The rise of cryptocurrencies has brought both opportunities and challenges for individuals and the legal system worldwide. One of those challenges is crypto wallet freezing orders – a legal tool being used to combat crypto crime. Here’s everything you need to know about these orders, the implications and how to prepare.
Crypto wallet freezing orders are legal powers that allow law enforcement agencies (LEAs) to freeze and seize cryptocurrency assets if they suspect they are linked to criminal activity. These are an extension of the UK’s Proceeds of Crime Act 2002 (POCA) which already allows for assets like cash and bank accounts to be frozen and forfeited if suspected of being connected to criminal activity. Since April 2024 these powers have extended to crypto assets.
LEAs can search for, seize and freeze crypto wallets if there is “reasonable suspicion” that the assets are linked to criminal activity. Reasonable suspicion is a low threshold, similar to the level required for an arrest. Once seized the assets can be frozen for up to 3 years while investigations are conducted.
During this time the frozen assets can be forfeited if a court decides it is more likely than not that they are derived from or intended for criminal activity. Importantly these are civil proceedings so the standard of proof required is the balance of probabilities and not the criminal standard of beyond a reasonable doubt. Courts can use intelligence, open-source information and even hearsay evidence to make their decisions.
Previously, cases involving crypto asset seizure were heard in the High Court which provides a higher level of judicial scrutiny. Under the new provisions, these can now be brought before the Magistrates’ Court with appeals to the Crown Court. While this speeds up the process it raises concerns about the level of judicial oversight given the Magistrates’ Courts already have a heavy workload.
High net worth individuals with significant crypto holdings are most at risk under these new powers. LEAs will likely target individuals with substantial assets in the UK especially given the financial incentive for successful asset seizure. Therefore, it’s critical for individuals to maintain clear audit trails of their cryptocurrency transactions so they can respond quickly to any investigations.
The new provisions also allow victims of crime to apply for the return of seized assets. This provides an avenue for individuals or entities to litigate ownership of crypto assets in a potentially more cost effective way. However, this will increase the number of cases in the courts which will only add to the delays.
While the legislation gives LEAs significant powers there are still several challenges. Firstly, the UK’s Magistrates’ Courts are already suffering from a heavy workload. This will hinder the processing of crypto related applications. Secondly, there is a lack of specialist training and technological resources to trace and manage crypto assets. The shortage of qualified experts in the UK also means international assistance will often be required.
UK courts only have jurisdiction over assets and wallet providers in the UK. If you are concerned about these powers, you may consider transferring your assets to a wallet provider outside the UK. However, this raises additional legal and ethical considerations.
If you have crypto assets or do business with crypto assets, consider the following:
Crypto wallet freezing orders are a major development in the UK’s regulation of cryptocurrency and the fight against financial crime. While these powers give LEAs the tools they need, they also present challenges for high net worth individuals and businesses in the crypto space. Transparency, accurate records and expert advice will be key to navigating this new legal landscape.
For expert legal advice on crypto wallet freezing orders or other issues related to cryptocurrency, engage a solicitor with a track record of success in this area of law.
The cryptoasset solicitors at Lewis Nedas Law are experts in their field. We can advise on and guide you through all elements involved in the tracing and recovery of crypto assets and the removal of seizure and freezing orders. If you need advice or assistance on any aspect of crypto assets, please take expert legal advice from Lewis Nedas Law’s crypto asset solicitors.
Siobhain Egan acted for:
With the rapid rise of cryptocurrency, the regulatory landscape is evolving to keep up with the challenges posed by this new asset class. The Economic Crime and Corporate Transparency Act 2023 has given UK authorities the power to issue cryptoasset restraint and freezing orders. As they get to grip with these new tools, it’s clear they will be used more frequently in the fight against crypto-related financial crime.
The addition of Chapter 3C in the Proceeds of Crime Act 2002 has been a significant development. This new chapter allows the police and other authorities to focus on the crypto environment—wallets and exchanges—where assets are often held or traded. By targeting those, they can freeze assets in real-time, preventing their movement during investigations or legal proceedings.
For cryptoasset holders, having their cryptoassets frozen can become a lengthy and frustrating ordeal. Initially, assets are frozen for up to 48 hours and, with extensions, up to six months or more. During this time, you cannot access or trade your holdings, often missing out on financial opportunities. Extensions are only granted if the authorities justify when the freeze should continue. Cryptoasset owners can challenge these decisions in court. However, these cases are complex and specialist legal advice is crucial.
Fraudsters exploit the unregulated crypto space. They use fake exchanges and phishing scams to steal cryptoassets. With the speed and anonymity of crypto transactions, stolen assets can be moved across the world in seconds, making recovery hard. Asset freezing orders are one of the best tools to stop the damage. These orders stop the movement of stolen assets so authorities can get control and stop criminals benefiting from their crimes.
Authorities are using freezing orders more proactively, especially in cases where investigations are just starting. With advances in blockchain analysis and cross-border cooperation, the police and the authorities can trace and freeze assets earlier in the process. This trend toward pre-emptive action will mean a lot more freezing orders will be used, giving authorities new tool in their fight against crypto-related crime.
If your cryptoassets are frozen, you need to act fast. Delay can mean more financial damage, so get expert legal advice. A solicitor experienced in cryptoasset law can help challenge the order, get funds released for essential expenses, or even get the freeze lifted if criminal involvement cannot be proven.
Cryptoasset freezing orders will be used increasingly as authorities get better at tackling financial crime in the crypto space. With governments around the world plugging regulatory loopholes, these orders will be a key tool for freezing and recovering laundered money.
If you wish to challenge an asset freezing order, you should engage a solicitor with a track record of success in this area of law.
The cryptoasset solicitors at Lewis Nedas Law are experts in their field. We can advise and guide you through all aspects of seizure, retention and release of cryptoassets. If you need advice or assistance on any aspect of cryptoassets, please take expert legal advice from Lewis Nedas Law’s crypto asset solicitors.
Blog post by expert crypto asset defence solicitor Siobhain Egan. For expert, trusted legal advice, please telephone us on 020 7387 2032 or complete our online enquiry form.
HMRC is taking a more active role in recovering tax due from those involved in the crypto asset world. Taxpayers are being encouraged to use HMRC’s new online disclosure facility to declare any unpaid taxes. This voluntary scheme covers tax due from crypto asset dealing, including exchange tokens, NFT’s and utility tokens.
Whilst this initiative might seem new, HMRC issued guidance in 2018 about paying tax by those involved in crypto assets. Whilst crypto assets can be bought, sold and traded with a high level of anonymity, HMRC suspects it is due substantial tax from those engaged in those activities.
Before you make disclosure to HMRC, you need to establish if you have a tax liability.
There is the possibility that you may owe some or all of the following types of tax:
Crypto assets trading may have provided you with a taxable income. There may also be national insurance implications if you received crypto assets as part of your salary.
If you are a company involved in a crypto asset business or deal in crypto assets, income and gains should be included in your Corporation Tax Return.
If you are operating as a business with a trading turnover above the VAT threshold you need to account to HMRC for VAT.
If you have invested in crypto assets and have sold these for gain, you may be liable to Capital Gains Tax.
Next, you need to work out how many years you need to declare. This will depend on why you have not previously declared the tax due. There are three options at this stage.
You underreported the tax liability:
The extent of the liability, in terms of time, will depend on the reason for underreporting tax:
In addition, you will need to pay interest and penalties.
Finally, after you have submitted the unpaid tax calculations to HMRC, you must make full payment within thirty days of submitting the disclosure.
If you are engaged in creating, dealing or investing in crypto assets and have failed to account for income and profits to HMRC take expert legal advice from Lewis Nedas Law’s crypto asset defence solicitors before doing anything.
Blog post by expert crypto asset defence solicitor Siobhain Egan. For expert, trusted legal advice, please telephone us on 020 7387 2032 or complete our online enquiry form.
Freezing cryptoassets became easier for the authorities when the relevant sections of the Economic Crime and Corporate Transparency Act 2023 came into force on 31 January 2024. This act extends the capability of the Proceeds of Crime Act 2022 by introducing a new Chapter. This new chapter replicates powers enjoyed by the police and certain authorities to freeze physical assets such as cash and property.
An asset freezing order is an order obtained, in criminal cases, by the police and certified financial investigators from the courts. It authorises them to attach assets.
An asset freezing order can also be obtained in a civil case when just cause is shown to the court. The court will supervise the freezing order until its determination.
When an asset freezing order is obtained, it freezes the assets on either a crypto trading exchange or in a crypto wallet. It also allows physical assets such as a USB drive or memory stick to be seized.
This means the crypto exchange cannot allow any interaction with the cryptoassets without permission from the courts. Access to the crypto wallet is controlled by the courts. Physical items seized by the police or authorised financial investigator are also subject to the authority of the courts.
As the cryptoassets are held to the order of the court, the only route to seek their release is through the courts.
You will need to mount a challenge to unfreeze the cryptoassets and to regain control over them.
In criminal proceedings, the owner of the cryptoassets will need to persuade the court that they are uninvolved in any criminal activity or wrongdoing. Even if the court does not unfreeze the order, you may be able to persuade it to release some part of the cryptoassets for living or business expenses.
It is important to be aware that asset freezing orders are time limited. They will initially be in place for 48 hours. An application needs to be made to extend this to 6 months. Further applications need to be made and the maximum time that an asset freeze can apply is 3 years. In each instance, those looking to extend the order, must justify why keeping the order in place is necessary.
On each occasion that an application for an extension is made, those affected by the order can make representation to the court seeking their release.
If you wish to challenge an asset freezing order, you should engage a solicitor with a track record of success in this area of law.
The cryptoasset solicitors at Lewis Nedas Law are experts in their field. We can advise on and guide you through all aspects of seizure, retention and release of cryptoassets. If you need advice or assistance on any aspect of cryptoassets, please take expert legal advice from Lewis Nedas Law’s crypto asset solicitors
Blog post by expert crypto asset defence solicitor Siobhain Egan. For expert, trusted legal advice, please telephone us on 020 7387 2032 or complete our online enquiry form.
It is a well-known fact that cryptoassets are targeted by fraudsters. They consider the possibility of prosecution negligible and the need to return the stolen assets almost non-existent. Indeed, the speed with which the stolen cryptoassets can be moved and converted into cash is positively breathtaking!
Perhaps the most common method of theft is through a fake exchange. Usually, a fraudster will contact you to persuade you to invest in cryptoassets. Once you’ve invested, they’ll invite you to register the cryptoassets with a fake exchange. This means that once you transfer your cryptoassets to the fake exchange, the fraudster has control. You will only know about this when you try to log onto the fake exchange and discover that you are locked out.
There are, of course, other ways fraudsters can steal your cryptoassets so you need to always be vigilant.
The very nature of cryptoassets means they are easy to move quickly. Because they are intangible and transferred electronically, a simple instruction is sufficient to move them from one holder to another. Once someone gains control over the cryptoassets, they can move them to the other side of the world instantly.
Simply reporting the theft to the police is unlikely to lead to restoration of your ownership of the stolen cryptoassets in the near term. However, to seek recovery you need to raise civil proceedings. To do that, you will need a solicitor experienced in dealing with cryptoassets.
Cryptoassets are easily transferrable. That means the first thing you need to try to do is to prevent that transmission. The fraudster will likely have transferred the cryptoassets to what they consider to be a safe haven abroad.
The first relief you will need to seek is a worldwide freezing injunction. This will prevent the further transfer of the assets.
You will also seek their recovery or a cash equivalence and, potentially, damages. You may also require information from the banking system if the cryptoassets have been converted to cash and lodged in a bank account.
In tandem with instructing solicitors, you will also need to find out where your cryptoassets have gone.
Despite the common myth that cryptoassets are untraceable, an experienced analyst working in this field will be able to track the assets. This is because each transaction on the blockchain is recorded. Painstaking work will provide the location of the assets.
If you wish to recover stolen cryptoassets you should engage a solicitor with a track record of success in this area of law.
The cryptoasset solicitors at Lewis Nedas Law are experts in their field. We can advise on and guide you through all aspects of the recovery of stolen cryptoassets. If you need advice or assistance on any aspect of cryptoassets, please take expert legal advice from Lewis Nedas Law’s crypto asset solicitors.
Blog post by expert crypto asset defence solicitor Siobhain Egan. For expert, trusted legal advice, please telephone us on 020 7387 2032 or complete our online enquiry form.
One of the biggest challenges of law enforcement throughout the world is to devise a means of seizing cryptoassets. Being intangible, cryptoassets are difficult to attach. That means that the focus must be on other elements of the crypto environment. Recent developments in the law mean that the police in the UK now have more tools to enable cryptocurrency asset seizure.
The Economic Crime and Corporate Transparency Act 2023 introduced changes to the Proceeds of Crime Act 2002 (the “2002 Act”). The replication of tried and tested seizure measures for other assets in the 2002 Act meant that the authorities now enjoy new powers based on real life experience when dealing with tangible assets. Specifically, the new Chapter 3C of the 2002 Act sets out the basis on which cryptoassets can be searched for, seized and held.
Due to their intangible nature, the main focus on cryptoassets seizure is on crypto wallets and crypto exchanges. Where a wallet is seized, it can then be held until the courts authorise its release. Also, by exercising diligence against an exchange, the cryptoassets can be detained and held pending a resolution in court.
An important aspect of this new legislation is the involvement of the courts throughout the process. The authorities must make a case to the courts (except in the case of an emergency seizure) to authorise the initial seizure. Thereafter, the courts must give consent to the continued retention of the cryptoassets.
Indeed, the maximum length of time the cryptoassets can be held is two years with the option for the authorities to hold them for an additional one year in exceptional circumstances. However, the authorities must make the case for the additional retention period and the courts must consider whether it is warranted. Otherwise, the right to hold the asset will end.
As the courts are involved in cryptoassets seizure cases, those affected can make representation to seek their release. The courts will weigh up the benefit to the authorities in retaining control of the cryptoassets. If the court is no longer satisfied with the reasons given for their retention, it will order their release. The court will also take into account the financial damage sustained by and the inconvenience caused to the owners of the cryptoassets by their retention. Where the cryptoassets are detained by the authorities, the owners cannot use or trade them and potentially miss out on opportunities to make significant gains.
The cryptoasset solicitors at Lewis Nedas Law are experts in their field. They can advise on and guide you through all aspects of seizure, retention and release of cryptoassets. If you need advice or assistance on any aspect of cryptoassets, please take expert legal advice from Lewis Nedas Law’s crypto asset solicitors.
Blog post by expert crypto asset defence solicitor Siobhain Egan. For expert, trusted legal advice, please telephone us on 020 7387 2032 or complete our online enquiry form.
Investing in crypto assets carries risk because they are unregulated types of investments. When you invest in traditional investments, you are mostly covered by regulation. If there is a failure you should receive compensation. Not so with crypto assets.
However, people are attracted to crypto assets by the possibility of extraordinary gains. Unfortunately, criminals also operate in the crypto field. They use sophisticated tactics to steal your money and any crypto assets you already hold.
Perhaps one of the most common types of crypto fraud is where criminals set up a fake trading exchange. They promise high returns from crypto dealing through glossy websites with fake celebrity endorsements. Social media promotions aim to draw you into the scam and create an account on their fake platform. They then ask you to send money to your account. Usually it shows initial excellent returns, encouraging you to send more money. Eventually, however, you are locked out and they steal your money.
Another type of fraud is where the scammers approach holders of crypto currency with the aim of gaining access to their wallets. Once the fraudsters gain access to your wallet, they will change the password and lock you out.
If you do wish to deal in crypto assets, you must check the company you are dealing with is properly registered with the Financial Conduct Authority (FCA). Crypto asset companies trading in the UK must register with the FCA. You should check the Financial Services Register to ensure the crypto company you are dealing with is registered.
Most scammers encourage you to send money to your account on their online fake trading platform. You normally do this through digital banking where you instruct funds to be sent to the online account on the fake platform.
Banks in the UK are under an obligation to monitor customer accounts for irregular activities. If they think the activity in your account is unusual or not within your normal spending habits, it should be flagged to their fraud prevention department to check. If they think the activity is suspicious, they should contact you to discuss it. However, this does not always happen.
If you have been scammed and have sent money to a fake trading platform, complain to your bank immediately. Explain that you have been scammed and ask them to investigate the payments you made. Then ask them to explain why they did not contact you about these.
The bank will likely reject your complaint. When they do that, you should contact the Financial Ombudsman Service (FOS). They will investigate the complaint and decide whether the bank has failed to protect you. If they decide that it has, they can order the bank to compensate you.
If you need assistance on any aspect of crypto assets, please take expert legal advice from Lewis Nedas Law’s crypto asset solicitors.
Blog post by expert crypto asset defence solicitor Siobhain Egan. For expert, trusted legal advice, please telephone us on 020 7387 2032 or complete our online enquiry form.
The phrase (digital assets) covers a myriad of different and distinct assets, but is broadly understood to mean assets stored in a digital or online form.