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Civil Recovery and Stolen Crypto

Author: Niall Hearty  7 September 2023
2 min read

Niall Hearty of Rahman Ravelli considers the significance of a case in which a civil recovery order was used to access stolen cryptocurrency.

In what may be the first recorded instance of a civil recovery order being used to gain access to a crypto wallet, authorities were able to seize cryptocurrency worth more than £750,000 from a hacker.

The case saw the Crown Prosecution Service (CPS) work with Wales’s Tarian Regional Economic Crime Unit and use powers under the Proceeds of Crime Act 2002 to recover the funds.

Police searched the hacker’s family home after receiving an intelligence tip-off. Inside they found a black book containing 12 “recovery seeds”. A recovery seed - also known as a recovery phrase, backup phrase or word seed - is a list of 12, 18 or 24 words that store all the information needed to recover a crypto wallet. The seeds helped the authorities access the hacker’s wallet. It contained what was described as a significant amount of cryptocurrency as well as more recovery seeds that enabled them to take a smaller amount of cryptocurrency from another digital wallet.

As the CPS now had evidence to show that the cryptocurrency had connections to hacking offences, it asked for an order to freeze the hacker’s assets before conviction so it could retrieve the funds. The hacker, however, agreed to follow a High Court order that forced the handover of all the crypto assets.

Precedent

The CPS has cited the case as an example of how it will use civil powers to deprive criminals of their ill-gotten gains. But the case is arguably more significant for setting a precedent regarding the treatment of cryptocurrencies – ensuring that they can now be treated as subject matter in enforcement orders.  

This means that in instances where criminal proceedings are not contemplated or are in their infancy, the authorities can use their civil powers to assist with the recovery of cryptocurrency. Until now, the only option in such situations has been confiscation proceedings before the Crown Court, which are both time-consuming and only available post-conviction. 

Civil recovery can be used when it is not possible to obtain a conviction, when a conviction is obtained but a confiscation order is not made or when the public interest will be better served by using civil recovery rather than by seeking a confiscation order. Civil recovery is a more achievable outcome than a confiscation order in situations where suspects have gone abroad to escape an investigation or the offending has taken place overseas and so cannot be prosecuted in UK courts. The fact that such action can now be taken in respect of cryptocurrency may prove to be of great value to the authorities.

Niall Hearty C 07998

Niall Hearty

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Niall has a wealth of corporate crime expertise and an ability to coordinate global bribery and corruption cases. His achievements in such investigations have made him a logical choice for corporate clients.

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