British justice has just strengthened the State’s chances of keeping 61,000 bitcoins seized in a Chinese fraud case. However, the decision does not yet award him this jackpot estimated at 3.8 billion pounds. It only determines the law applicable to victims’ requests.
In brief
- British justice strengthens the UK’s chances of keeping 61,000 seized Bitcoins, estimated at $5 billion.
- The victims’ claims will be examined under Chinese law, a decision that could complicate their compensation.
- The bitcoins come from a large financial scam carried out in China between 2014 and 2017.
- Victims must prove their ownership rights to the cryptocurrencies to hope to recover them.
- The UK could keep this fortune, but no final decision has yet been made.
Chinese law will apply to seized bitcoins
The High Court in London ruled on October 12 that claims relating to bitcoins will have to be examined under Chinese law, not English law. This choice constitutes a preliminary, but decisive, step in the civil procedure initiated around the assets.
Judge Mark Turner found that the essential elements of the fraud were in China. He has explain :
The relevant harm occurred in China. The plaintiffs parted with their money in China. The alleged fraudulent statements were made in China.
Contractual relations and immediate economic losses were also linked to Chinese territory. The fact that bitcoins are now held in the United Kingdom is therefore not enough to automatically subject their ownership to English rules.
This decision does not transfer any bitcoin to the UK Treasury. It also does not determine which investors can be compensated or the amount they could receive. Another hearing will have to examine the content of Chinese law and its application to the various claims.
The Fieldfisher firm, which represents victims, plans to challenge the judgment on appeal.
A Chinese scam turned into a digital fortune
The case concerns Zhimin Qian, also known as Yadi Zhang. She admitted to having organized between 2014 and 2017 a vast fraudulent investment system which affected thousands of people in China.
The facts admitted in the procedure relate to at least 128,409 investment contracts. More than 100,000 BTC would have been purchased from an account opened on the Huobi platform thanks to the funds collected.
Qian left China for the United Kingdom, where she led a particularly expensive lifestyle. The London Metropolitan Police seized several wallets during searches carried out starting in October 2018 and over the following years.
The British authorities finally recovered around 61,000 bitcoins. Their value was much lower at the time of seizure. The rise of BTC has since transformed these assets into a jackpot valued at 3.8 billion pounds, or approximately 4.4 billion euros.
This increase creates the heart of the conflict. The victims demand the current value of the cryptos they claim are their money. The British government could, for its part, keep all or part of the confiscation proceeds if the applicants do not demonstrate a recognized right of ownership.
Victims must prove that the bitcoins belong to them
English law would have offered plaintiffs a more favorable avenue to argue that the bitcoins belong directly to them. With the application of Chinese law, their situation could be assimilated more to that of creditors demanding 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 they demonstrate that the asset “belongs” legally.
Applicants will therefore have to establish that they have a property right to the bitcoins under Chinese law. The High Court will then have to verify that this right also meets the British criteria for return of seized products.
The outcome remains uncertain, as the investments originally involved contracts denominated in traditional currency, and not necessarily a specific quantity of BTC. It will be necessary to establish a legal link between the payments of each victim and the recovered cryptocurrencies.
Prosecutors mentioned the existence of a compensation scheme organized from China. However, some investors contest this solution, in particular because it could repay their capital with limited interest without attributing to them the spectacular rise of bitcoin.
The British government has gained nothing yet
If the victims fail to have their rights recognized, the courts could order the definitive confiscation of the bitcoins. The assets would then be sold and the proceeds transferred to the UK Treasury’s general fund, in line with the criminal property recovery rules.
Part of the amounts recovered can also be used to compensate victims or to finance the fight against economic crime. The government cannot therefore immediately include the 3.8 billion pounds in its revenue or freely dispose of the bitcoins during the procedure.
The decision only improves its legal position by making the plaintiffs’ path more difficult. The announced appeal, the expertise of Chinese law and the individual examination of requests can still modify the outcome of the case.
The United Kingdom is thus getting closer to an exceptional budgetary gain, but the ownership of the 61,000 bitcoins remains contested. Talking about a definitive acquisition by London would, at this stage, be premature.
Maximize your Tremplin.io experience with our ‘Read to Earn’ program! For every article you read, earn points and access exclusive rewards. Sign up now and start earning benefits.
