How Public and Private Sector Collaboration Can Recover Stolen Crypto-Assets for Victims

Imagine a world in which the police, lawyers and cryptocurrency exchanges worked harmoniously together, in aid of the victims of crypto scams…well…

In a groundbreaking case, the collaborative efforts of police, lawyers, and cryptocurrency exchanges led to the successful recovery of stolen life savings for an elderly, vulnerable victim. This success story showcases the power of innovative thinking and cooperation in the fight against cryptocurrency fraud.

Bitcoin_Crypto Fraud

A Farmer’s Life Savings Stolen

Imagine spending your entire life working hard on a farm, reaching the age of 77, and still working while caring for your wife with dementia during lockdown. This was the reality for Mr. X, a 77-year-old farmer who lost his life savings worth hundreds of thousands, to a cryptocurrency scam. During this particular scam, mid-way through, Mr X lost his wife to dementia, and the fraudsters had the temerity to call him on the day of the funeral to persuade him to invest more into the false investment platform that had been created.

A few months later, after taking out various loans, the fraudsters had taken everything and more. Despite the familiar nature of such scams, it is often the elderly and less tech-savvy individuals who are targeted, losing hundreds of thousands of pounds—amounts significant enough to ruin lives but often too small to afford extensive legal remedies.

A Typical Crypto Scam Scenario

In most cases, victims of cryptocurrency fraud face an uphill, almost impossible, battle:

  • Reporting to Action Fraud (AF) often yields no response.
  • Hiring lawyers is prohibitively expensive.
  • Overseas cryptocurrency exchanges require law enforcement involvement or court orders to act, usually marking the end of the road for many victims.

However, this case took a different turn, illustrating what can be achieved when the police, legal professionals, and exchanges work together.

Police Step In

In this case, very fortunately, one of the few police officers in the country, specialising in cryptocurrency tracing, carried out the initial steps of the investigation. Mr. X lost 11.86 Bitcoin over a year after engaging with scammers who gained access to his computer via AnyDesk and encouraged him to set up accounts on Revolut, Skrill, and Binance. When Mr. X ran out of money, he was persuaded to take out personal loans and sell his vintage cars.

Thankfully, the Police Officer visited Mr. X’s home, seized his computer, and began tracing the funds. Despite the scammer’s efforts to remain anonymous using obfuscated website domains and AnyDesk, The Officer managed to obtain Mr. X’s Binance account history via GDPR, revealing the external transactions to the scammer’s addresses. The funds were traced through multiple clusters and peel-chains, eventually reconvening at a Binance deposit address. Binance voluntarily suspended the suspect account and provided the necessary disclosures.

A Breakthrough in the Investigation

The balance of the suspect’s Binance account was found to be 17.72 Bitcoin, belonging to an Israeli national. The Police Officer met with Binance’s Head of European Investigations to discuss recovery options. Despite identifying the suspect, several challenges remained:

  • Uncertainty about the suspect’s true identity.
  • The possibility of stolen or illegally obtained identity information.
  • Insufficient evidence for international extradition.

The Proceeds of Crime Act 2002 (POCA) presented additional barriers, as the status of cryptocurrencies under the account freezing order regime was unclear. The Economic Crime and Corporate Transparency Act (ECCTA) could have helped clarify these barriers, but at that time, NWP lacked the necessary knowledge and training.

Turning to the Private Sector

With public sector options running out, the Police referred the case to Edmonds Marshall McMahon (EMM) for private sector assistance. Despite initial difficulties in sharing information due to GDPR constraints, a Crown Court Production Order allowed the necessary data to be shared with EMM.

Innovative Legal Strategy and Negotiation

EMM bypassed costly steps such as imaging the computer and obtaining an NPO/Freezer, saving £50-100k. We directly engaged with the alleged fraudster, issuing a Letter Before Action (LBA) and leveraging the fact of the account being frozen and the threat of proceedings. It was helpful that there was also an ongoing criminal investigation. These factors enabled a carefully handled negotiation which led to the return of the victims Bitcoin, with an agreement that:

  • All claims against the account holder would be dropped.
  • Assurance from police that the account holder would not face prosecution for money laundering.
  • EMM then worked with Binance to finalise a suitable agreement and release forms to allow the release of the frozen digital assets back to the victim.

This enabled a successful recovery for a victim to an organised, sophisticated and quite heinous fraud all without the need for a court order in sight.

A Model for Future Cases

Sadly, this type of collaboration is rarely seen or possible. This case, however, highlights the potential of innovative collaboration between the police, the private sector, and the crypto sector to recover stolen assets. By working together, we achieved what many victims only dream of: reclaiming their stolen life savings. In our view, with only a small amount of tenacity and desire, this model of cooperation and practical problem-solving could be replicated in hundreds of similar cases, offering hope to countless victims of cryptocurrency fraud. It, however, seems unlikely.

This case was led by Partner, Ashley Fairbrother, and Senior Associate, Fani Gamon of Edmonds Marshall McMahon.

Ashley Fairbrother