UK High Court Rules Chinese Law Governs Claims Over $5 Billion in Seized Bitcoin
Chinese law will decide who owns over 61,000 seized bitcoin
Mr Justice Mark Turner of the UK High Court ruled on Monday that Chinese law must be used to decide whether victims of a multibillion-dollar investment fraud have ownership rights to more than 61,000 bitcoin seized by London's Metropolitan Police.
The case involves Zhimin Qian, who ran Ponzi schemes in China between 2014 and 2017. She was sentenced to 11 years and eight months in prison last November after pleading guilty to money laundering offenses. The bitcoin at issue was purchased using proceeds from the fraud before Qian fled to Myanmar in July 2017.
Key numbers in the case
- Estimated 61,245 BTC seized, valued at roughly £3.8 billion ($5 billion), according to wallet addresses tracked by onchain analytics platform Arkham.
- About 16,000 Chinese victims have joined the UK proceedings, according to Caixin.
- The UK ranks third among governments by bitcoin holdings, behind the United States (estimated 328,372 BTC) and China (190,000 BTC).
How the fraud worked
The bitcoin was acquired through multiple channels: purchases on a Huobi trading account (now known as HTX), over-the-counter transactions in China, and mining. London police seized devices used to access the bitcoin during searches in October and November 2018, after Qian relocated to the UK.
What the judge said
The ruling forms part of civil recovery proceedings brought by the Director of Public Prosecutions. Under Section 281 of the Proceeds of Crime Act 2002, investors can seek a declaration that seized property belongs to them. Turner stated that applicants must demonstrate a proprietary interest in the bitcoin rather than simply claiming repayment from the fraudsters.
Law firm Duan & Duan, which represents some of the victims, explained that a personal claim as a creditor for the value of money paid is not sufficient on its own.
Victims push for an appeal
At a hearing in July, the victims' lawyers wanted the High Court to apply English law, or a combination of English and Chinese law, to their claims. Prosecutors argued that Chinese law should govern. Fieldfisher, the lead firm representing individual claimants, told the Financial Times it is pursuing an appeal against Turner's ruling.
Duan & Duan UK LLP partner Jackson Ng said, "Today's judgment is an important decision for the many thousands of Chinese investors who lost money in the Tianjin Lantian Gerui scheme." He added that the court held whether victims retain rights in the frozen bitcoin will be decided under Chinese law.
What is still undecided
Monday's ruling did not determine who owns the bitcoin. The court must still decide whether the investors have valid ownership rights under Chinese law. The Financial Times reported that the ruling could improve the UK government's chances of retaining much of the seized bitcoin, as victims may face difficulty establishing ownership under Chinese law.
Caixin also reported that victims may be limited to their original investments and interest rather than a share of any gains in bitcoin's value.
Sources
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