The English Court: A Fraudster’s Crypto-nite
Cryptoassets are essentially electronic currencies which are offered as an alternative to centralised national currencies, the first and arguably most famous of which is Bitcoin.
The term cryptoasset also tends to be used as a catch-all for any form of digital asset that exists solely within the internet. A cryptoasset uses cryptography, peer to peer networking and distributed ledger technology (DLT) that regulates the creation of any new units. DLT also helps verify transactions and secures them without the need of any involvement from a third party.
There’s no simple answer to this question, but there are a few red flags which you could look out for:
That doesn’t mean that a site which doesn’t exhibit these features is genuine. As with any financial investment, you should proceed with caution and only after you’ve properly checked out the place and people you’re thinking of sending your money to.
On the assumption that there are links to England and Wales, you have a number of options in order to investigate and try to recover your money or crypto assets:
Claims involving crypto assets can involve complicated arguments relating to what country’s law might apply and in which country’s courts could a claim be brought. The solicitors at Kingsley Napley are qualified to advise on the laws of England and Wales. Whilst we often work with lawyers in other countries, unless there is a link to England or Wales, getting an English firm involved may be unnecessary and may just increase costs.
We can advise you on claims against various parties including exchanges. We will need to see the terms and conditions which govern your use of the exchange which may dictate where a claim can be brought and which country’s laws will apply to any claim and which may include limitations or exclusions of liability on behalf of the exchange.
There are numerous reasons why an exchange or wallet provider might freeze a wallet. You might need to update your ID documents, or there may be a misunderstanding about a transaction, or the exchange or wallet provider might have cause to suspect money laundering or the receipt of proceeds of crime. However, there might also be technical reasons why a wallet could be frozen. Likewise the inability to access a wallet or the assets in that wallet could be the first sign that something is wrong with the provider.
Whilst we can assist with some of those reasons, we cannot necessarily speed up the release of a wallet if there are suspicions of money laundering or receipt of the proceeds of crime, particularly if a Suspicious Activity Report has been made to the NCA. We will not be able to help if a technical glitch has caused the freeze of your wallet.
Many exchanges and wallet providers reserve the right to close accounts in certain circumstances. If this has caused you to suffer a loss you might want to instruct us to look at the terms and conditions for use of the account to see whether the exchange/wallet provider had the right to close your account or whether they have breached their own terms in doing so.
Not to retail customers. Since 6 January 2021, a ban has been in force prohibiting the sale, marketing and distribution of derivative products (including CFDs, futures and options) as well as exchange traded notes (ETNs) which reference what are referred to as unregulated transferable cryptoassets. The ban only applies to retail clients and not to professional clients or eligible counterparties. Breaching the ban is a criminal offence and great care should therefore be taken if engaging in activities which could be considered to fall within the remit of new restriction.
All crypto firms operating by way of business in the UK are now required to register with the FCA under the Money Laundering Regulations before engaging in crypto asset activities. This covers three principal categories of activity:
Operating without the required registration may constitute a criminal offence or render the firm liable to a civil penalty.
Applications for registration are made via the FCA’s online system, Connect.
You will need to pay a fee of £2,000 if your business has UK crypto asset income of up to £250,000 and £10,000 if you have income of more than £250,000.
Businesses are required to provide:
You must also disclose to the FCA any issues as to why your business may not be fit and proper to be regulated by the FCA for these purposes. This is something that the FCA takes very seriously, and giving them false or misleading information may be a criminal offence.
The FCA has three months to determine an application but this time period only starts to run when the FCA is satisfied that it has received all the information it requires: where further information has to be requested, this can significantly extend this three month period.
The registration process is a rigorous one and many firms are finding that their applications have been unsuccessful. There is a process by which a decision to refuse an application to register may be challenged. However, it may be more practical simply to withdraw the application, consider whether there are steps which may be taken to address the concerns raised by the FCA and, if so, submit a new registration application in due course.
The FCA may make contact with firms and individuals who are not currently registered under the Money Laundering Regulations and / or authorised under the Financial Services and Markets Act 2000 where the FCA considers that they should be. Registration and authorisation are two separate regimes but operating without required registration or authorisation are both criminal offences. It is therefore critical that you seek legal advice and engage proactively with the regulator to address their concerns.
No one factor determines how money made on trading crypto assets will be taxed and the circumstances must be looked at carefully as whole. In the UK, money made by an individual is likely to be taxed as capital (on the basis that the crypto assets are held as investments) and so capital gains tax will be payable. However, income tax will apply if a trade is carried on. This is a question of fact that will be determined by, for example, the frequency of trades and how organised the activities are. Advice should always be taken on this, together with the inheritance tax implications of owning crypto assets and whether any overseas tax implications are relevant.
Different considerations will apply to companies which own crypto assets.
Our team of specialist crypto asset lawyers bring together legal expertise from multiple disciplines across the firm, including our corporate and commercial, regulatory, dispute resolution, criminal, family, real estate & construction and employment practices. Our integrated team are able to advise on:
Our recent crypto asset experience includes:
Partner and Head of Department
The English High Court, in Mr Dollar Bill Limited v Persons Unknown and Others  EWHC 2718 (Ch), has once again come to the rescue for victims of fraud – this time armed with a Norwich Pharmacal Order to be served outside the jurisdiction.
On 10 January 2020, the Financial Conduct Authority (FCA) became the anti-money laundering (AML) and counter-terrorist financing (CTF) supervisor for UK cryptoasset firms. Two years in, how effectively is it performing its role as the gatekeeper of the new registration regime?
With the price of crypto assets generally making a good recovery from the Covid-19 related decline of 2019 contrasted with the very recent volatility following issues with the adoption of the cryptocurrency as legal tender in El Salvador, investors in cryptocurrencies might be considering realising some of their gains to try to help minimise any further instability.
The Financial Conduct Authority (FCA), in its annual business plan published today, sets out its areas of focus for the year ahead. It is, as ever, essential reading for all those in the regulated sector.
For the fourth year the FCA has published research on the changing relationship between consumers and cryptoassets. In spite of the pandemic, the strong upward trend in public engagement and media coverage has continued, with the FCA estimating 2.3 million adults now hold cryptoassets.
A Director at the National Crime Agency recently voiced concern about crypto assets being used to fund property purchases in the UK. The NCA’s Nigel Leary was quoted by The Times as saying: “Anything purchased with crypto assets I’d be slightly sceptical about. I’d like to see why they’re being done in that way and what the requirement is for that anonymity, and why it needed to be done in a crypto transaction.”
The price of Bitcoin and other crypto assets is notoriously unstable. Whether caused by a cryptic crypto related tweet from a billionaire inventor, or a crypto crackdown being announced by regulators of the world’s second largest economy, the rise and fall of crypto assets continues to prove that crypto can be risky business.
Despite the Covid-19 pandemic, 2020 was an incredible year for crypto assets. Largely driven by the increased demand from institutional investors, Bitcoin shattered its previous price records. However, its pseudonymous nature and the ease with which it allows users to instantly send funds anywhere in the world makes crypto assets appealing to criminals.
Hot on the heels of its consultation on bringing cryptoasset inside the scope of the financial promotions regime at the tail end of last year, the FCA has launched a further consultation on the UK’s regulatory approach to cryptoassets and stablecoins.
As of 10 January 2021, all cryptoasset firms are required to be registered with the Financial Conduct Authority (FCA) under the Money Laundering Regulations.
Research recently undertaken by the FCA has found that 5.35% of the UK population hold (or have previously held) cryptoassets where in 2019 this figure was 3%. For several years now the Government, the Bank of England and the FCA have been consulting on and considering how best to regulate this burgeoning market.
The year 2019 started with plenty of optimism regarding the growth of Security Token Offerings (STOs). Many articles at the start of the year suggested, like one on TokenMarket, that “it’s looking very likely that 2019 will be the year of the security token offering”. In this blog we look back on some of the key moments of 2019 with regard to STOs and consider whether 2019 really was the dawning of a new era worthy of the revolutionary hype back at the start of the year. However, if you would first like to take a step back and digest a user-friendly introduction to the concept of security tokens, please listen to our podcast or read our earlier crypto assets blog.
In just ten years, cryptoassets have become a £100 billion industry. We now face the alarming prospect that millions of pounds can be hidden behind a few lines of computer code without ever touching a bank account. If your soon-to-be ex-partner has made a fortune with Bitcoin, how do you get a share?
The tenth anniversary of the first ever BitCoin transaction will fall in April 2020. Not many people are using cryptoassets for everyday transactions, such as a takeaway pizza order and as such Satoshi Nakamoto’s vision of a stateless peer to peer electronic currency is yet to be realised, but in the last few years cryptoassets have certainly entered the public consciousness, even if that does mostly relate to the huge spike in the value of BitCoin in December 2017.
Security tokens are a digital representation of ownership rights in real world assets (such as property or shares) and have captured the curiosity of entrepreneurs, startups and investors. This blog summarises the potential benefits and pitfalls of security tokens and is part of our wider crypto assets blog.
The Singapore International Commercial Court (SICC) case of B2C2 Ltd v Quoine Pte Ltd  SGHC(I) 03 considers how the law relating to mistake could apply to contracts formed on an automated basis by computers using algorithmic software.
Whether you are in the market for short-term profit or making long-term investments, adequate planning is certainly a worthwhile (and small) investment of your time and money. If you’ve been savyy enough to successfully invest in crypto-assets, make sure you are smart enough to ensure your loved ones can benefit, should the worst happen.
“Cryptoassets have attracted significant and growing attention from consumers, markets, governments and regulators globally”, stated the FCA earlier this year in launching its consultation on its Guidance on Cryptoassests. Jill Lorimer has previously commented on the Cryptoassests guidance.
The aim of the Guidance is to “provide regulatory clarity for market participants carrying on activities in this space” and it appears to do just that.
The recent confirmation by the UK Financial Conduct Authority (FCA) that it is investigating 18 firms involved in the sale of crypto assets, such as Bitcoin, indicates a ramping up of regulatory focus on the controversial sector.
The Treasury Committee’s inquiry into economic crime is one of the most wide-ranging of the committee’s current workstreams, and its conclusions are keenly awaited.
As well as assessing the effectiveness of the anti-money laundering regime in the UK, MPs have been examining the impact of economic crime on consumers.
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