Edmonds Marshall McMahon (EMM) has helped facilitate the recovery of nearly USD $900,000 for a victim of a sophisticated online romance fraud, using a stable-coin recovery process believed to be the first of its kind involving a UK-instructed asset recovery team.
The recovery was achieved following EMM’s crypto fraud team collaborating with blockchain tracing specialists, Grant Thornton UK, the stable-coin issuer Tether Ltd, and U.S. federal law enforcement, following civil seizure warrants being obtained enabling the burn-and-remint of USDT tokens, which were the traceable proceeds of assets stolen from the victim.
Overview of the burn-and-remint case
The victim had been induced to withdraw her pension funds and transfer them as USDT to an individual posing as a high-net-worth professional based in London.
The victim was targeted during a vulnerable period of her life. Through Match.com, she met a man calling himself ‘David Haughn’, who professed to be a wealthy Kensington-based diplomat. In November 2023, after many months of manipulation, including deep-fake video calls and fabricated legal documents, the fraudster induced EMM’s client to cash in $1 million of her pension, convert it into cryptocurrency and transfer it to him. Slowly the fraud came to an end over many months of subterfuge from Mr Haughn claiming that his mother had died and later, someone contacting the victim to say he was in a coma and sedated.
Edmonds Marshall McMahon was contacted six months after the fraud had taken place. Reverse image searches of the Match.com profile revealed the that the photographs sent by the fraudster were in fact lifted from the social media websites of a former Italian politician and senator.
After being formally instructed, EMM:
- obtained disclosure from the victim’s Coinbase account, which had been closed as a result of the fraud, to be able to trace the stolen crytpo;
- engaged Grant Thornton, who rapidly traced the assets through the blockchain; and
- having identified several potential targets., including centralised exchanges and private addresses, efforts were focused on Tether.
EMM wrote to Tether’s UK legal representatives requesting the urgent blacklisting of the two addresses holding the traceable proceeds of assets stolen from the victim, to preserve the assets while evidence was provided. Faced with the evidence presented, they advised that a request from law enforcement would be required.
After extensive engagement with various law enforcement contacts, whilst UK Law Enforcement could not be galvanised to engage with Tether, both EMM and the victim engaged with US Law Enforcement, who, formally contacted Tether’s investigations team to request the blacklist.
Given the ongoing risk of dissipation, EMM simultaneously wrote again suggesting emergency injunctive relief would be sought. Following further correspondence the same evening, by 19:30 BST, Tether confirmed that, at the request of U.S. law enforcement, both addresses had been successfully blacklisted, avoiding the need for injunctive relief.
EMM then worked with a tenacious U.S IRS team and a local District Attorney who subsequently issued seizure warrants in the Northern District of California, based on evidence packages prepared by EMM and forensic specialists. Once executed, Tether burnt the tainted tokens and reissued new tokens to a U.S. government-controlled wallet for the benefit of the victim.
EMM then worked with US counterparts to secure the recovery of the assets under a civil forfeiture process commenced under 18 U.S.C. § 981(a)(1)(C).
Burn-and-remint: developing practice in stable-coin asset recovery
Tether’s burn-and-remint mechanism enables recovery where cryptoassets have been transferred into non-custodial environments or otherwise fall outside the reach of traditional restraint or account freezing tools. It is technically and legally distinct from mere Centralised exchange “freezing”, because it results in the creation of a clean replacement asset while the compromised asset is permanently disabled.
It is understood that U.S. enforcement agencies now frequently utilise this mechanism in parallel with standard civil forfeiture legislation to return funds to victims of fraud, cyber-crime and investment scams, and have done so for some time. Whereas it is understood UK law enforcement are currently of the view that their Proceeds of Crime Act powers and civil recovery laws do not permit them to assist similar victims in the UK and that there is no agreement in place at all with Tether about this matter.
Significance for cross-border fraud investigations
The case goes to demonstrate:
- the importance of rapid blockchain tracing following fraudulent transfers;
- the availability of recovery routes even where assets have moved outside standard financial intermediaries;
- the operational value of close cooperation between the private sector and law enforcement;
- the increasing role of stable-coin issuers in securing law enforcement outcomes
The matter also illustrates how recovery may still be achieved where jurisdictional obstacles complicate domestic enforcement.
Ashley Fairbrother commented:
“My primary focus was to support the victim swiftly, as I know in digital asset cases, every minute counts. This case showed that, even in complex cross-border circumstances, there are practical and legal mechanisms available to protect victims and restore stolen funds. Achieving an outcome for our client was a collaborative effort involving the public and private organisations, each with an important role to play, and it is that expertise that EMM is able to deploy, to achieve success for victims.
I hope the use of burn-and-remint recovery tools expand and UK Law Enforcement can mobilise like their US counterparts to adapt to the prevalence of stable-coins in fraud and cybercrime typologies. At Edmonds Marshall McMahon, we understand that the continued development of cross-border cooperation frameworks between the private and public sector will be critical to victims obtaining timely redress.”
Ashley Fairbrother, Partner, Edmonds Marshall McMahon
