The U.K. government is taking steps to retain most of the £5 billion (approximately $7 billion) in Bitcoin it seized from Zhimin Qian in 2018, following her guilty plea to possessing criminal property. Qian’s involvement in a large-scale investment fraud scheme, which spanned from 2014 to 2017, resulted in substantial financial losses for over 120,000 victims in China. With Qian’s conviction, a critical question has emerged regarding the fate of the seized Bitcoin, particularly as the victims seek compensation.
The legal proceedings are set to unfold as the Crown Prosecution Service has initiated civil recovery measures at the High Court, with the first hearing scheduled for January. Victims of the fraud have begun civil actions in an attempt to secure compensation. Experts indicate that these claimants are entitled to relief under English Law, contingent on their ability to demonstrate a connection to the seized Bitcoin.
Ashley Fairbrother, a legal expert at Edmonds Marshall McMahon, expressed uncertainty around the government’s legal standing in retaining the seized cryptocurrency. He noted that victims have avenues to assert claims on the seized property under Section 281 of the Proceeds of Crime Act 2002. Fairbrother explained that victims could utilize various legal frameworks, including trust law, to establish their proprietary claims.
The court may consider several factors when determining how to cater to the victims. Fairbrother mentioned a “pari passu” approach, which seeks to distribute the funds proportionally based on victims’ contributions to the fraudulent scheme. This could significantly benefit those affected, many of whom have lost a collective £640 million.
Despite this, there is caution concerning the outcome of the civil proceedings. Fairbrother warned that, even if victims are awarded compensation, it might only reflect the value of their losses at the time, likely in fiat currency rather than Bitcoin. This outcome could prevent victims from reaping any benefits from the substantial appreciation of Bitcoin since the time of the fraud.
Victims’ representatives from London-based international law firm Fieldfisher have voiced concerns about the prolonged absence of their clients’ property, highlighting that many are elderly or vulnerable individuals who have lost their life savings. They assert that the frozen Bitcoin rightfully belongs to the victims, not the U.K. state, and that the government does not possess the right to sell or otherwise mishandle the seized assets.
The civil proceedings threaten to become contentious, potentially dragging on for several years. This complexity raises further questions about the U.K. government’s plans for the seized Bitcoin. There are suggestions that Treasury officials have debated using the crypto windfall to address budget deficits ranging from $34 billion to $67 billion. However, selling the Bitcoin could parallel past controversial actions, such as the U.K.’s 1999 gold sale during a downturn.
As this situation develops, it remains to be seen how the High Court will navigate the intricacies of the case, particularly in balancing the interests of fraud victims with those of the government.
