The rise of cryptocurrencies, NFTs, and other digital assets has transformed the financial landscape, offering new opportunities for wealth storage and transfer. However, recent legal developments have introduced significant risks for businesses and investors, particularly surrounding asset forfeiture and the seizure of crypto wallets. Understanding these risks is crucial for anyone involved in the crypto space.
Crypto Wallet Seizure and Legal Provisions
Provisions allowing authorities to freeze crypto wallets and forfeit crypto assets came into force in 2024. These new powers, part of the civil recovery regime under Part 5 of the Proceeds of Crime Act 2002 (POCA), mirror the Account Freezing Order (AFO) regime but apply specifically to digital assets like Bitcoin, Ethereum, and NFTs.
Authorities are expected to aggressively enforce these provisions, with high-profile and high-net-worth individuals likely to face scrutiny. The evolving reputation of crypto investments has only heightened this risk. Concerns about the misuse of cryptocurrencies for illicit activities have made them a focal point for regulatory action, raising questions like, "Why is my crypto wallet frozen?" and "How do I get my crypto wallet back?"
Can Bitcoin Be Seized?
The answer is yes. Despite the decentralised nature of cryptocurrencies, legal mechanisms allow governments and law enforcement agencies to freeze and seize digital assets. A frozen crypto wallet can occur when authorities suspect that the assets are linked to criminal activity, money laundering, or tax evasion. In such cases, the wallet’s owner may be barred from accessing their funds until the matter is resolved.
A High-Profile Case: Do Kwon and Terraform
A South Korean man accused of being responsible for a cryptocurrency crisis which cost investors $40bn (£31.8bn) has finally been extradited to the United States.
Do Kwon was the boss of Terraform, which operated two cryptocurrencies - TerraUSD and Luna - both of which collapsed in 2022, sparking a wider sell-off in the crypto market. The US says he was responsible for the coins' failure, accusing him of "orchestrating a multi-billion dollar crypto asset securities fraud."
Kwon fled South Korea after a warrant for his arrest was issued, eventually ending up in Montenegro where he has now been extradited from, following a lengthy legal battle. He was previously found guilty of forging documents by a Montenegro court, having been arrested as he was attempting to board a plane to Dubai in March 2023. It had been unclear whether he would face criminal proceedings in the US, however, as Montenegro does not have extradition treaties with the US or South Korea, which has also been seeking his extradition.
Kwon finally being sent to the US brings to an end legal proceedings that lasted more than 18 months. His case highlights the international reach of crypto-related enforcement and the serious consequences of alleged misconduct in the digital asset space.
Protecting Your Digital Assets
For investors and businesses, the prospect of a crypto wallet seizure is a serious concern. Provisions under POCA can lead to significant financial and reputational harm. However, there are strategies and legal measures to mitigate these risks. Your legal team should advise on:
Reputation Management: Consider whether to request that proceedings be held in private to minimise public exposure.
Procedural Milestones: Understand the steps required to request disclosure of helpful material from authorities.
Setting Aside or Varying Orders: Apply to challenge the freeze or seizure order at the earliest opportunity, or develop a strategy to respond to the authorities’ next move.
Out-of-Court Settlements: If advantageous, pursue a fair settlement to resolve the matter efficiently.
Contested Hearings: Prepare for any legal hearings to maximise your chances of success.
Costs and Compensation: Challenge applications for costs or seek compensation if the authorities’ application fails or is abandoned.
With expert advice, you can minimise the impact of these proceedings and protect your investments.
Seeking Legal Representation
If your crypto wallet has been seized, or you face the risk of asset forfeiture, it’s essential to seek immediate legal advice. Garrick Law’s Criminal Defence and Financial Crime Team specialises in such matters, offering decades of experience in criminal, regulatory, and financial cases. Our team collaborates with top barristers, experts, and public relations firms to provide comprehensive support.
Contact us today at +44 (0)203 196 7822 or email enquiries@garricklaw.com for expert advice and representation. Protect your digital assets and navigate these challenging proceedings with confidence.
Comments