UK Could Keep 61,000 Bitcoin After Key Legal Ruling

British justice has just increased the chances of the State retaining 61000 bitcoins seized in a Chinese scam case. However, the decision does not yet attribute this pot estimated at 3.8 billion pounds to it. It only determines the applicable law to victims’ claims.

Chinese law will apply to the seized bitcoins

The High Court in London ruled on October 12 that claims regarding the bitcoins must be examined under Chinese law, not English law. This choice is a preliminary but decisive step in the civil procedure initiated around the assets.

Judge Mark Turner considered that the key elements of the scam took place in China. He explained :

The harm occurred in China. The claimants parted with their money in China. The alleged fraudulent statements were made in China.

The contractual relationships and the immediate economic losses were also linked to Chinese territory. The fact that the bitcoins are now held in the UK is therefore not sufficient to automatically subject their ownership to English rules.

This decision does not transfer any bitcoin to the British Treasury. It also does not determine which investors can be compensated nor the amount they might receive. Another hearing will have to examine the content of Chinese law and its application to the various claims.

The Fieldfisher firm, representing victims, plans to challenge the judgment on appeal.

A Chinese scam turned into digital fortune

The case concerns Zhimin Qian, also known as Yadi Zhang. She admitted to organizing between 2014 and 2017 a large-scale fraudulent investment scheme affecting thousands of people in China.

The facts admitted in the procedure speak of at least 128409 investment contracts. More than 100000 BTC were allegedly purchased from an account opened on the Huobi platform with the collected funds.

Qian left China for the UK, where she led a particularly expensive lifestyle. The Metropolitan Police of London seized several wallets during searches conducted from October 2018 onwards, and in subsequent years.

The British authorities eventually recovered about 61000 bitcoins. Their value was much lower at the time of seizure. Since then, BTC’s rise has turned these assets into a pot evaluated at 3.8 billion pounds, about 4.4 billion euros.

This rise is the core of the conflict. Victims claim the current value of the cryptos which they believe to be from their money. The British government could keep all or part of the confiscation proceeds if claimants do not demonstrate a recognized ownership right.

Victims must prove the bitcoins belong to them

English law would have offered claimants a more favorable route to support that the bitcoins belong directly to them. With the application of Chinese law, their situation could be more akin to creditors claiming repayment of a debt.

This distinction is essential. Under the UK Proceeds of Crime Act, a victim can only prevent the State from retaining a criminal asset if she demonstrates that this asset “belongs to” her legally.

Claimants will therefore have to establish that they possess an ownership right on the bitcoins according to Chinese legislation. The High Court will then have to verify that this right also meets the British criteria for restitution of seized proceeds.

The result remains uncertain, as the investments originally involved contracts denominated in traditional currency, and not necessarily in a determined quantity of BTC. A legal link must be established between each victim’s payments and the recovered cryptocurrencies.

Prosecutors mentioned the existence of a compensation scheme organized from China. Some investors contest this solution, notably because it might repay their capital with limited interest without granting them the spectacular increase of bitcoin.

The British government has not yet won anything

If victims fail to have their rights recognized, the court could order the permanent confiscation of the bitcoins. The assets would then be sold and their proceeds transferred to the UK Treasury general fund, according to the rules for recovering criminal assets.

Part of the recovered amounts can also be used to compensate victims or finance the fight against economic crime. The government therefore cannot immediately record the 3.8 billion pounds in its revenues nor freely dispose of the bitcoins during the procedure.

The decision only improves its legal position by making the claimants’ path more difficult. The announced appeal, the expertise on Chinese law, and the individual examination of claims can still change the outcome of the case.

The United Kingdom is thus approaching an exceptional budget gain, but ownership of the 61000 bitcoins remains disputed. To speak of a definitive acquisition by London would be premature at this stage.

DISCLAIMER

The views, thoughts, and opinions expressed in this article belong solely to the author, and should not be taken as investment advice. Do your own research before taking any investment decisions.