Cryptocurrency, police and account blocking: a review of court decisions
Although in Ukraine cryptocurrency is not officially recognized as a means of payment, statistics confirm: 12% Ukrainians own cryptocurrencies and this is becoming commonplace. This is also confirmed by more than 60 court decisions in criminal cases, which include blocking the accounts of users of cryptocurrency exchanges at the request of police officers, cases of unauthorized access to third party accounts, fraud using cryptocurrency.
Cryptocurrency owners and users of cryptocurrency exchanges will find it useful to review court decisions to better protect their assets in the event of third-party misconduct.
Blocking of the cryptocurrency exchange account at the request of the investigator
In this case The Ukrainian reported to the police that he had committed fraud with his electronic account, which contained cryptocurrencies in the amount of 24,000 USDT. These funds were later transferred to another account owned by a foreign national.
The investigator launched a criminal investigation and sent a request to the HUOBI GLOBAL cryptocurrency exchange to block the account. The exchange blocked the user's account and refused to unblock it until the investigator applied again.
As it turned out, there was no court decision that would authorize the investigator to send a request to block the account. At the same time, Ukrainian law does not provide for such a right of the investigator in the absence of a court decision.
The foreigner then went to court to defend his rights because the investigator had unjustifiably violated his property rights. The court ordered the investigator to request that the account be unblocked.
Why it's important: an investigator's request is enough to block the account. Then the exchange will decide whether to fulfill such a request or not. If the account is blocked, the owner will have to go to court to unlock it.
The court may seize the cryptocurrency in the event of a police appeal
In a criminal case investigators found that the attackers seized the victim's cryptocurrency accounts, forcing him to send his own cryptocurrencies to several different e-wallets of third parties.
Analyzing the account, the investigator found that digital funds in the amount of 600,000 USDT (cryptocurrency Tether) were partially transferred to another cryptocurrency account on the cryptocurrency exchange Binance.
Cryptocurrency exchange Binance reported that the owner of the cryptocurrency account is citizen X and additionally provided information about wallets in other currencies and IP addresses from which the person's connection was made.
The investigator acknowledged the physical evidence of the cryptocurrency kept in the accounts of the cryptocurrency exchange Binance and KUNA, which were illegally transferred from the victim's cryptocurrency accounts. The investigator went to court and asked to seize the accounts. The court agreed to arrest the cryptocurrency because it is physical evidence.
Why it's important: the court recognized that the cryptocurrency could be seized as material evidence and that it was property. At the same time, it is unclear how such a court decision can be enforced, there are no mechanisms for this. It is possible that the referral of such a court decision by the investigator to the cryptocurrency exchange will lead to the blocking of the account if the exchange deems such blocking necessary.
1 Bitcoin compensation for illegal search
In this case the plaintiff stated that investigators conducted an illegal search of the rented apartment where he lived with his family. Nothing was seized during the search and there were no further complaints against the citizen, but the search caused significant stress to the plaintiff's family. A pregnant wife and a young child were present during the search.
The plaintiff assessed the moral suffering caused in 1 Bitcoin. Calculation formula: 1 Bitcoin for 1 illegal search. However, the Supreme Court did not grant the plaintiff's complaint because it did not find the allegations of violation substantiated.
Why it's important: although the claim was denied, the court did not object that the non-pecuniary damage could be reimbursed in cryptocurrency. In fact, bitcoin has been recognized as a means of redress.
Declaration of cryptocurrency by civil servants must be supported by evidence
Every year, civil servants submit a declaration of property status, in order to confirm the compliance of the level of income with the level of expenses.
In this case In the annual declaration of property status, the civil servant noted that he is the owner of a cryptocurrency - 2.88 Bitcoins. Representatives of the National Agency for the Prevention of Corruption, which monitors the correctness of filling out declarations, proved in court that the civil servant has no evidence that he has 2.88 Bitcoins. To confirm this, they tracked the movement of assets in the cryptocurrency specified by government officials on the Blockchain.com service in Bitcoin Explorer.
The defendant stated that there was no intention to hide the property or its value, but the court found the person guilty of committing a corruption offense under Art. 172-6 KUoAP (violation of financial control requirements).
Why it's important: Although cryptocurrency does not yet have legal status in Ukraine, the court has identified bitcoin as an intangible asset that can also be declared. So, in this situation, the cryptocurrency acted as a monetary equivalent.
Theft of cryptocurrency through a fraudulent platform
In this case the victim decided to invest in a company operating on the World Wide Web at https://crypto-worlds.org. After registering on the site, the victim made a cryptocurrency of 30 Ethereum from his electronic account, at that time it was about $ 12,000, but the transfer of this amount did not pass. The victim later learned that he had fallen victim to fraud. He established that the site operates in Krivoy Rog, Ukraine, and not in the United States, as indicated on the site.
As a result, the police searched the offices of the call center and confiscated computer equipment. Call center employees should advise potential investors about the benefits of investing in a supposedly promising project. As a result, the head said that the project was closing, while the cryptocurrency was not returned to investors.
Why it's important: as the demand for cryptocurrency grows in Ukraine, so does the number of fraudsters who want to make money on it. You should carefully choose which sites to trust your investment and verify their authenticity.
The court recognized the cryptocurrency purchase agreement as valid
In this case the plaintiff emphasized that the defendant unreasonably acquired the funds and asked to return them. The plaintiff pointed out that the money was transferred as payment for the purchased goods - cryptocurrency (bitcoins), a total of 3.8837 bitcoins outside the will of the plaintiff. However, the court emphasized that the plaintiff had not proved the circumstances relied on. In particular, that the plaintiff did not want to enter into a contract of sale. Therefore, the claims were not satisfied, and the contract of sale of cryptocurrency remained in force.
Why it's important: by this decision the court recognized that in Ukraine the subject of the contract of sale may be cryptocurrency. In the case of cryptocurrency had the legal status of a commodity.
In Ukraine, there is a trend of further development of the cryptocurrency market. In fact, this market exists and is active, although there is no legal regulation. However, in case of disputes, the parties go to court, which makes the final decision to protect the violated rights of the owner of the cryptocurrency. This means that we should expect a legal settlement of cryptocurrency turnover in Ukraine in the near future.
Authors of the article: Dmitry Nikiforov, Victoria Balatskaya.