Syed Rahman explains the significance of the Serious Fraud Office’s use of a crypto wallet freezing order
In what is the first use of its new powers, the Serious Fraud Office (SFO) has frozen the equivalent of £10,865.76 in Bitcoin and USDC stablecoin valued at £289.30.
The SFO applied to Westminster Magistrates’ Court for its first ever crypto wallet freezing order (CWFO). The crypto assets that are the subject of the order will now be held for up to nine months to allow any affected parties to come forward. The assets belong to Richard Yeowart, who is a suspect in the SFO’s ongoing investigation into collapsed outside broadcast company, Arena TV.
While the first use of any legal power can be seen as significant, this is particularly notable. In obtaining its first CWFO, the SFO emphasised its intention to use every tool at its disposal to prevent criminals benefiting from their crimes. It signalled its determination to build its crypto capability and keep pace with what it called “increasingly sophisticated attempts to hide criminal assets’’.
The Economic Crime and Corporate Transparency Act 2023 introduced CWFOs and crypto wallet forfeiture orders (CWForOs). CWFOs are similar to account freezing orders (AFOs), which were introduced by the Criminal Finances Act 2017.
Since 24 April 2024, prosecutors and enforcement authorities in England and Wales have been able to apply to a magistrates’ court for a CWFO if they have reasonable grounds to suspect that cryptoassets held in a crypto wallet administered by a UK-connected crypto service provider are the proceeds of unlawful conduct or are intended for use in unlawful conduct. A subsequent CWForO can then be made if the court is satisfied that that is the case.
Revealed
Seasoned SFO observers will have noted that the CWFO on Richard Yeowart’s crypto was granted just a matter of days after a freedom of information request revealed that the agency had never used the powers it had been given to seek CWFOs and CWForOs.
In fairness to the SFO, however, HM Revenue and Customs has sought less than five of either order since April last year. It should be remembered that SFO cases can often be large, complex and long-running investigations and it is not uncommon for there to be a lag between the passing of legislation introducing new powers and them being used by enforcement agencies. What also needs to be considered regarding these powers is that they relate to crypto assets, which are an evolving and often complicated area to navigate.
As the SFO gains the knowledge and skills to use these powers, a steady rise in the number of cases involving CWFOs can be expected. That the SFO is now starting to use these powers illustrates its awareness of the way many are looking to use increasingly novel methods to hide the proceeds of their crimes and / or wealth that they fear may be subject to tracing and recovery by either enforcement agencies or other parties.
In its five-year plan, published earlier this year, the SFO stated its intention to develop specialist staff’s expertise regarding what it called “new capabilities in cryptoassets”. This first use of a CWFO can be viewed as proof that the SFO has no reservations about attempting to keep pace with the evolving crypto world – something that regulators and the courts have already shown a willingness to do.
