Bitcoin Is Decentralised, but Who Controls It After Confiscation?

[Lexandroove]

The news has been making headlines lately: China’s confiscation of 61,800 BTC tied to a $5.7 billion fraud scheme.

Chinese prosecutors have been battling the growing use of Bitcoin for underlying duplicitous activities, which has compounded into a whopping dollar sum, with the case coming to a head after a U.K. court ruled that Chinese law governs victims’ claims to the coins.
Prosecutors allege that Qian Zhimin, the alleged controller of Tianjin Lantian Gerui Electronic Technology, recruited associates to sell fake wealth management products nationwide from 2014 to 2017 without financial regulatory approval, promising investors guaranteed returns, which raised some RMB 40.3 billion ($2.8 billion).

I know that many would likely be in support of such a move, as fraud, especially on digital assets, must be curbed in any way, shape, or form, but in my opinion, the biggest long-term implication is that this case could become a major test of who ultimately controls seized Bitcoin: the victims of the fraud, the government pursuing confiscation, or the jurisdiction holding the assets.

What direction would y’all prefer that the pendulum swung towards? Especially at this time, when the demand for self-custody is at a significant high.

I’d like to hear your take on this.

[Joy_learns_crypto]

Bitcoin maybe decentralized but if a crime is committed against any country or under there law they can confiscate the stolen Bitcoin when the lay their hands on it.
Bitcoin is decentralized but is not above the law and any crime caught using Bitcoin will face the normal judiciary procedures.

[Charles-Tim]

The government certainly controls it after confiscation. The UK government has it. UK said China will know what that will be done with it. I expected China to give the coins back to the owners so far it can be sent back to the address that sent the coin to the scammer or if the victim can prove the ownership of their addressees.

But China is hostile to bitcoin. There is probability that China may not send the coin to the owners. I think we should wait and see what will happen if UK send China the coin.

It is worth knowing that the case is still in UK.

[Upgrade00]

I will always want to see the victims of fraud who lost their money get it returned to them. It was theirs before it was stolen, if the scammers are caught and the loot recovered they should return to the victims.

For the exact legal standpoint, anyone in such a situation should seek legal advice. You will likely need to have a case or complaint filed with the authorities to possibly receive anything back. It helps a lot if you are in the country where the investigation is ongoing and can follow up with whatever paperwork is required of you.

I know that many would likely be in support of such a move, as fraud, especially on digital assets, must be curbed in any way, shape, or form, but in my opinion, the biggest long-term implication is that this case could become a major test of who ultimately controls seized Bitcoin: the victims of the fraud, the government pursuing confiscation, or the jurisdiction holding the assets.

There have been many such cases with confiscated amounts and different outcomes that I do not think this sets a precedence. Cases will still be viewed subjectively with the facts peculiar to it.

[Sanitough]

The government certainly controls it after confiscation. The UK government has it. UK said China will know what that will be done with it. I expected China to give the coins back to the owners so far it can be sent back to the address that sent the coin to the scammer or if the victim can prove the ownership of their addressees.

But China is hostile to bitcoin. There is probability that China may not send the coin to the owners. I think we should wait and see what will happen if UK send China the coin.

It is worth knowing that the case is still in UK.

This is a case of fraud, but it did not originate from a Bitcoin investment. It was originally a fiat investment and then the scammers later converted the money into Bitcoin, now the Bitcoin is under UK custody as they were the ones who confiscated it.

So assuming the UK grants China's request and returns the confiscated Bitcoin to them, the scenario that could happen is that China will just pay the victims the equivalent amount they lost in fiat, and they will keep the gains of around $4 billion more or less. Personally I can't remember a government paying back the total current value of Bitcoin to scam victims.

For instance in the case of FTX, after it was declared bankrupt, creditors were generally paid based on the dollar value of their crypto at the time of bankruptcy plus interest, so this is likely what could happen here. Even in the Mt. Gox case, the value of Bitcoin had increased significantly by the time repayments began, although some creditors received Bitcoin rather than just its old fiat value.

So what I see here is just my own opinion, I believe the UK will not grant China's request, they will keep the Bitcoin themselves since they were the ones who confiscated it.

[m2017]

Prosecutors allege that Qian Zhimin, the alleged controller of Tianjin Lantian Gerui Electronic Technology, recruited associates to sell fake wealth management products nationwide from 2014 to 2017

Three whole years. And no one cared about his illegal activities?

without financial regulatory approval, promising investors guaranteed returns, which raised some RMB 40.3 billion ($2.8 billion).

That was the case at the time. Now, this amount is much higher due to the rise in the exchange rates of the respective cryptocurrencies.

I know that many would likely be in support of such a move, as fraud, especially on digital assets, must be curbed in any way, shape, or form,

This is merely addressing the consequences. The root cause must be tackled: the naivety (or, more precisely, the low level of financial literacy) of investors who believe in guaranteed (and high) returns. Naturally, none of these investors bothered to verify whether the necessary authorizations from the financial regulator were actually in place.

but in my opinion, the biggest long-term implication is that this case could become a major test of who ultimately controls seized Bitcoin: the victims of the fraud, the government pursuing confiscation, or the jurisdiction holding the assets.

Nothing has changed since the creation of bitcoin: the person who holds the access keys is the one who has control.

What direction would y’all prefer that the pendulum swung towards? Especially at this time, when the demand for self-custody is at a significant high.

I’d like to hear your take on this.

What I find particularly curious in this story is how the scales of "greed" will ultimately tip; there is currently a debate over the form in which investor's funds should be returned. If they are to be repaid in traditional currency, which seems the most likely outcome, then who will end up with the remaining cryptocurrency assets? After all, the value of these confiscated assets has risen significantly since the 2014–2017 period.

Amazingly. At least, after all these years, the regulators have finally taken pity and decided to return the money to the affected investors.

[Questat]

Bitcoin maybe decentralized but if a crime is committed against any country or under there law they can confiscate the stolen Bitcoin when the lay their hands on it.
Bitcoin is decentralized but is not above the law and any crime caught using Bitcoin will face the normal judiciary procedures.

I don't even understand why "bitcoin is decentralized" is in the title.

I mean, it's just about the confiscation of bitcoin and not the system of bitcoin itself so decentralization has nothing to do with it. it's two governments claiming the confiscated bitcoin so that is a centralized matter.. But we don't know who will win and get the confiscated amount when it's supposed to be for the victims as it was their money that the scammers used to buy bitcoin ,, they have to trace the source of funds used to buy that bitcoin, although even if governments know where the funds came from they might not acknowledge it as we're talking about billions of dollars they would want to keep.

[Call_Me_Guru]

Brilliant point, OP. This is a major test for crypto, especially with the growing push for self-custody. Ideally, the BTC should go straight back to the victims’ private wallets. They lost everything by trusting a centralized fraudster, only for their coins to end up with the government...bad. Returning the BTC to the owners would support crypto’s core values. But the UK ruling gives wrong power. China has opened registration for the 102,000 victims, but it remains unclear how much BTC will go back to them and how much the government pockets.

This is a hard reminder that “not your keys, not your coins.” The legal precedent will be worth watching, but this case also shows why people are leaving centralized platforms for self-custody. Victims deserve their money back, not another situation where someone else has full control over their assets.

[obuoma]

You would have added link to this post for copyright issues and also help those who may want to know more details of the case. This will also save you from being accused of plagiarism which is forbidden in this forum.

I know that many would likely be in support of such a move, as fraud, especially on digital assets, must be curbed in any way, shape, or form, but in my opinion, the biggest long-term implication is that this case could become a major test of who ultimately controls seized Bitcoin: the victims of the fraud, the government pursuing confiscation, or the jurisdiction holding the assets.

What direction would y’all prefer that the pendulum swung towards? Especially at this time, when the demand for self-custody is at a significant high.

I’d like to hear your take on this.

From the standpoint of morality, the seized Bitcoins is supposed to be returned to the victims of the scam because it is their money. But that will only be possible if they can prove that the money is theirs, such process may be difficult though. Neither China no any other country deserve to keep the money but from experience, when Bitcoin are seized by government like those seized by the US and German governments, they are not usually returned to their rightful owners even when they know the origin of the coins. 

[Dareo]

-snip-
I’d like to hear your take on this.

Well it may appear as a short term solution to combat fraudulent schemes by government authorities seizing vast quantities of Bitcoin, the reality is that it is highly unlikely that the victims will ever fully recover their funds. In the case where there is a conflict of jurisdiction in terms of asset ownership , funds remain trapped within government wallets for long times. This is proven by the example where victims were able to recover part of their lost funds in court ten years after the Mt. Gox hack incident. So the only way to avoid legal and governmental disputes is to keep custody of your assets yourself and not hand them over to a centralized system in hopes of financial gain.

[stompix]

The news has been making headlines lately: China’s confiscation of 61,800 BTC tied to a $5.7 billion fraud scheme.

Oh god! What news are you reading?
China didn't confiscate anything!

The coins were seized by UK law enforcement. China didn't do anything; it was the British who found the coins. It was they who seized them, it's them who control them at this moment, it was always going to be a British judge who ruled if they and how they should return the coins to the Chinese victims.

What do you think China is going to do, steal the coins from the UK authorities?

[MainIbem]

Bitcoin maybe decentralized but if a crime is committed against any country or under there law they can confiscate the stolen Bitcoin when the lay their hands on it.
Bitcoin is decentralized but is not above the law and any crime caught using Bitcoin will face the normal judiciary procedures.

You're right, decentralization doesn’t shield offenders that are caught, afterall the US built their Bitcoin reserve through seized stolen Bitcoin and in some cases the offenders caught by the FBI and arrested. So anyone thinking of laundering money with Bitcoin or scamming people and think they're safe cause of decentralization should think twice cause if caught, the law is no respecter of decentralization especially when it comes to criminals who use Bitcoin for crime.

[Localhostspeed]

Well it may appear as a short term solution to combat fraudulent schemes by government authorities seizing vast quantities of Bitcoin, the reality is that it is highly unlikely that the victims will ever fully recover their funds. In the case where there is a conflict of jurisdiction in terms of asset ownership , funds remain trapped within government wallets for long times. This is proven by the example where victims were able to recover part of their lost funds in court ten years after the Mt. Gox hack incident. So the only way to avoid legal and governmental disputes is to keep custody of your assets yourself and not hand them over to a centralized system in hopes of financial gain.

They are not doing anything if confiscating the coins is the solution. This is not like fiat that when a scammer scammed an amount of money from people, they track the scammer and make sure they remit back everything stolen and go to jail. After the process, the victims get back their money and some get compensated. The Bitcoin they sieze from scammers is supposed to be return back to the victims, but since Bitcoin doesn't have kyc, it's hard to trace original owner of the coins and they keep it to theirself.

The US government have large pool of Bitcoin sitting their, some were from silk road but I can tell you that some part of those belongs to many innocent people from different countries and they never give it back to them. Those this means that we are enriching the government through this act? There should be a way the Bitcoin get back to the original owners if they want to be fair.

[Lexandroove]

Bitcoin maybe decentralized but if a crime is committed against any country or under there law they can confiscate the stolen Bitcoin when the lay their hands on it.
Bitcoin is decentralized but is not above the law and any crime caught using Bitcoin will face the normal judiciary procedures.

Of course, Bitcoin doesn't put anyone above the law, and criminals should face justice, but the distinction is that decentralisation makes Bitcoin harder to seize through the network itself; authorities still need access to private keys, cooperation, or a custodial intermediary to move the funds.

That's where the worrying question arise: Should they be returned to victims, retained by the state, or handled through another legal process? Due process and protecting victims' rights should remain central, regardless of the asset involved

[Lexandroove]

The government certainly controls it after confiscation. The UK government has it. UK said China will know what that will be done with it. I expected China to give the coins back to the owners so far it can be sent back to the address that sent the coin to the scammer or if the victim can prove the ownership of their addressees.

But China is hostile to bitcoin. There is probability that China may not send the coin to the owners. I think we should wait and see what will happen if UK send China the coin.

It is worth knowing that the case is still in UK.

Yeap, we need to wait for the legal process to unfold, especially since the case is still being handled in the UK. However, the court has not yet determined who ultimately owns the Bitcoin, and the victims have now been granted permission to appeal the ruling on which country's law applies.

Returning the coins to the original sending addresses also may not be straightforward, since those addresses may not belong exclusively to individual victims.

The fairest outcome, in my opinion, would be one that protects the victims' rights and ensures they receive what they can legally establish as theirs, rather than allowing the government to benefit simply because the assets were confiscated

[Joy_learns_crypto]

Bitcoin maybe decentralized but if a crime is committed against any country or under there law they can confiscate the stolen Bitcoin when the lay their hands on it.
Bitcoin is decentralized but is not above the law and any crime caught using Bitcoin will face the normal judiciary procedures.

Of course, Bitcoin doesn't put anyone above the law, and criminals should face justice, but the distinction is that decentralisation makes Bitcoin harder to seize through the network itself; authorities still need access to private keys, cooperation, or a custodial intermediary to move the funds.

That's where the worrying question arise: Should they be returned to victims, retained by the state, or handled through another legal process? Due process and protecting victims' rights should remain central, regardless of the asset involved

Of course if the funds are gotten it should be returned to the victims and the criminal will face the necessary sentence, if the criminal has been correctly identified and captured then they would be left with no other choice but to send the money to the authorities who will then send it back to the victims.
The biggest problem is tracing and capturing the criminal, the wallet also can be flagged.

[Obim34]

I’d like to hear your take on this.

The government may not be able to recover the full amount from the scammers, and confiscating the funds is part of the legal process. Decisions can be made later on to compensate the victims. The government has no right to permanently confiscate the coins and refuse to return them, most of the victims invested a significant part of their life savings, it's only unfair if the government holds on to it.

[justinlamode]

We have not seen any instance of seized coins being returned to the rightful owners, it has always been the governmemts who delight in keeping them. This has nothing to do with the decentralized nature of Bitcoin, but more of confiscation of properties that we see even with fiats and even physical properties.

The matter referenced is an ongoing matter that is still passing through legal process, so it has not been established who will hage final custody of the coins, hence my statement is based on previous cases of government seizing Bitcoin.

[Aliciaworld]

 Governments all over the world as well as big tech and hedge funds are fighting to increase their control of cryptocurrency, owning ever growing percentage of Bitcoin and Ethereum, enacting laws to further strengthen their grip on cryptocurrency.

Will they succeed? What does success in this field look like? And what would it mean for cryptocurrency and block chain in general?

[pooya87]

Of course, Bitcoin doesn't put anyone above the law, and criminals should face justice, but the distinction is that decentralisation makes Bitcoin harder to seize through the network itself; authorities still need access to private keys, cooperation, or a custodial intermediary to move the funds.

I feel like you are overthinking the situation. Bitcoin is just a tool the criminals used. They might as well have used something else like cash. The authorities would need access to the hiding place of that cash and they had to force the arrested culprits to reveal it. It's the same with bitcoin. They arrest them and force them to give up the stolen funds.

That's where the worrying question arise: Should they be returned to victims, retained by the state, or handled through another legal process? Due process and protecting victims' rights should remain central, regardless of the asset involved

Same here. Should the seized assets (cash, goods, properties, etc.) be returned to the victims or something else? The legal system is clear on this in most countries as far as I know. They file everything and process all the claims made by the victims and return the assets to them regardless of what they are.