Back in the mid 90's I visited the Los Angeles County Sheriff's Office firearms lab a few times. When the received firearms there after they were processed as evidence, if the gun was stolen they would try to find the rightful owner, if they gun was an illegal type or no rightful owner could be found the guns were sorted. The junk guns were melted down. If it was a nice gun or had reference value or could be of use, they checked how many they already had of that model, if they had enough they checked with other area departments to see if any of them wanted it. If it could not be disposed of that way, then it was destroyed. Over the years they had built up an impressive collection of mostly handguns but other interesting stuff as well. There was a 30 gallon trash can in one corner full of silencers. Mostly old Sionics cans for Mac-10's on a number of homemade cans; some of them very well made. The head of the lab had on his desk an original Maxim silencer with the mailing tube it was shipped in and the receipt. It was shipped to California in 1912. Was part of an estate and was checked and had never been registered.
They did have an extensive collection of unregistered machine guns. Mostly WW II through Vietnam era weapons. A rack full of Beretta 38/42 sub machine guns, some MP-41 smg's, a lot of PPsH-41 and 43's, a rack of Thompsons, some grease guns, about 2 racks of M16 and AK rifles (all original select fire, not converted) even some belt fed toys. I saw 5 Steyr AUG rifles that were converted to full auto. They even had a couple of Trejo pistols from Mexico (think Walther TPH with a selector switch).
I asked where most of the guns came from and was told the most common scenario was grandpa died and the family finds the gun stored somewhere. The take it out to Angeles National Forest and try it out. Some hears it and call the Sheriff's Office and they have a new addition to their collection. The Trejo pistols were taken off of gang members, and some other guns were also captured from actual criminal.
The scariest story was how they got their M2HB .50 BMG. Deputies responded to a call of a man sitting in a van and acting strange at Long Beach Airport. They removed a seriously disturbed man from the van (he ended up in a mental hospital) and in the back of the van they found the M2, pointed toward the rear of the van, mounted on a tripod, and loaded with a belt of ammo.
Two other quickies, Phoenix PD forensics lab had an MG-34 hanging up on the wall that the department confiscated. The owner claimed the gun was legal because it had been deactivated. It had been deactived by driving a brass rod down the barrel. Once the removed the rod the gun ran just fine.
When I was working back east, this small town had a WWI memorial on the couthouse plaza complete with a Maxim MG-08 on display. Had been put their in the '50's by the VFW. It was starting to look bad because of so many layers of paint on it so they asked the company I was working for to help with cleaning it up and making it look presentable again. When we got through all the paint and got the gun apart we discovered it was a live gun that had never been deactivated
. The bluing on the interior was in pristine condition, the gun had possibly never been fired. We did make sure and fix that problem before we deactivated it
. ATF was ok with how we deactivated it (the company was a class 2 manufacturer) and the gun is back on display.
My experience seems to indicate there are more illegal machine guns out there than a lot of us think, but it is fairly rare that any of them are used by bad guys.