According to a court decision shared with CoinDesk. London’s High Court has ordered six cryptocurrency exchanges fraud cases, including Binance, Coinbase, CoinDesk sister firm Luno, and Kraken. To provide client information to assist trace $10.7 million that was stolen from a U.K.-based exchange in 2020.
Cryptocurrency Fraud Case
After being breached in late 2020, the exchange maintains its anonymity. While tracking stolen cash, was able to locate $1.7 million of the illicit gains.
The $1.7 million was split among 26 accounts on six offshore cryptocurrency exchange fraud case. All of these are now compelled to provide papers in accordance with a new U.K. regulation that applies to overseas businesses.
The U.K.-based exchange was defended by Syedur Rahman, a partner at the law firm Rahman Ravelli. “The case is a tremendous step forward for those who are trying to recover assets that have been seized fraudulently and transported across borders,” said Syedur Rahman.
This decision serves as tangible evidence of the benefits of Practice Direction 6B’s revision. and the opportunities it presents to those tasked with tracing and reclaiming their property.
This year saw a huge rise in cryptocurrency-related theft, with ActionFraud reporting that $273 million. And had been stolen in the U.K. in 2022, up 32% from the previous year.
Last week, the U.K. government decided to grant law enforcement the authority to seize bitcoin assets linked to criminal behavior. Taking action to halt the growth of cryptocurrency crime.
A current instance
A business called LMN, the petitioner ran a bitcoin exchange (applicant). It claimed to be the victim of a cyberattack. That saw large quantities of money transferred from its computers into the accounts of the hackers. The applicant requested disclosure from a number of third-party exchanges (respondents), including Binance. The largest cryptocurrency exchange in the world right now, in order to learn more about the identities of the accounts. That the allegedly stolen cryptocurrencies had been transferred to as well as information about what has happened to those cryptocurrencies.
Butcher J. considered the criteria for a Bankers Trust order and determined that the following components had been satisfied in granting the requested order:
A strong argument might be made that cryptocurrencies constitute a type of property, in which case, if the bitcoin had been obtained through fraud. Equity would impose constructive trust on the victim. The preferable position seems to be that there has only been a transfer of property that can be tracked. Despite assertions that the transfer of bitcoin actually creates a new asset in the hands of the acquirer.
There was a reasonable possibility that this information would lead to the finding or preservation of the stolen bitcoins given the nature of the suspected scam and of the information requested. Which included the identity of account holders and the destination of transfers.
The applicant had a clear advantage in acquiring the information requested, and the potential harm to the respondents may be lessened thanks to the applicant’s promises about costs and damages as well as the limitations included in the order’s structure.
The applicant proposed to provide the requisite guarantees regarding costs, loss, and confidentiality.
Butcher J. added that the requested relief might also be granted under the court’s Norwich Pharmacal jurisdiction because the respondent exchanges were “mixed up” in the fraud (but were not directly participating in any fraudulent activity). However, the judgment refrained from making a decision on the more fundamental issue of whether the two instructions were actually one given their substantial overlap. It will be decided in a subsequent instance whether there is still a discrepancy between the two orders.