1 00:00:02,560 --> 00:00:06,360 Speaker 1: I'm Stacy Marie Ishmael, Managing editor of Crypto for Bloomberg News, 2 00:00:06,720 --> 00:00:10,400 Speaker 1: And this is Bloomberg Crypto, a daily Bloomberg I heard podcast. 3 00:00:10,920 --> 00:00:27,080 Speaker 1: It's Monday, August one. Picture this. You're the FBI trying 4 00:00:27,120 --> 00:00:29,120 Speaker 1: to track down the digital keys that will give you 5 00:00:29,160 --> 00:00:33,440 Speaker 1: access to illicit or stolen crypto. You're rifling through books, 6 00:00:33,800 --> 00:00:38,360 Speaker 1: paper stuffed in suitcases, You're tearing open gum wrappers. It's 7 00:00:38,400 --> 00:00:41,600 Speaker 1: like something out of a movie. But in the world 8 00:00:41,640 --> 00:00:45,000 Speaker 1: of crypto, these odd nooks and crannies have become totally 9 00:00:45,120 --> 00:00:50,800 Speaker 1: normal places for law enforcement to look for digital passwords alone. 10 00:00:51,240 --> 00:00:53,440 Speaker 1: Cops in the U S and the UK sees billions 11 00:00:53,479 --> 00:00:57,200 Speaker 1: of dollars in crypto assets from various different criminal busts. 12 00:00:57,720 --> 00:01:00,920 Speaker 1: With so much money on the line, enforced agencies around 13 00:01:00,920 --> 00:01:04,120 Speaker 1: the world have had to learn and learn quickly how 14 00:01:04,160 --> 00:01:08,360 Speaker 1: to spot these digital assets and seize them from accused criminals. Today, 15 00:01:08,600 --> 00:01:11,560 Speaker 1: I'm joined by Bloomberg reporters Ellen Milligan. They are spending 16 00:01:11,600 --> 00:01:15,040 Speaker 1: all this taxpayer money to train these police officers in crypto, 17 00:01:15,080 --> 00:01:18,480 Speaker 1: and then they're losing them. And David Vorriacos while the 18 00:01:18,520 --> 00:01:22,160 Speaker 1: crypto was in the possession of the US government stole 19 00:01:22,160 --> 00:01:24,440 Speaker 1: it from right under their noses. To discuss how the 20 00:01:24,440 --> 00:01:28,560 Speaker 1: seizures of digital assets are transforming policing policies and protocols 21 00:01:28,600 --> 00:01:34,280 Speaker 1: around the world. Ellen David, thank you so much for 22 00:01:34,360 --> 00:01:36,800 Speaker 1: joining us today. Thanks for having us. We're going to 23 00:01:36,880 --> 00:01:40,400 Speaker 1: talk about something kind of weird, which is how do 24 00:01:40,480 --> 00:01:46,200 Speaker 1: police officers sees imaginary money? And I don't just mean 25 00:01:46,240 --> 00:01:49,559 Speaker 1: imaginary in the sense of contested valuation. I mean imaginary 26 00:01:49,600 --> 00:01:53,560 Speaker 1: as in not cash, not physical, not things that you 27 00:01:53,560 --> 00:01:55,920 Speaker 1: can sort of wrap your head around. You know, people 28 00:01:55,960 --> 00:01:57,800 Speaker 1: are breaking down the door and they're like, freeze and 29 00:01:57,800 --> 00:02:00,240 Speaker 1: we're gonna take all your stuff. You have been writing 30 00:02:00,280 --> 00:02:03,560 Speaker 1: about what happens when cops sees crypto. Tell us more 31 00:02:03,560 --> 00:02:10,160 Speaker 1: about what that's like. Well, police traditionally have sees physical 32 00:02:10,200 --> 00:02:16,919 Speaker 1: items like jewelry, cash, cars, boats, planes, and with crypto, 33 00:02:17,120 --> 00:02:19,160 Speaker 1: they have to know that it's there, and they have 34 00:02:19,240 --> 00:02:22,880 Speaker 1: to be educated enough about the process to understand that 35 00:02:22,960 --> 00:02:25,920 Speaker 1: it has value and there are are unusual ways to 36 00:02:26,000 --> 00:02:28,679 Speaker 1: access it. And so that's what we wrote about. The 37 00:02:29,240 --> 00:02:33,519 Speaker 1: police around the world are educating themselves on what crypto 38 00:02:33,760 --> 00:02:36,800 Speaker 1: is and how to access it. Then once they get it, 39 00:02:37,120 --> 00:02:40,280 Speaker 1: how they store it and how they sell it and 40 00:02:40,360 --> 00:02:44,800 Speaker 1: ellen what does that look like. Well, really, there's a 41 00:02:44,840 --> 00:02:49,040 Speaker 1: few different elements to this. Like David said, there's the 42 00:02:49,160 --> 00:02:53,600 Speaker 1: seizing of the crypto and discovering it, which is easier 43 00:02:53,680 --> 00:02:58,280 Speaker 1: said than done, because often there's not a physical element 44 00:02:58,360 --> 00:03:02,520 Speaker 1: to crypto. Sometimes there is like kind of hardware device 45 00:03:02,720 --> 00:03:06,480 Speaker 1: that crypto wallets kept on or something like that, but 46 00:03:06,600 --> 00:03:12,880 Speaker 1: often these are digital assets, and to discover them and 47 00:03:12,919 --> 00:03:17,560 Speaker 1: then to seize them, you need a seed phrase that 48 00:03:17,720 --> 00:03:21,320 Speaker 1: accesses the crypto wallet. So even if you're holding a 49 00:03:21,520 --> 00:03:25,640 Speaker 1: keep key device for example, police won't know how much 50 00:03:25,680 --> 00:03:29,400 Speaker 1: bitcoin or another cryptocurrency is held on there until they 51 00:03:29,400 --> 00:03:33,440 Speaker 1: can access it using this kind of password. And then 52 00:03:33,520 --> 00:03:36,760 Speaker 1: they're storing it once they've seized it. How do they 53 00:03:36,880 --> 00:03:41,440 Speaker 1: keep this asset safe often for years while you go 54 00:03:41,520 --> 00:03:45,960 Speaker 1: through a criminal trial and then a forfeiture order. Um, 55 00:03:46,000 --> 00:03:49,760 Speaker 1: there's real security issues with hacks for example, but also 56 00:03:49,880 --> 00:03:52,960 Speaker 1: there's you know, in some cases there have been corrupt 57 00:03:53,000 --> 00:04:02,280 Speaker 1: police officers who have taken it for themselves. Um. And 58 00:04:02,320 --> 00:04:08,320 Speaker 1: then the last element is how you release that that cryptocurrency, UM, 59 00:04:08,360 --> 00:04:10,480 Speaker 1: if you give it back to victims or what value 60 00:04:10,520 --> 00:04:13,200 Speaker 1: you give it back to victims if the state keeps it. 61 00:04:13,920 --> 00:04:20,039 Speaker 1: These are the questions that law enforcement has been grappling with. 62 00:04:20,720 --> 00:04:23,560 Speaker 1: And what David and I really discovered is there's no 63 00:04:24,040 --> 00:04:28,360 Speaker 1: standardized procedure of the way that people do this. Everyone, 64 00:04:28,880 --> 00:04:30,719 Speaker 1: as in any of the parts, like each one is 65 00:04:30,720 --> 00:04:35,880 Speaker 1: idiosyncratic exactly, and every different law agency around the world, 66 00:04:36,040 --> 00:04:39,680 Speaker 1: and different law agencies within the same countries do it differently. 67 00:04:40,279 --> 00:04:42,080 Speaker 1: And the police, like the rest of the world when 68 00:04:42,080 --> 00:04:43,920 Speaker 1: it comes to crypto, have had to learn this as 69 00:04:43,960 --> 00:04:46,920 Speaker 1: they go along, and inevitably mistakes have been made along 70 00:04:46,920 --> 00:04:49,919 Speaker 1: the way, and they're still grappling with this. So you 71 00:04:50,000 --> 00:04:54,039 Speaker 1: mentioned kind of three elements, each of which sounds hilariously complicated. 72 00:04:54,160 --> 00:04:56,679 Speaker 1: So let's let's take one of each one in turn. 73 00:04:57,480 --> 00:05:01,400 Speaker 1: First of all, is the the identify kitian, right, like, 74 00:05:02,440 --> 00:05:05,440 Speaker 1: something suspicious is happening. We think that's a suspicious things 75 00:05:05,480 --> 00:05:09,800 Speaker 1: in crypto. We've figured out that that exists. What are 76 00:05:09,839 --> 00:05:12,960 Speaker 1: the steps involved in Okay, we think that this is suspicious. 77 00:05:12,960 --> 00:05:15,080 Speaker 1: We have, you know, good cause we have all the paperwork, 78 00:05:15,080 --> 00:05:18,240 Speaker 1: etcetera that's required. How do they even get those passwords 79 00:05:18,240 --> 00:05:22,839 Speaker 1: in the first place. Well, in identifying the suspicious crypto, 80 00:05:23,000 --> 00:05:25,920 Speaker 1: they can see the movement of crypto on the blockchain. 81 00:05:26,000 --> 00:05:29,679 Speaker 1: That is a public ledger ledger that they can see, 82 00:05:29,839 --> 00:05:32,839 Speaker 1: and they can. What they must first do is trace 83 00:05:32,920 --> 00:05:37,120 Speaker 1: it to criminal activity UH. And once they've traced it 84 00:05:37,160 --> 00:05:40,760 Speaker 1: to criminal activity, they can then get a court order 85 00:05:41,279 --> 00:05:46,479 Speaker 1: two seize wallets that are associated with UM, say stolen crypto. 86 00:05:46,600 --> 00:05:50,719 Speaker 1: At that point they can They cannot actually access those 87 00:05:50,720 --> 00:05:53,960 Speaker 1: wallets without the seed recovery phrases, and they can come 88 00:05:54,040 --> 00:05:57,240 Speaker 1: in different ways. They may be written on slips of paper, 89 00:05:57,720 --> 00:06:00,600 Speaker 1: They may get it from UM inside writers who are 90 00:06:00,600 --> 00:06:03,120 Speaker 1: familiar with it. But if they do not have those 91 00:06:03,160 --> 00:06:07,799 Speaker 1: seed recovery phrases, they can't. The police cannot access the crypto, 92 00:06:07,960 --> 00:06:11,839 Speaker 1: so they can't say compel and exchange to have that 93 00:06:11,880 --> 00:06:16,040 Speaker 1: crypto over to them. There's a case UM that's pending 94 00:06:16,200 --> 00:06:20,159 Speaker 1: in federal court in Washington in which UM, a guy 95 00:06:20,240 --> 00:06:25,719 Speaker 1: named Gary Harmon from Akron, Ohio, UM is alleged to 96 00:06:25,760 --> 00:06:29,479 Speaker 1: have stolen crypto right from out under the noses of 97 00:06:29,520 --> 00:06:33,760 Speaker 1: the Internal Revenue Service, which had seized crypto from Gary's 98 00:06:33,839 --> 00:06:39,400 Speaker 1: brother Larry Harmon, who pleaded guilty UM two charges associated 99 00:06:39,440 --> 00:06:43,520 Speaker 1: with running a crypto mixer and helping to obscure the 100 00:06:43,600 --> 00:06:49,160 Speaker 1: identity of crypto, and the federal government alleges that Gary Harmon, 101 00:06:49,480 --> 00:06:52,719 Speaker 1: while the crypto was in the possession of the U. 102 00:06:52,800 --> 00:06:55,359 Speaker 1: S Government, stole it from right under their noses and 103 00:06:55,640 --> 00:07:01,440 Speaker 1: has a value of many millions of dollars m. He's 104 00:07:01,480 --> 00:07:04,200 Speaker 1: scheduled to go to trial early next year, but there 105 00:07:04,200 --> 00:07:07,000 Speaker 1: have been negotiations that have been spelled out in court 106 00:07:07,040 --> 00:07:12,440 Speaker 1: papers in which uh, the federal government just wants the 107 00:07:12,520 --> 00:07:15,480 Speaker 1: seed recovery phrase so they can have the crypto, and 108 00:07:16,120 --> 00:07:20,440 Speaker 1: Gary Harmon's lawyers say that's essentially tantamount to him admitting 109 00:07:20,440 --> 00:07:25,560 Speaker 1: he committed the crime. Interesting, so all of the big 110 00:07:25,720 --> 00:07:28,400 Speaker 1: parts of jurisprudence that people might be familiar with now 111 00:07:28,440 --> 00:07:31,920 Speaker 1: being applied to the slightly more chaotic entities involved in crypto. 112 00:07:32,520 --> 00:07:37,040 Speaker 1: That sounds like fun. Ellen, you mentioned that that the 113 00:07:37,120 --> 00:07:41,120 Speaker 1: second part of this complex thing around storage. This seems 114 00:07:41,160 --> 00:07:43,360 Speaker 1: to be part of the problem the David is describing 115 00:07:43,400 --> 00:07:46,000 Speaker 1: if if another entity can just be like, nope, that's 116 00:07:46,040 --> 00:07:49,160 Speaker 1: mine and take it once that crypto has been seized 117 00:07:49,200 --> 00:07:51,080 Speaker 1: by the government or by the police, Like, what's going 118 00:07:51,120 --> 00:07:55,920 Speaker 1: on there? What are those fail safes? Exactly? And um, 119 00:07:55,960 --> 00:07:58,240 Speaker 1: a lot of these cases have come out of like 120 00:07:58,360 --> 00:08:03,480 Speaker 1: the teen time where there was kind of the last 121 00:08:03,520 --> 00:08:10,360 Speaker 1: big spike in crypto and then crashed before before spike UM, 122 00:08:10,400 --> 00:08:12,720 Speaker 1: and a lot of those cases came out of hacks, 123 00:08:12,760 --> 00:08:15,000 Speaker 1: and that just shows you even if the police are 124 00:08:15,040 --> 00:08:18,360 Speaker 1: holding it um and storing this crypto in their own 125 00:08:18,400 --> 00:08:22,560 Speaker 1: internal system or outsource system, there's still a danger that 126 00:08:22,560 --> 00:08:24,480 Speaker 1: that could be hacked. And when you've got cases like 127 00:08:24,520 --> 00:08:27,760 Speaker 1: the bit for next case that that David spoke about, 128 00:08:28,200 --> 00:08:31,480 Speaker 1: I mean, the whole world knows how much UM that 129 00:08:31,680 --> 00:08:35,839 Speaker 1: this law enforcement agency has ceased, and it becomes very vulnerable, 130 00:08:36,200 --> 00:08:40,400 Speaker 1: vulnerable because of that. I spoke to a small police 131 00:08:40,440 --> 00:08:45,439 Speaker 1: force in southern England for this story. They stumbled across 132 00:08:45,480 --> 00:08:50,679 Speaker 1: crypto for the first time accidentally really in twenty seventeen. 133 00:08:51,200 --> 00:08:54,080 Speaker 1: So this was a kidnapping case UM where a guy 134 00:08:54,200 --> 00:08:57,000 Speaker 1: was kidnapped. Turned out his house was a cannabis farm. 135 00:08:57,160 --> 00:08:59,560 Speaker 1: So they did some digging around and they found this 136 00:08:59,800 --> 00:09:03,280 Speaker 1: key key device which had a notepad attached to it 137 00:09:04,000 --> 00:09:08,520 Speaker 1: with two seed phrases and it had nine hundred grand 138 00:09:08,840 --> 00:09:14,160 Speaker 1: in bitcoin I think on it. And so what police 139 00:09:14,160 --> 00:09:16,520 Speaker 1: did is that there was no precedent for this. They 140 00:09:16,520 --> 00:09:18,880 Speaker 1: had no idea what to do. Most of them didn't 141 00:09:18,880 --> 00:09:21,680 Speaker 1: really know what crypto was. They bought their own keep 142 00:09:21,720 --> 00:09:26,520 Speaker 1: key device and they transferred UM the bitcoin from his 143 00:09:26,600 --> 00:09:30,280 Speaker 1: wallet to their wallet, their crypto wallet, and then they 144 00:09:30,480 --> 00:09:33,240 Speaker 1: kept this keep key device and the seed phrases in 145 00:09:33,240 --> 00:09:36,400 Speaker 1: a safe and only to hang on like a physical 146 00:09:36,960 --> 00:09:40,000 Speaker 1: a physical safe in the police station. And I need 147 00:09:40,040 --> 00:09:45,240 Speaker 1: two policemen had access to the to the safe. And 148 00:09:45,400 --> 00:09:50,160 Speaker 1: that's because in the silk Row case that David referred to, UM, 149 00:09:50,240 --> 00:09:54,199 Speaker 1: there two police officers ran off in that case in 150 00:09:54,280 --> 00:09:57,319 Speaker 1: the US with some of the money that they were 151 00:09:57,360 --> 00:10:01,160 Speaker 1: storing UM, and so there was a you the police 152 00:10:01,160 --> 00:10:04,040 Speaker 1: were very worried about corrupt police officers, but also about 153 00:10:04,120 --> 00:10:07,360 Speaker 1: losing losing the money. So that's how they did it. 154 00:10:07,440 --> 00:10:11,080 Speaker 1: And then UM they eventually sold it to a trusted exchange. 155 00:10:11,120 --> 00:10:14,240 Speaker 1: Now they don't do that anymore, not surprisingly because it 156 00:10:14,400 --> 00:10:18,120 Speaker 1: is very dangerous to keep such millions of dollars in 157 00:10:18,200 --> 00:10:23,199 Speaker 1: cryptus in a mini like small police station in southern England. 158 00:10:23,400 --> 00:10:27,240 Speaker 1: It's ridiculous now, UM, but these are the kinds of 159 00:10:27,280 --> 00:10:29,560 Speaker 1: ways that they would do it as they were learning 160 00:10:29,880 --> 00:10:33,360 Speaker 1: on the job. And I mean now what they do 161 00:10:33,400 --> 00:10:36,760 Speaker 1: and what most UK law enforcement agencies do, which is 162 00:10:36,800 --> 00:10:40,720 Speaker 1: they have a UM they outsource it to a company 163 00:10:40,760 --> 00:10:46,559 Speaker 1: called Comani, which is backed by a Ledger and others, 164 00:10:46,760 --> 00:10:50,839 Speaker 1: and it's they've got their own secure, high tech like 165 00:10:51,200 --> 00:10:54,840 Speaker 1: system of doing what they say. You know, I guess 166 00:10:54,880 --> 00:10:58,080 Speaker 1: time will time will tell. We'll be right back with 167 00:10:58,080 --> 00:11:01,439 Speaker 1: more from Bloomberg reporters David vore Yachos and Ellen Milligan 168 00:11:01,760 --> 00:11:03,839 Speaker 1: on how law enforcement is keeping up with this new 169 00:11:03,880 --> 00:11:13,240 Speaker 1: digital to mention of financial crime. I want to push 170 00:11:13,280 --> 00:11:15,679 Speaker 1: on something that you're saying here about. You know, they 171 00:11:15,720 --> 00:11:19,600 Speaker 1: tried some stuff, the stuff didn't necessarily work. Now they 172 00:11:19,640 --> 00:11:22,680 Speaker 1: may be getting better at it. How are they getting better? 173 00:11:22,800 --> 00:11:26,160 Speaker 1: Like where are they finding people? You've mentioned outsourcing, but 174 00:11:26,200 --> 00:11:30,520 Speaker 1: they obviously need police officers who are themselves trained in 175 00:11:30,640 --> 00:11:32,720 Speaker 1: knowing what to do. What has that process been like? 176 00:11:33,280 --> 00:11:36,480 Speaker 1: So in the UK UM the police lobbied the government, 177 00:11:36,559 --> 00:11:40,000 Speaker 1: the Home Office UM for funding to train about two 178 00:11:40,480 --> 00:11:45,760 Speaker 1: fifty officers around the country in how to investigate sees 179 00:11:45,960 --> 00:11:48,959 Speaker 1: and realize the value of these assets. They were dubbed 180 00:11:49,000 --> 00:11:58,000 Speaker 1: crypto tactical advisors and I think one or two from 181 00:11:58,040 --> 00:12:01,240 Speaker 1: every force around the country was trained in this and 182 00:12:01,360 --> 00:12:03,520 Speaker 1: that really helped them, and then they did a public 183 00:12:03,640 --> 00:12:07,719 Speaker 1: procurement process UM to outsource this, and I know that 184 00:12:07,720 --> 00:12:11,920 Speaker 1: that's been done in the US less successfully UM, which 185 00:12:12,000 --> 00:12:15,640 Speaker 1: David can tell you about. But actually the trouble that 186 00:12:15,679 --> 00:12:19,360 Speaker 1: they're having now is UM they've lost a number of 187 00:12:19,400 --> 00:12:24,160 Speaker 1: these crypto tactical advisors to coin based chain analysts, these 188 00:12:24,200 --> 00:12:27,160 Speaker 1: firms who can triple their pay. So that's something they're 189 00:12:27,240 --> 00:12:30,400 Speaker 1: really struggling with is they are spending all this taxpayer 190 00:12:30,440 --> 00:12:32,960 Speaker 1: money to train these police officers in crypto and then 191 00:12:33,000 --> 00:12:35,880 Speaker 1: they're losing them to these firms who can pay them 192 00:12:35,920 --> 00:12:39,480 Speaker 1: far more. So let me just make sure I'm understanding this. 193 00:12:39,679 --> 00:12:43,040 Speaker 1: I a US taxpayer, have nominally contributed to somebody working 194 00:12:43,040 --> 00:12:48,440 Speaker 1: for coin base right now essentially potentially I as a 195 00:12:48,559 --> 00:12:54,000 Speaker 1: UK taxpayer definitely UM. In the US I mean, the 196 00:12:54,559 --> 00:12:59,720 Speaker 1: FBI and the Internal Revenue Service have some extremely talented investigators. 197 00:13:00,440 --> 00:13:04,080 Speaker 1: They have a very large databases at their access which 198 00:13:04,080 --> 00:13:07,080 Speaker 1: are able to they're able to use to triangulate to 199 00:13:07,120 --> 00:13:10,480 Speaker 1: figure out who owns a wallet because they can follow 200 00:13:10,960 --> 00:13:15,319 Speaker 1: the movement of crypto across the blockchain in ways that 201 00:13:15,440 --> 00:13:19,679 Speaker 1: people can't do it UM who have only public access, 202 00:13:19,720 --> 00:13:23,640 Speaker 1: and they also work with firms like ch Analysis, which 203 00:13:23,840 --> 00:13:28,640 Speaker 1: um Ellen had mentioned, to help them put together who owns, 204 00:13:28,920 --> 00:13:32,720 Speaker 1: you know, disputed wallets. And I would also say that 205 00:13:32,760 --> 00:13:37,040 Speaker 1: the government is looking to privatize the storage and sale 206 00:13:37,280 --> 00:13:41,480 Speaker 1: of seized crypto assets. The Justice Department, through the marshals 207 00:13:41,480 --> 00:13:45,000 Speaker 1: has had sort of mixed success with that. Marshals used 208 00:13:45,040 --> 00:13:48,560 Speaker 1: to auction crypto themselves and they stopped in They were 209 00:13:48,559 --> 00:13:52,320 Speaker 1: trying to hire an outside firm and the two firms 210 00:13:52,360 --> 00:13:55,520 Speaker 1: that they had settled on both were disqualified because they 211 00:13:55,520 --> 00:13:59,800 Speaker 1: were too big under the the regulations, And so the 212 00:14:00,000 --> 00:14:02,680 Speaker 1: martials are doing it themselves, but they're looking for a 213 00:14:02,720 --> 00:14:08,240 Speaker 1: firm outside to do it for them. And Ellen this 214 00:14:08,360 --> 00:14:11,040 Speaker 1: is related to the third part of that complex tree, right, 215 00:14:11,080 --> 00:14:14,520 Speaker 1: which is the distribution once some sort of judgment has 216 00:14:14,559 --> 00:14:17,200 Speaker 1: been rendered on on either the crypto or the alleged 217 00:14:17,200 --> 00:14:21,840 Speaker 1: criminal involved. Yeah, this is almost the most complicated part 218 00:14:21,920 --> 00:14:26,360 Speaker 1: because there was no legal precedent for for this. And 219 00:14:26,680 --> 00:14:31,480 Speaker 1: what a court does when, for example, it finds someone guilty, 220 00:14:32,120 --> 00:14:36,600 Speaker 1: there's a forfeiture proceeding UM that happens later on and 221 00:14:36,680 --> 00:14:41,640 Speaker 1: often this happens years after UM. And what's the forfeiture 222 00:14:41,720 --> 00:14:46,080 Speaker 1: proceeding UM. In the UK you have the Proceeds of 223 00:14:46,120 --> 00:14:48,760 Speaker 1: Crime Act, and this is a twenty year old act. 224 00:14:49,520 --> 00:14:52,920 Speaker 1: And at the end of the case, when someone's found 225 00:14:52,920 --> 00:14:56,840 Speaker 1: guilty and sent to jail within a year, there's usually 226 00:14:57,880 --> 00:15:02,040 Speaker 1: court hearing where judge will decide the seat what to 227 00:15:02,160 --> 00:15:05,200 Speaker 1: do with the seized assets, whether the criminal can keep 228 00:15:05,240 --> 00:15:10,000 Speaker 1: some of them, whether they forfeit them um and also 229 00:15:10,560 --> 00:15:13,160 Speaker 1: how whether they stay with the state, whether they have 230 00:15:13,280 --> 00:15:18,080 Speaker 1: to be distributed to victims. For example, the trouble that 231 00:15:18,160 --> 00:15:21,200 Speaker 1: this police force had in the case I was talking 232 00:15:21,240 --> 00:15:24,880 Speaker 1: about earlier was this law was twenty years old when 233 00:15:24,880 --> 00:15:27,600 Speaker 1: crypto didn't exist, so they had to go to a 234 00:15:27,720 --> 00:15:32,240 Speaker 1: judge and convince them that this is an asset. The 235 00:15:32,320 --> 00:15:36,120 Speaker 1: most valuable asset in the case it was. They came 236 00:15:36,160 --> 00:15:41,359 Speaker 1: across cash about two hundred grand in cash, watches, artwork, gold, 237 00:15:41,640 --> 00:15:45,600 Speaker 1: but the crypto was the most valuable asset. The other complication, 238 00:15:45,680 --> 00:15:48,760 Speaker 1: and we've seen that even more so, is that crypto 239 00:15:48,840 --> 00:15:50,960 Speaker 1: will be a much different price than it was when 240 00:15:50,960 --> 00:15:53,200 Speaker 1: they seized it. And and and the good thing that 241 00:15:53,560 --> 00:15:56,920 Speaker 1: police have had up until this year was it ballooned 242 00:15:56,920 --> 00:16:01,120 Speaker 1: in price, so either the state or victim got quite 243 00:16:01,120 --> 00:16:03,160 Speaker 1: a good deal out of it. And I think what 244 00:16:03,280 --> 00:16:07,360 Speaker 1: police are now really grappling with is actually that that 245 00:16:07,440 --> 00:16:10,840 Speaker 1: crypto that they've been storing for so long has actually 246 00:16:10,880 --> 00:16:14,680 Speaker 1: fallen in price now quite a lot, what actually quite 247 00:16:14,680 --> 00:16:17,560 Speaker 1: a lot? And at what point do they sell it? 248 00:16:18,280 --> 00:16:21,200 Speaker 1: They're confined by the law, but at what point do 249 00:16:21,280 --> 00:16:25,440 Speaker 1: they convert that? Do they convert it before and they forfeit? 250 00:16:25,480 --> 00:16:29,640 Speaker 1: It's it's really complicated, and it's really those kinds of 251 00:16:29,680 --> 00:16:32,400 Speaker 1: questions are actually outside the law, and it's about instinct 252 00:16:32,560 --> 00:16:35,560 Speaker 1: or mist and David, is it similar in the US? 253 00:16:36,200 --> 00:16:40,760 Speaker 1: In the US, assets can be forfeited when someone is 254 00:16:40,800 --> 00:16:45,280 Speaker 1: convicted of a crime, but they're seized before someone is 255 00:16:45,280 --> 00:16:47,440 Speaker 1: convicted of a crime, so they may sit there for 256 00:16:47,480 --> 00:16:51,280 Speaker 1: a year or two, three four years while someone is 257 00:16:51,320 --> 00:16:56,960 Speaker 1: going through the judicial process, and the government cannot sell 258 00:16:57,000 --> 00:17:01,200 Speaker 1: those crypto assets until after as an order from the 259 00:17:01,280 --> 00:17:05,320 Speaker 1: judge saying it's okay to um to liquidate this. I 260 00:17:05,400 --> 00:17:07,800 Speaker 1: was going to say, there's an interesting case in San 261 00:17:07,840 --> 00:17:14,280 Speaker 1: Francisco where someone stole sixty thousand, three hundred seventy bitcoin 262 00:17:14,440 --> 00:17:18,800 Speaker 1: from the Silk Road site in November of It was 263 00:17:18,840 --> 00:17:21,120 Speaker 1: worth a billion dollars that then went up a great 264 00:17:21,119 --> 00:17:24,080 Speaker 1: deal more than that, and it's fallen since then. But 265 00:17:24,240 --> 00:17:28,080 Speaker 1: there's someone referred to only as individual X who agreed 266 00:17:28,119 --> 00:17:31,720 Speaker 1: to forfeit it, and so he's not he or she 267 00:17:31,920 --> 00:17:36,240 Speaker 1: is not contesting ownership. Um. But there are a bunch 268 00:17:36,280 --> 00:17:39,520 Speaker 1: of other people who are putting claims in saying well, 269 00:17:39,600 --> 00:17:43,399 Speaker 1: they had some of the crypto that was in dispute 270 00:17:43,560 --> 00:17:48,560 Speaker 1: and um. So the judge in San Francisco is ruling 271 00:17:48,600 --> 00:17:53,280 Speaker 1: on that dispute and he's hearing testimony and reading reports 272 00:17:53,280 --> 00:17:57,359 Speaker 1: from experts on both sides, and in every case so 273 00:17:57,440 --> 00:18:00,719 Speaker 1: far he's ruled for the government. And a couple of 274 00:18:00,720 --> 00:18:03,560 Speaker 1: the people who say that, um, some of the crypto 275 00:18:03,720 --> 00:18:07,480 Speaker 1: is there's have appealed it and the so it has 276 00:18:07,520 --> 00:18:11,679 Speaker 1: to be adjudicated at the district court level and the 277 00:18:11,680 --> 00:18:14,200 Speaker 1: appellate court level before they can go ahead and sell 278 00:18:14,800 --> 00:18:17,600 Speaker 1: all of the crypto, which is very valuable. And it 279 00:18:17,680 --> 00:18:20,360 Speaker 1: sounds like it's going to take a long time. It 280 00:18:20,400 --> 00:18:23,560 Speaker 1: has taken almost two years so far. It probably take 281 00:18:23,760 --> 00:18:26,800 Speaker 1: I would guess another year or so, but then I 282 00:18:26,800 --> 00:18:30,760 Speaker 1: assume they're going to go ahead and sell it. Wow. Well, 283 00:18:30,800 --> 00:18:35,720 Speaker 1: thank you both for joining us on this. Frankly, fascinating episode. 284 00:18:35,720 --> 00:18:38,240 Speaker 1: I really appreciate you both taking the time. Thank you 285 00:18:38,280 --> 00:18:42,359 Speaker 1: so much. Thank you Ellen, and thank you David. You 286 00:18:42,359 --> 00:18:44,760 Speaker 1: can find more of their reporting on the Bloomberg Terminal, 287 00:18:44,920 --> 00:18:48,480 Speaker 1: on Bloomberg dot com, and on Twitter. Ellen is at 288 00:18:48,640 --> 00:18:51,879 Speaker 1: Ellen A. Milligan That's m I L L I G 289 00:18:52,119 --> 00:18:56,719 Speaker 1: A N. And David is at David Voiacos That's David 290 00:18:57,040 --> 00:19:03,320 Speaker 1: V O R E A c O s. On the 291 00:19:03,359 --> 00:19:06,840 Speaker 1: next episode of Bloomberg Crypto, one of the most interesting 292 00:19:06,880 --> 00:19:10,439 Speaker 1: conversations in crypto right now is all about definitions, and 293 00:19:10,600 --> 00:19:14,240 Speaker 1: especially the definition of a so called security Who betters 294 00:19:14,240 --> 00:19:17,199 Speaker 1: to tackle this from Bloomberg ompinion columnist Matt Levine, a 295 00:19:17,280 --> 00:19:21,160 Speaker 1: former practicing lawyer and investment banker who has written extensively 296 00:19:21,320 --> 00:19:25,800 Speaker 1: about securities, securities law, inside of trading, all the things 297 00:19:25,800 --> 00:19:28,520 Speaker 1: that are very much topical right now. You'll also hear 298 00:19:28,600 --> 00:19:31,520 Speaker 1: highlights from Matt's interview Sam bankmun Freed at the recent 299 00:19:31,520 --> 00:19:39,960 Speaker 1: Bloomberg Crypto Suwhach in New York. This is Bloomberg Crypto, 300 00:19:40,160 --> 00:19:43,480 Speaker 1: a daily podcast from Bloomberg and I Heart Radio. For 301 00:19:43,520 --> 00:19:45,800 Speaker 1: more shows from I Heart Radio, visit the i heart 302 00:19:45,840 --> 00:19:49,560 Speaker 1: Radio app, Apple Podcasts, or wherever you get your podcasts. 303 00:19:50,359 --> 00:19:52,920 Speaker 1: Send us your comments, questions or suggestions for the show 304 00:19:53,080 --> 00:19:56,359 Speaker 1: to Crypto at bloomberg dot net or find us on Twitter. 305 00:19:56,600 --> 00:20:03,679 Speaker 1: We're at Crypto m. The supervising producer of Bloomberg Crypto 306 00:20:03,760 --> 00:20:06,960 Speaker 1: is Vicky ver Galina. Our senior producer is Janet Babin. 307 00:20:07,560 --> 00:20:11,280 Speaker 1: Our producer is Sharon Burriro. Our associate producers of Sanam 308 00:20:11,280 --> 00:20:14,880 Speaker 1: Siddiki and Moses and m Desta wonder At is our engineer. 309 00:20:15,400 --> 00:20:21,280 Speaker 1: Original music by Leo Sidron. I'm Stacy Marie Schmal. We'll 310 00:20:21,280 --> 00:20:22,000 Speaker 1: be back tomorrow.