LEA's auction all kind of seized crap, furniture, cars, boats, golf clubs, tools, and some firearms.
My Ruger Police Service Six, was sold to an FFL from the Oakland County, Ca, Sheriff's office when dept's were transitioning to semi-auto's.
I don't see a problem with LEA's including firearms in an auction through FFL's. If the serial numbers are cleared, and re-assigned to a lawful purchaser, so what?