UK regulators and law enforcement are beginning to grapple with the burgeoning cryptocurrency industry. Law enforcement around the world is now recognising the threat level of criminals using cryptocurrencies to transact in regard to crimes, as well as moving and hiding criminal property. Criminals use cryptocurrencies to transfer criminal property quickly, cheaply and anonymously across international borders. Law enforcement is further realising that existing investigative powers are not always suited to maximising the value from the proceeds of crypto crime.
Pursuant to the Economic Crime and Corporate Transparency Act 2023 (ECCTA), the UK has recently amended the Proceeds of Crime Act 2002 (POCA) to more easily enable law enforcement to seize, retain and realise crypto-assets in criminal (section 47c, section 47J-M and section 67ZA of the Proceeds of Crime Act 2002, as amended by schedule 8 of the Economic Crime and Corporate Transparency Act 2023) and civil (section 303Z29, section 303Z31 and section 303Z54 of the Proceeds of Crime Act 2002, as amended by schedule 9 of the Economic Crime and Corporate Transparency Act 2023) recovery proceedings.
Whilst the trial in 2023 preceded the incorporation of the ECCTA into POCA, the latest developments in the case of Boys at Preston Crown Court illustrate how law enforcement has developed its approach to the misuse of crypto-assets by criminals.
R v Boys
On 13 June 2023, Boys et al were convicted at Preston Crown Court of money laundering, Caton and Robinson were additionally convicted of fraudulently obtaining crypto-assets and cash from an Australian crypto exchange. The defendants were sentenced to six years, four and a half years, and four and a half years imprisonment, respectively. The convictions followed a multi-jurisdictional criminal investigation involving international cooperation between the authorities in England, Australia and Finland. Post-confiscation proceedings were adjourned.
Compensation, confiscation and civil recovery
On the 17 January 2025, Preston Crown Court made a confiscation order against the convicted defendants. One suspect had died before trial and the Crown Prosecution Service (CPS) used civil recovery powers under part 5 of POCA to recover criminal property from the deceased estate.
The purpose of the confiscation order was to assess the criminal benefit to the defendants. Additionally, and separately, the victim crypto exchange was fully compensated for its loss. In total the defendants were ordered to return over £23 million, which they had fraudulently obtained and laundered.
POCA confiscation orders are made by the Crown Court, pursuant to the guideline for sentencing in fraud provided by the Sentencing Council in 2014. POCA is separate and distinct from criminal sentencing, including making compensation orders. The purpose of POCA is to assess the criminal benefit and to deprive criminals of the proceeds of crime.
In the case of Boys, the confiscation order included 445 bitcoin, luxury watches, houses, cars and cash.
Interestingly, the bitcoin could have depreciated in value, but in fact given the prevailing market, the bitcoin had increased in value by £3 million. The £3 million windfall was split by the Home Office, the courts and Lancashire Police, pursuant to the Asset Recovery Incentivisation Scheme (ARIS). Although in Boys the prosecution secured a £3 million profit from the value of the crypto seized, it could quite easily have been the opposite due to the volatility of the crypto market.
Boys was a pre-ECCTA case, however we argue that new POCA powers enacted under ECCTA to sell seized crypto for cash, in the event of market volatility, do not go far enough to give prosecutors adequate powers to properly realise the full value of crypto in government hands.
Government handling of crypto in long criminal investigations under the ECCTA 2023
Under the amended POCA, the police and prosecution authorities can retain crypto-assets similar to cash seizure powers. Further, the ECCTA permits a court application to convert retained crypto-assets into cash on application of the victim or law enforcement prior to a confiscation proceeding. The rationale for such an application is to mitigate risks regarding the volatility in terms of the value of the assets. Section 303Z54 of POCA states: ‘In deciding whether to make an order under this section the court must have regard to whether the cryptoassets (as a whole) are likely to suffer a significant loss in value during the period before they are released or forfeited’. The Ministry of Justice’s Explanatory Notes to the Economic Crime and Corporate Transparency Act 2023 do not provide the parties or a judge additional guidance as to when an application should be granted. As noted above, the market can fall very quickly in the time that it takes to prepare, list and hear such an application.
Working with crypto market volatility
Although under UK law cash and crypto are more or less legally equivalent, we believe the nature of the crypto market demands that law enforcement take a more nuanced and speedy approach to maintain the value of the asset or indeed extract additional value from the asset over the course of a criminal investigation, trial and subsequent confiscation proceedings. Cash is put on deposit, to maintain value or accrue value. However, nothing appears to have been done in Boys to maximise the value or minimise the loss with respect to the crypto-assets during the criminal investigation.
It appears that in Boys, the authorities were fortunate the market had improved at the point of realisation, whereas the market could easily have moved in the opposite direction. Hypothetically, if Boys had been acquitted on appeal and the market had fallen, Boys would have been out of pocket.
Boys was a great success for the CPS. The victim crypto exchange was made whole, and a confiscation order made against the defendants. Although Boys predated the ECCTA 2023 being consolidated into POCA, the seized bitcoin was sold at a profit, but in truth, the windfall was more luck than good stewardship.
Under the new laws, had Boys been acquitted, pursuant to section 303Z64 POCA, Boys could have made an application for compensation, and if the court was satisfied that he had suffered a loss as a result of the retention or conversion of his crypto-assets, it can order compensation to be paid. However, the amount is whatever the court thinks is reasonable and, therefore, does not necessarily equate to the amount of value increase of the crypto-assets.
Therefore, it is not just the issue of maintaining the assets or turning them into cash in the event of a market downturn using the new POCA powers, but also the converse, using the time prosecution have the assets to use it for profit.
Conclusion
We do not think that the amended POCA legislation goes far enough to safeguard value and/or increase the value of seized crypto-assets in lengthy and complex criminal investigations. A retreat to cash as per the new regime is not the best solution to maximise value in a volatile market.
As the secondary market for digital assets continues to grow, profit could be made from lending cryptocurrencies, as well as through innovative methods such as tokenisation, whereby tokens representing the assets could be used to allow for more controlled, safe and transparent asset management, whilst also reaching a bigger, more liquid market.
We believe the returns for lending or otherwise treasuring crypto will almost inevitably be better than converting crypto into cash.
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