Crypto Asset Recovery in Fraud Cases After Police Seizure
Introduction: Scam victims and Asset Recovery
There’s a huge rise in digital scams and fraud including cryptocurrency-related schemes.
If victims have reported the matter to the police, the police may investigate and seize assets relating to the crime. Such assets would include virtual assets such as digital tokens, non-fungible tokens (NFTs) and cryptocurrency.
Victims can seek recovery of assets, including money and virtual assets, which have been seized by the police. Cryptocurrency has been increasingly recognised by the law as a class of property. Thus, it can be protected, traced, and seized for recovery. It would be a valuable asset that victims may want to recover from the police.
Disposal Inquiry for Monies Involved in a Scam
In scams, there would usually be multiple parties claiming an asset (“the Asset”), because the scammers would have layered and integrated the assets through multiple victims. The scam victims may then become claimants who try to recover the Asset which they were cheated of.
When the police no longer require them, a court proceeding called a Disposal Inquiry will be conducted for the court to determine on a rough and fast basis to who the assets should be returned. A victim may also apply for early disposal under the Criminal Procedure Code.
The court will have to consider who has the property interest (or the best interest) to the Asset.
The Court will consider which claimant has lawful possession of the assets at the time of the Disposal Inquiry and awards the Asset to him accordingly (“Lawful Possession Test”). In previous cases, the Court refused to award the Asset to parties if they gained the Asset through illegal or questionable means. Some examples include:
a) Assets were proceeds of illegal moneylending;[1]
b) No satisfactory explanation on how a claimant came into possession of the Assets.[2]
To date, there appears to be no cases where two competing claimants were awarded a proportion of the Asset (“Asset Apportionment”). For example, Claimant A and B were both victims of a Bitcoin scam and tried to lay claim on $100,000 that is now in Claimant A’s bank account. The Court would likely award the full $100,000 to either Claimant A or B - it does not split the $100,000 amongst both claimants. While this remains a possible area for improvement in the law, it remains to be seen whether there will be future Court decisions ordering Asset Apportionment, rather than ordering the full Asset to one claimant only.
The court will generally not wade into in-depth legal and evidential issues of property ownership.
Nonetheless, adducing one’s own evidence and cross-examination of witnesses are availed to parties. However, in cases where all claimants agree on the facts, the Court can sometimes direct that parties file an Agreed Statement of Facts and therefore waive off the need for cross-examination.
Police Involvement and Disposal Enquiry Orders
The police will also have their own investigation report setting out details and evidence on the background, the claimants, the assets, and the interests claimed.
It’s important for victims to make known to the police early their claim to the Assets and ask for updates on the case, including the investigation report on the assets seized and claimed.
Often, however, the police may only be able to seize a small fraction of the scammed Assets, and thus only the seized portion would be available for division at a disposal inquiry. Also, victims who fail at the Disposal Inquiry (DI) may still claim in civil proceedings for the asset against the other persons who were granted the assets from a DI.
Once the Court has granted the Disposal Inquiry Order, the police/relevant enforcement agency will release the Asset to the rightful claimant (Claimant A). If a competing claimant (Claimant B) is dissatisfied with the outcome, he may (i) apply for a criminal revision and/or (ii) apply for a stay of execution to prevent the Assets from flowing to Claimant A.
We have assisted clients in various disposal inquiries and would be happy to assist if you require an in-depth consultation.
[1] Oon Heng Lye v Public Prosecutor [2017] 5 SLR 1064.
[2] AB Partners Pte Ltd v Public Prosecutor [2020] 4 SLR 1082: in this case, the Asset flowed to the Applicant, which was a company. But the controllers of the company could not satisfactorily explain how the Applicant rightfully came into possession of the Asset.