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Is it possible to seize and confiscate digital currencies? Experts answer


When you hear the news about the “confiscation of digital currencies by legal entities”, you probably think to yourself, how can digital currencies be confiscated?

We all think of the decentralized nature of digital currencies is that no one can control or confiscate them; But in fact, the news we hear about the confiscation of digital currencies is not a rumor, and it is really happening in the world.

One of the latest news is from the UK. The British police recently confiscated another میلیون 180 million worth of digital currencies on 13 July. Under the same pretext, The Block website interviewed relevant experts and asked them exactly how to seize such large sums of money.

In the following, Report You are reading this interview:

Digital currencies; Tangible or non-foreclosed assets?

Seizure of digital currencies

In July, اخباری The Metrop 180 million digital currency was seized by the British Metropolitan Police. Just a few weeks ago, another ۴ 114 million worth of digital currency was seized by police. Seizure have been. Now may be a good time to look at how legal entities operate to confiscate such amounts of digital currencies.

One of the positives that fans and holders of digital currencies are always proud of and talk about is the non-seizure of their assets.

Ryan Radloff, CEO of Digital Currency Investment Company Choice by Kingdom Trust, has made this clear in a recent interview. He said:

I personally have free bitcoins [غیرامانی] I have myself. I have my own multi-signature bitcoins. Now you come and try to take it from me. There is no way you can get them out of my hands. It does not matter if the whole system fails or not; I have my own bitcoins and you can not do otherwise.

Despite such perceptions, it is very interesting that we now see that the police have been able to confiscate such large sums of money from criminals. Detentions are taking place not only in Britain, but all over the world.

South Korean authorities seized $ 47 million worth of bitcoins in late June. Earlier that month, the FBI seized $ 2.3 million in bitcoins paid to Colonial Pipeline hackers. Take it back.

The fact is that if criminals who trade in digital currencies are prosecuted, their digital assets will often be as vulnerable and confiscated as other non-digital assets such as jewelry and cash.

Of course, this does not mean that legal institutions do not face any challenge in pursuing and seizing digital assets; Legal institutions for the seizure of digital currencies face problems that are specific to these currencies and stem from their inherent nature. To better understand this issue, it is better to get acquainted with the various methods of seizing digital currencies and examine each of them.

Methods of confiscation of digital assets

Methods of confiscating digital currencies

Some experts find the use of the term “seizure” in digital currencies a bit misleading.

Aidan Larkin, a former criminal investigator, founder and CEO of Asset Reality Asset Recovery, which also specializes in digital currencies, explains that what is discovered and confiscated in such cases is not digital currency; It is a tool to control them. In this regard, he says:

You are not actually seizing Bitcoin. Bitcoin is in the Blockchain; Bitcoin is a software and a code. What you are seizing is a private key or tool to control and access that asset.

Larkin continues:

Some liken the seizure of digital assets to the seizure of land and property by the government. You are not really seizing the building; But you change the locks on it, or you get a confiscation order for the land so that no one can trade or sell it.

Zihao Xu, CEO of Octapus Ventures Investment Company (Octopus Ventures) Which is the investor of China Elliptical Block Analysis Company (Elliptic) Also, referring to a scene from the movie “In Search of Happiness”, he tried to explain the difference between the seizure of digital currencies and the seizure of cash.

Chris Gardner, played by Will Smith, realizes in a part of the film that the US Internal Revenue Service (IRS) has withdrawn $ 600 in unpaid taxes from his bank account. Is.

Zhou says:

This is something that never happens with digital currencies. This is the big difference. Digital currency cannot be automatically deleted from your account and transferred to another address; But what organizations can do is track assets. By tracking, they find out who you are; They then seize your laptop and force you to reveal your privacy key.

Police aim to track digital currencies with Blockchain analytics companies such as Elliptical and Chinalis (Chainalysis) Cooperates.

“Metropolitan Police Deputy Commissioner Graham McNulty said in a statement that the digital currencies were banned and introduced as part of ongoing investigations into the fight against international money laundering.

Specialist and trained officers and units have been able to track down the criminals despite their constant efforts to hide them.

Zhou says obtaining private keys (used to control digital currencies) is the “hardest step” in the seizure process.

Of course, this requires the least amount of technical operations.

Possession of a private key

Private keys - confiscation of digital currencies

Larkin describes two different scenarios that police encounter when trying to seize digital currencies.

The first and simplest scenario is when the police gather evidence of illegal activities related to digital currencies and find that the criminals under investigation are operating in a known exchange office and conducting their transactions there. “Larkin says:

This scenario is no different than finding the invoice of a safe deposit box in Haton Graden. We contact a third party (centralized exchange office) that owns the property, receive a court order, and issue a suspension or cessation of third party activity. A third party usually follows legal guidelines to transfer ownership of digital assets to an account controlled by legal entities or to allow a legal entity access to digital assets.

The second scenario is more complex than the first. In this scenario, the offender has stored digital currencies in his private hardware wallet. In this case, access to digital assets is completely restricted and subject to retrieval terms.

Backup phrases include a list of words in a specific order. These words are all that is needed to retrieve a wallet.

The Metropolitan Police have not revealed in any report or news how they acted in the میلیون 180 million seizure that took place on July 13; But a reliable source told The Block website that the process was carried out by police obtaining private keys.

Therefore, it is possible that the digital assets were kept in a private wallet and that the police had access to the wallet. The same person added that the confiscated assets were transferred to wallets under the control of legal entities.

It was in January that British police began working with Kumaino, a digital currency safeguard platform backed by the Japanese bank Nomura, to protect confiscated digital currencies.

Amanda Wick, Chief Financial Officer of Chinalissis and Senior Political Advisor at the Financial Crimes Network (FinCEN), says there are ways to access hardware wallets. One is “a person cooperating with the police and providing the necessary information,” and the other is legal processes that allow police to search people’s phones or laptops and search for private keys.

In this regard, he says:

Criminals use the same techniques they used to hide Fiat currencies to hide their digital currencies. When I was in charge of legal institutions, we used to find recovery phrases in people’s homes.

The importance of fast performance in finding private keys and digital currency wallets has put pressure on legal institutions. In this regard, he says:

We have often encountered cases where police have recorded retrieval statements, but another person who was an accomplice to the defendant also possessed a copy of the private key or retrieval statement. While the police were in the process of arresting him, he entered his wallet, generated a new key, and transferred the assets to another location. So the most important thing we are currently working on with government agencies is to be able to transfer assets the moment we are on the scene.

If the police are unlucky and unable to find quick access to hardware wallets, it will be difficult to recover illegal currencies.

One example that can be cited in this regard is a person named Clifton Collins. He was a drug dealer in Ireland who claimed to have lost access to میلیون 46 million (approximately $ 64 million).

Clifton claims that after printing the recovery statements on an A4 paper, he hid them in the aluminum case of his fishing rod. He was arrested in early 2017 and sentenced to five years in prison. According to Clifton, at the same time, his landlord evacuated his home, threw the container containing his private key in the trash and lost it.

Wake says in this regard:

Law enforcement must understand this technology, and that is why education in this area is so important. We hear horrible stories about some law enforcement officers simply passing QR codes; Codes that can hold millions of dollars and they don’t even think they might be digital currency.

It seems that the police and law enforcement agencies will put education on the agenda above all else in order to overcome the technical challenges related to the field of digital currency crimes.

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