UK court puts Chinese law at center of 61,000-BTC claims

The High Court ruled on 12 October that Chinese law will govern investors’ claims to more than 61,000 bitcoin seized in a fraud case, according to the court’s judgment. The coins came from investment schemes run in China by Zhimin Qian between 2014 and 2017; The Block put their current value at about £3.8 billion ($5 billion).

The ruling sets the legal test for victims’ claims, but does not decide who owns the bitcoin or who will receive it.

What did the judge decide about the victims’ claims?

Mr Justice Turner decided which country’s law applies, not whether the investors have rights to the coins. The claims were brought under section 281 of the Proceeds of Crime Act 2002, which lets people ask the court to declare that property in recovery proceedings belongs to them.

To succeed, applicants must show they have a proprietary interest in the bitcoin. A claim to repayment from the fraudsters as a creditor is not enough. The judge held that Chinese law governs whether those property rights exist.

The investors had argued for English law or a mix of English and Chinese law. The Director of Public Prosecutions argued for Chinese law. The court’s decision means the next stage will examine the claimants’ rights under Chinese law; the judgment says no evidence of that law had yet been heard.

How did the fraud proceeds become bitcoin?

The judgment describes around ten schemes Qian designed and ran in China from 2014 to July 2017. Funds raised from investors totalled about 40.2 billion yuan, or £4.1 billion, according to a Chinese court judgment cited by the High Court.

Some proceeds were converted into bitcoin before Qian left China. The court records purchases through a Huobi account, over-the-counter transactions in China and mining machines located there. More than 61,000 bitcoin are now among assets controlled in England and Wales.

What remains before the coins can be claimed?

The court must still determine whether individual applicants can establish ownership rights under Chinese law. The High Court’s ruling does not itself award the bitcoin to the UK government, the victims or any other party.

The Director of Public Prosecutions brought civil recovery proceedings under Part 5 of the Proceeds of Crime Act. For investors, the practical task is to show that their particular claims give them a proprietary interest in the seized assets under the law the judge selected. The Block reported that claimants’ lawyers are pursuing an appeal.

Sources

• the court’s judgment — caselaw.nationalarchives.gov.uk
• reported that claimants’ lawyers are pursuing an appeal — theblock.co