the whole point. Anyone can scrape the Bitcoin blockchain and to various degrees spy on the p2p. That information can and will be used in various ways and even 100% innocent people will get hurt by it. That is how mass surveillance (and big data generally) works. False positives are rampant.

The best defense against this is to deny the data in the first place.

EDIT: clarify mass surveillance as opposed to just surveillance

if you are not bored or if you do

then have a look:

http://www.coindesk.com/chainalysis-ceo-denies-launching-sybil-attack-on-bitcoin-network/

What is more interesting is how little of substance has been done in the significant time period since that incident. A disclaimer? Really?

I'm not sure fault is the right word. Yes they apparently got it wrong (if OP on the issue is to be believed and who knows), but their job is to investigate these things based on often-unreliable information. The problem isn't really that they do that, it is that Bitcoin creates so such an enormous body of unreliable and dangerous information people may be reluctant to use it at all. This doesn't even need to involve law enforcement, at least not directly. As I said earlier, Coinbase has become much less useful to me since it has become apparent how they investigate blockchain taint meaning even innocent uses can put you under a cloud of suspicion. It makes me want to have nothing to do with it at all.

I am assuming, and I may be incorrect, that were a dealing with a jurisdiction where probable cause or something very similar is needed for before a law enforcement agency can do what was described in the OP, which was a lot more than merely investigate. Yes Bitcoin has serious shortcomings when it comes to coin taint and Coinbase is adding to the problem in a big way; however this does not absolve the law enforcement agency involved if they needed probable cause or something very similar.  

What the OP actually may need is 1) A good lawyer, 2) The financial resources to pay for the lawyer and 3) The willingness to make an example out of the law enforcement agency involved in the courts.

Edit:  Hueristic is right on. In many cases law enforcement agencies and large corporations take advantage of the fact that many of their victims cannot afford to fight back even though they are well aware of the fact that they are in the wrong. In these cases when the victim does has the resources to fight back they also have the ethical and moral responsibility to not only fight back but to also make an example out of the law enforcement agency or corporation involved in the courts.

"Probable cause" to seize computers (or worse cash) and make you work (and spend money) to get them back seems pretty damn low in practice today. Maybe it shouldn't be, and maybe more people should fight back but don't, but that's how things are now.

This is the classic mistake: To settle for getting 90% of the money back. Now they are suing after the settlement. The question becomes are their chances of success more or less now?  
Edit: These guys are poker players yet they do not seem to understand the concept of bluffing. My bet is with the state on this one.

Let's assume they are professional poker players. That being the case the $100K was probably essential to their livelihood. If you are a baker and your bakery is seized, you don't really have the luxury of waiting ages for the case to play out in court to see if you might get it back.

Now don't quote me on this (yeah right ) But I think I remember reading that the first question people are being asked is, "How much money are you carrying", and if they do not give an answer then that is considered probable cause that a crime is in progress. And then a search is conducted. And if they do answer and some I read were as little as 1k they get there money seized right on the side of the road.