1
00:00:02,520 --> 00:00:05,720
Speaker 1: Hi, this is Vickie with the Bloomberg Crypto podcast team.

2
00:00:05,800 --> 00:00:07,960
Speaker 1: We've been taking a break this week to recharge our

3
00:00:08,000 --> 00:00:10,440
Speaker 1: batteries for the new year, and we'll be back tomorrow

4
00:00:10,440 --> 00:00:13,200
Speaker 1: with some fresh episodes for you. But today we're re

5
00:00:13,360 --> 00:00:15,880
Speaker 1: upping the last in our series of our team favorites,

6
00:00:16,160 --> 00:00:18,840
Speaker 1: and this one is definitely in my top ten. It's

7
00:00:18,840 --> 00:00:23,480
Speaker 1: a fascinating interview with Bloomberg reporters Ellen Milligan and David Vorriacos.

8
00:00:23,920 --> 00:00:26,759
Speaker 1: They walk us through how police and FBI agents have

9
00:00:26,840 --> 00:00:30,000
Speaker 1: had to rethink how to recover stolen goods when they're

10
00:00:30,040 --> 00:00:32,960
Speaker 1: dealing with digital assets. This sort of turns into a

11
00:00:33,040 --> 00:00:36,440
Speaker 1: Keystone Caper's type adventure with agents trying to track down

12
00:00:36,479 --> 00:00:39,680
Speaker 1: digital keys after a raid or a seizure, all the

13
00:00:39,720 --> 00:00:42,720
Speaker 1: gain access to stolen crypto. All of us here on

14
00:00:42,760 --> 00:00:46,159
Speaker 1: the Bloomberg Crypto team hope you had a great end too,

15
00:00:46,320 --> 00:00:48,240
Speaker 1: and we look forward to what the new year will bring.

16
00:00:48,640 --> 00:00:59,800
Speaker 1: Hope you enjoyed this one picture this You're the FBI

17
00:01:00,200 --> 00:01:02,400
Speaker 1: trying to track down the digital keys that will give

18
00:01:02,440 --> 00:01:06,800
Speaker 1: you access to illicit or stolen crypto. You're rifling through books,

19
00:01:07,160 --> 00:01:11,759
Speaker 1: paper stuffed in suitcases. You're tearing open gum wrappers. It's

20
00:01:11,760 --> 00:01:15,000
Speaker 1: like something out of a movie. But in the world

21
00:01:15,000 --> 00:01:18,360
Speaker 1: of crypto, these odd nooks and crannies have become totally

22
00:01:18,480 --> 00:01:24,200
Speaker 1: normal places for law enforcement to look for digital passwords alone.

23
00:01:24,600 --> 00:01:26,840
Speaker 1: Cops in the U S and the UK sees billions

24
00:01:26,840 --> 00:01:30,600
Speaker 1: of dollars in crypto assets from various different criminal busts.

25
00:01:31,120 --> 00:01:34,319
Speaker 1: With so much money on the line, enforcement agencies around

26
00:01:34,319 --> 00:01:37,520
Speaker 1: the world have had to learn and learn quickly how

27
00:01:37,560 --> 00:01:41,000
Speaker 1: to suppot these digital assets and seize them from accused criminals.

28
00:01:41,360 --> 00:01:44,440
Speaker 1: Today I'm joined by Bloomberg reporters Ellen Milligan. They are

29
00:01:44,480 --> 00:01:47,880
Speaker 1: spending all this taxpayer money to train these police officers

30
00:01:47,920 --> 00:01:50,960
Speaker 1: in crypto, and then they're losing them. And David Vorriacos

31
00:01:51,280 --> 00:01:55,080
Speaker 1: while the crypto was in the possession of the US government,

32
00:01:55,200 --> 00:01:57,720
Speaker 1: stole it from right under their noses. To discuss how

33
00:01:57,720 --> 00:02:01,240
Speaker 1: the seizures of digital assets are transforming leasing policies and

34
00:02:01,280 --> 00:02:07,640
Speaker 1: protocols around the world. Ellen, David, thank you so much

35
00:02:07,640 --> 00:02:10,080
Speaker 1: for joining us today, Thanks for having us. We're going

36
00:02:10,120 --> 00:02:13,600
Speaker 1: to talk about something kind of weird, which is how

37
00:02:13,639 --> 00:02:19,400
Speaker 1: do police officers sees imaginary money. And I don't just

38
00:02:19,400 --> 00:02:22,320
Speaker 1: mean imaginary in the sense of contested valuation. I mean

39
00:02:22,360 --> 00:02:26,840
Speaker 1: imaginary as in not cash, not physical, not things that

40
00:02:26,880 --> 00:02:29,040
Speaker 1: you can sort of wrap your head around. You know,

41
00:02:29,080 --> 00:02:31,120
Speaker 1: people are breaking down the door and they're like freeze

42
00:02:31,120 --> 00:02:33,280
Speaker 1: and we're gonna take all your stuff. You have been

43
00:02:33,280 --> 00:02:36,800
Speaker 1: writing about what happens when cops sees crypto. Tell us

44
00:02:36,840 --> 00:02:42,200
Speaker 1: more about what that's like. Well, police traditionally have sees

45
00:02:43,080 --> 00:02:49,880
Speaker 1: physical items like jewelry, cash, cars, boats, planes, and with crypto,

46
00:02:50,480 --> 00:02:52,520
Speaker 1: they have to know that it's there, and they have

47
00:02:52,639 --> 00:02:56,240
Speaker 1: to be educated enough about the process to understand that

48
00:02:56,360 --> 00:02:59,280
Speaker 1: it has value and there are are unusual ways to

49
00:02:59,360 --> 00:03:03,040
Speaker 1: access and so that's what we wrote about. The police

50
00:03:03,080 --> 00:03:07,280
Speaker 1: around the world are educating themselves on what crypto is

51
00:03:07,360 --> 00:03:10,160
Speaker 1: and how to access it. Then once they get it,

52
00:03:10,480 --> 00:03:13,639
Speaker 1: how they store it and how they sell it and

53
00:03:13,720 --> 00:03:18,160
Speaker 1: ellen what does that look like. Well, really, there's a

54
00:03:18,200 --> 00:03:22,440
Speaker 1: few different elements to this. Like David said, there's the

55
00:03:22,560 --> 00:03:27,040
Speaker 1: seizing of the crypto and discovering it, which is easier

56
00:03:27,080 --> 00:03:31,680
Speaker 1: said than done, because often there's not a physical element

57
00:03:31,720 --> 00:03:35,400
Speaker 1: to crypto. Sometimes there is like a kind of hardware

58
00:03:35,480 --> 00:03:39,640
Speaker 1: device that crypto wallet is kept on or something like that,

59
00:03:39,760 --> 00:03:46,120
Speaker 1: but often these are digital assets and to discover them

60
00:03:46,160 --> 00:03:50,560
Speaker 1: and then to seize them, you need a seed phrase

61
00:03:50,880 --> 00:03:54,400
Speaker 1: that accesses the crypto wallet. So even if you're holding

62
00:03:54,600 --> 00:03:58,680
Speaker 1: a keep key device, for example, police won't know how

63
00:03:58,800 --> 00:04:02,600
Speaker 1: much bitcoin or another cryptocurrency is held on there until

64
00:04:02,640 --> 00:04:06,680
Speaker 1: they can access it using this kind of password, and

65
00:04:06,720 --> 00:04:09,920
Speaker 1: then they're storing it once they've seized it. How do

66
00:04:09,960 --> 00:04:14,680
Speaker 1: they keep this asset safe often for years while you

67
00:04:14,720 --> 00:04:19,320
Speaker 1: go through a criminal trial and then a forfeiture order. Um.

68
00:04:19,400 --> 00:04:23,160
Speaker 1: There's real security issues with hacks, for example, but also

69
00:04:23,240 --> 00:04:26,320
Speaker 1: there's you know, in some cases there have been corrupt

70
00:04:26,360 --> 00:04:35,640
Speaker 1: police officers who have taken it for themselves. Um. And

71
00:04:35,680 --> 00:04:39,680
Speaker 1: then the last element is how you release that that

72
00:04:39,800 --> 00:04:43,279
Speaker 1: cryptocurrency um, if you give it back to victims or

73
00:04:43,279 --> 00:04:45,680
Speaker 1: what value you give it back to victims if the

74
00:04:45,760 --> 00:04:51,880
Speaker 1: state keeps it. These are the questions that law enforcement

75
00:04:51,960 --> 00:04:55,640
Speaker 1: has been grappling with, and what David and I really

76
00:04:55,640 --> 00:05:00,559
Speaker 1: discovered is there's no standardized procedure of where that people

77
00:05:00,600 --> 00:05:03,479
Speaker 1: do this every as in any of the parts like

78
00:05:03,560 --> 00:05:08,480
Speaker 1: each one is idiosyncratic exactly, and every different law agency

79
00:05:08,560 --> 00:05:11,279
Speaker 1: around the world and different law agencies within the same

80
00:05:11,320 --> 00:05:14,880
Speaker 1: countries do it differently. And the police let the rest

81
00:05:14,880 --> 00:05:16,640
Speaker 1: of the world when it comes to crypto, have had

82
00:05:16,680 --> 00:05:19,520
Speaker 1: to learn this as they go along, and inevitably mistakes

83
00:05:19,520 --> 00:05:21,719
Speaker 1: have been made along the way, and they're still grappling

84
00:05:21,760 --> 00:05:25,400
Speaker 1: with this. So you mentioned kind of three elements, each

85
00:05:25,400 --> 00:05:28,719
Speaker 1: of which sounds hilariously complicated. So let's let's take one

86
00:05:28,720 --> 00:05:32,640
Speaker 1: of each one in turn. First of all, is the

87
00:05:32,640 --> 00:05:37,440
Speaker 1: the identification, right, So, like something suspicious is happening, we

88
00:05:37,520 --> 00:05:40,640
Speaker 1: think that's a suspicious things in crypto. We've figured out

89
00:05:41,200 --> 00:05:44,880
Speaker 1: that that exists. What are the steps involved in Okay,

90
00:05:44,920 --> 00:05:46,919
Speaker 1: we think that this is suspicious. We have, you know,

91
00:05:47,000 --> 00:05:49,520
Speaker 1: good cause we have all the people work, etcetera. That's required.

92
00:05:49,920 --> 00:05:53,360
Speaker 1: How do they even get those passwords in the first place. Well,

93
00:05:53,760 --> 00:05:57,760
Speaker 1: in identifying the suspicious crypto, they can see the movement

94
00:05:57,760 --> 00:06:00,720
Speaker 1: of crypto on the blockchain. That is a public um

95
00:06:01,240 --> 00:06:04,560
Speaker 1: ledger ledger that they can see, and they can What

96
00:06:04,680 --> 00:06:08,760
Speaker 1: they must first do is trace it to criminal activity. Uh.

97
00:06:08,800 --> 00:06:12,239
Speaker 1: And once they've traced it to criminal activity, they can

98
00:06:12,279 --> 00:06:16,680
Speaker 1: then get a court order two seize wallets that are

99
00:06:16,720 --> 00:06:21,000
Speaker 1: associated with UM say stolen crypto. At that point they

100
00:06:21,120 --> 00:06:25,279
Speaker 1: can't they cannot actually access those wallets without the seed

101
00:06:25,320 --> 00:06:28,880
Speaker 1: recovery phrases, and they can come in different ways. They

102
00:06:28,920 --> 00:06:31,680
Speaker 1: may be written on slips of paper. They may get

103
00:06:31,720 --> 00:06:35,039
Speaker 1: it from UM insiders who are familiar with it. But

104
00:06:35,120 --> 00:06:37,960
Speaker 1: if they do not have those seed recovery phrases, they

105
00:06:38,000 --> 00:06:42,000
Speaker 1: can't The police cannot access the crypto, so they can't

106
00:06:42,080 --> 00:06:47,159
Speaker 1: say compel and exchange to have that crypto over to them.

107
00:06:47,200 --> 00:06:50,640
Speaker 1: There's a case UM that's pending in federal court in

108
00:06:50,640 --> 00:06:58,200
Speaker 1: Washington in which UM a guy named Gary Harmon from Akron, Ohio. UM.

109
00:06:58,279 --> 00:07:01,680
Speaker 1: He is alleged to have stolen crypto right from out

110
00:07:01,960 --> 00:07:04,800
Speaker 1: under the noses of the Internal Revenue Service, which had

111
00:07:04,839 --> 00:07:10,120
Speaker 1: seized crypto from Gary's brother Larry Harmon, who pleaded guilty

112
00:07:10,520 --> 00:07:15,520
Speaker 1: UM two charges associated with running a crypto mixer and

113
00:07:15,680 --> 00:07:20,640
Speaker 1: helping to obscure the identity of crypto. And the federal

114
00:07:20,680 --> 00:07:24,400
Speaker 1: government alleges that Gary Harmon, while the crypto was in

115
00:07:24,440 --> 00:07:27,480
Speaker 1: the possession of the U. S Government, stole it from

116
00:07:27,560 --> 00:07:30,640
Speaker 1: right under their noses and has a value of many

117
00:07:30,680 --> 00:07:36,360
Speaker 1: millions of dollars. He's scheduled to go to trial early

118
00:07:36,440 --> 00:07:39,320
Speaker 1: next year, but there have been negotiations that have been

119
00:07:39,400 --> 00:07:43,680
Speaker 1: spelled out in court papers in which Uh, the federal

120
00:07:43,720 --> 00:07:47,560
Speaker 1: government just wants the seed recovery phrase so they can

121
00:07:47,640 --> 00:07:52,320
Speaker 1: have the crypto. And Gary Harmon's lawyers say that's essentially

122
00:07:52,440 --> 00:07:56,360
Speaker 1: tantamount to him admitting he committed the crime. Interesting, so

123
00:07:56,960 --> 00:08:00,320
Speaker 1: all of the big parts of jurisp it and so

124
00:08:00,400 --> 00:08:02,720
Speaker 1: people might be familiar with now being applied to the

125
00:08:02,760 --> 00:08:06,360
Speaker 1: slightly more chaotic entity is involved in crypto. That sounds

126
00:08:06,400 --> 00:08:11,160
Speaker 1: like fun Ellen, you mentioned that that's the second part

127
00:08:11,280 --> 00:08:14,840
Speaker 1: of this complex thing around storage. There seems to be

128
00:08:15,000 --> 00:08:17,320
Speaker 1: part of the problem the David is describing if if

129
00:08:17,360 --> 00:08:20,040
Speaker 1: another entity can just be like, Nope, that's mine and

130
00:08:20,120 --> 00:08:22,760
Speaker 1: take it once that crypto has been seized by the

131
00:08:22,760 --> 00:08:25,000
Speaker 1: government or by the police, Like, what's going on there?

132
00:08:25,040 --> 00:08:29,640
Speaker 1: What are those faiel safes exactly? And Um, A lot

133
00:08:29,640 --> 00:08:33,679
Speaker 1: of these cases have come out of like the eighteen

134
00:08:33,760 --> 00:08:37,960
Speaker 1: time where there was kind of the last big spike

135
00:08:38,000 --> 00:08:43,880
Speaker 1: in crypto and then crash before before spike. Um, and

136
00:08:43,920 --> 00:08:46,240
Speaker 1: a lot of those cases came out of hacks. And

137
00:08:46,280 --> 00:08:48,760
Speaker 1: that just shows you even if the police are holding

138
00:08:48,800 --> 00:08:52,280
Speaker 1: it um and storing this crypto in their own internal

139
00:08:52,320 --> 00:08:56,040
Speaker 1: system or outsourced system, there's still a danger that that

140
00:08:56,080 --> 00:08:58,000
Speaker 1: could be hacked and when you've got cases like the

141
00:08:58,000 --> 00:09:01,839
Speaker 1: bit for next case that David spoke about, I mean,

142
00:09:01,880 --> 00:09:05,440
Speaker 1: the whole world knows how much UM that this law

143
00:09:05,520 --> 00:09:10,079
Speaker 1: enforcement agency has ceased, and it becomes very vulnerable, vulnerable

144
00:09:10,160 --> 00:09:14,079
Speaker 1: because of that. I spoke to a small police force

145
00:09:14,160 --> 00:09:19,480
Speaker 1: in southern England for this story. They stumbled across crypto

146
00:09:20,120 --> 00:09:24,679
Speaker 1: for the first time accidentally really in twenty seventeen. So

147
00:09:24,760 --> 00:09:28,200
Speaker 1: this was a kidnapping case UM where a guy was kidnapped.

148
00:09:28,559 --> 00:09:30,959
Speaker 1: Turned out his house was a cannabis farm. So they

149
00:09:30,960 --> 00:09:33,600
Speaker 1: did some digging around and they found this keep key

150
00:09:33,640 --> 00:09:38,000
Speaker 1: device which had a notepad attached to it with two

151
00:09:38,160 --> 00:09:43,080
Speaker 1: seed phrases, and it had nine hundred grand in bitcoin

152
00:09:43,160 --> 00:09:47,880
Speaker 1: I think on it. And so what police did is

153
00:09:47,960 --> 00:09:50,040
Speaker 1: that that there was no precedent for this. They had

154
00:09:50,040 --> 00:09:52,480
Speaker 1: no idea what to do. Most of them didn't really

155
00:09:52,480 --> 00:09:55,280
Speaker 1: know what krypto was. They bought their own key key

156
00:09:55,320 --> 00:10:00,400
Speaker 1: device and they transferred UM the bitcoin from his wallet

157
00:10:00,400 --> 00:10:04,120
Speaker 1: to their wallet, their crypto wallet, and then they kept

158
00:10:04,160 --> 00:10:06,720
Speaker 1: this keep key device and the seed phrases in a

159
00:10:06,840 --> 00:10:10,400
Speaker 1: safe and only to hang on like a physical a

160
00:10:10,520 --> 00:10:13,679
Speaker 1: physical safe in the police station. And I need two

161
00:10:13,720 --> 00:10:19,000
Speaker 1: policemen had access to the to the safe. And that's

162
00:10:19,040 --> 00:10:23,520
Speaker 1: because in the silk Row case that David referred to, UM,

163
00:10:23,600 --> 00:10:27,640
Speaker 1: there two police officers ran off in that case in

164
00:10:27,679 --> 00:10:31,920
Speaker 1: the US with some of the money that they were storing. UM,

165
00:10:32,000 --> 00:10:34,600
Speaker 1: and so there was a you know, the police are

166
00:10:34,679 --> 00:10:37,920
Speaker 1: very worried about corrupt police officers but also about losing

167
00:10:38,880 --> 00:10:40,920
Speaker 1: losing the money. So that's how they did it. And

168
00:10:40,960 --> 00:10:44,440
Speaker 1: then UM they eventually sold it to a trusted exchange.

169
00:10:44,480 --> 00:10:47,600
Speaker 1: Now they don't do that anymore, not surprisingly because it

170
00:10:47,760 --> 00:10:52,440
Speaker 1: is very dangerous to keep such a millions of dollars

171
00:10:51,440 --> 00:10:56,600
Speaker 1: in in a mini like small police station in southern England.

172
00:10:56,800 --> 00:11:00,600
Speaker 1: It's ridiculous now, um, but these are the kinds of

173
00:11:00,679 --> 00:11:02,920
Speaker 1: ways that they would do it as they were learning

174
00:11:03,280 --> 00:11:06,680
Speaker 1: on the job. And I mean now what they do

175
00:11:06,800 --> 00:11:10,120
Speaker 1: and what most UK law enforcement agencies do, which is

176
00:11:10,200 --> 00:11:14,080
Speaker 1: they have a UM. They outsource it to a company

177
00:11:14,120 --> 00:11:19,920
Speaker 1: called Kamani, which is backed by a Ledger and and others,

178
00:11:20,120 --> 00:11:24,240
Speaker 1: and it's they've got their own secure, high tech like

179
00:11:24,559 --> 00:11:28,240
Speaker 1: system of James. So they say, you know, I guess

180
00:11:28,240 --> 00:11:31,440
Speaker 1: time will time will tell. We'll be right back with

181
00:11:31,480 --> 00:11:35,240
Speaker 1: more from Bloomberg reporters. David Vorriakos and Ellen Milligan on

182
00:11:35,280 --> 00:11:37,640
Speaker 1: how law enforcement is keeping up with this new digital

183
00:11:37,679 --> 00:11:46,720
Speaker 1: to mention of financial crime. I want to push on

184
00:11:46,760 --> 00:11:49,400
Speaker 1: something that you're saying here about. You know, they tried

185
00:11:49,480 --> 00:11:53,120
Speaker 1: some stuff, the stuff didn't necessarily work. Now they may

186
00:11:53,160 --> 00:11:56,080
Speaker 1: be getting better at it. How are they getting better?

187
00:11:56,200 --> 00:11:59,480
Speaker 1: Like where are they finding people? You've mentioned outsourcing, but

188
00:11:59,520 --> 00:12:03,640
Speaker 1: they obvious we need police officers who are themselves trained

189
00:12:03,840 --> 00:12:06,120
Speaker 1: in knowing what to do. What has that process been like?

190
00:12:06,679 --> 00:12:09,840
Speaker 1: So in the UK, UM the police lobbied the government,

191
00:12:09,920 --> 00:12:13,400
Speaker 1: the Home Office UM for funding to train about two

192
00:12:13,840 --> 00:12:19,160
Speaker 1: fifty officers around the country in how to investigate sees

193
00:12:19,320 --> 00:12:22,360
Speaker 1: and realize the value of these assets. They were dubbed

194
00:12:22,400 --> 00:12:31,120
Speaker 1: crypto tactical advisors. Yes, and I think one or two

195
00:12:31,200 --> 00:12:34,040
Speaker 1: from every force around the country was trained in this

196
00:12:34,480 --> 00:12:36,520
Speaker 1: and that really helped them. And then they did a

197
00:12:36,520 --> 00:12:40,840
Speaker 1: public procurement process UM to outsource this and I know

198
00:12:40,920 --> 00:12:45,040
Speaker 1: that that's been done in the US less successfully UM,

199
00:12:45,080 --> 00:12:48,880
Speaker 1: which David can tell you about. But actually the trouble

200
00:12:48,960 --> 00:12:52,480
Speaker 1: that they're having now is UM they've lost a number

201
00:12:52,640 --> 00:12:57,280
Speaker 1: of these crypto tactical advisors to coin based chain analysts.

202
00:12:57,320 --> 00:13:00,320
Speaker 1: These firms who can triple their pay. So that's something

203
00:13:00,360 --> 00:13:02,960
Speaker 1: that really struggling with is they are spending all this

204
00:13:03,280 --> 00:13:06,240
Speaker 1: taxpayer money to train these police officers in crypto and

205
00:13:06,240 --> 00:13:09,079
Speaker 1: then they're losing them to these firms who can pay

206
00:13:09,120 --> 00:13:12,120
Speaker 1: them far more. So let me just make sure I'm

207
00:13:12,200 --> 00:13:15,679
Speaker 1: understanding this. I a U S taxpayer, have nominally contributed

208
00:13:15,720 --> 00:13:20,679
Speaker 1: to somebody working for coin base right now, essentially potentially

209
00:13:21,360 --> 00:13:26,040
Speaker 1: I as a UK taxpayer, definitely um I would say

210
00:13:26,040 --> 00:13:28,880
Speaker 1: also in the US, I mean the FBI and the

211
00:13:28,920 --> 00:13:33,959
Speaker 1: Internal Revenue Service have some extremely talented investigators and they

212
00:13:34,000 --> 00:13:37,600
Speaker 1: have a very large databases at their access which are

213
00:13:37,679 --> 00:13:40,800
Speaker 1: able to they're able to use to triangulate to figure

214
00:13:40,800 --> 00:13:44,480
Speaker 1: out who owns a wallet because they can follow the

215
00:13:44,559 --> 00:13:49,120
Speaker 1: movement of crypto across the blockchain in ways that people

216
00:13:49,320 --> 00:13:53,320
Speaker 1: can't do it um who have only public access. And

217
00:13:53,640 --> 00:13:58,240
Speaker 1: they also work with firms like Analysis, which um Ellen

218
00:13:58,320 --> 00:14:02,520
Speaker 1: had mentioned, to help them put together who owns, you know,

219
00:14:02,960 --> 00:14:06,680
Speaker 1: disputed wallets. And I would also say that the government

220
00:14:07,080 --> 00:14:11,320
Speaker 1: is looking to privatize the storage and sale of seized

221
00:14:11,360 --> 00:14:15,199
Speaker 1: crypto assets. The Justice Department, through the Marshals has had

222
00:14:15,280 --> 00:14:18,959
Speaker 1: sort of mixed success with that. Marshals used to auction

223
00:14:19,080 --> 00:14:22,840
Speaker 1: crypto themselves and they stopped in They were trying to

224
00:14:22,920 --> 00:14:26,080
Speaker 1: hire an outside firm and the two firms that they

225
00:14:26,080 --> 00:14:29,240
Speaker 1: had settled on both were disqualified because they were too

226
00:14:29,240 --> 00:14:33,880
Speaker 1: big under the the regulations, and so the marshals are

227
00:14:33,920 --> 00:14:36,960
Speaker 1: doing it themselves, but they're looking for a firm outside

228
00:14:37,000 --> 00:14:42,120
Speaker 1: to do it for them. And Ellen. This is related

229
00:14:42,240 --> 00:14:44,640
Speaker 1: to the third parts of that complex tree, right, which

230
00:14:44,680 --> 00:14:48,080
Speaker 1: is the distribution once some sources of judgment has been

231
00:14:48,120 --> 00:14:52,920
Speaker 1: rendered on on either the crypto or the alleged criminal involved. Yeah,

232
00:14:52,960 --> 00:14:56,640
Speaker 1: this is almost the most complicated part because there was

233
00:14:56,680 --> 00:15:01,120
Speaker 1: no legal preston for for this and what a court

234
00:15:01,200 --> 00:15:05,840
Speaker 1: does when, for example, it finds someone guilty, there's a

235
00:15:05,880 --> 00:15:10,400
Speaker 1: forfeit tire proceeding um that happens later on and often

236
00:15:10,440 --> 00:15:16,640
Speaker 1: this happens years after um. And what's the forfeits proceeding um.

237
00:15:16,720 --> 00:15:20,000
Speaker 1: In the UK you have the Proceeds of Crime Act

238
00:15:20,160 --> 00:15:23,640
Speaker 1: and this is a twenty year old act. And at

239
00:15:23,640 --> 00:15:27,400
Speaker 1: the end of the case, when someone's found guilty and

240
00:15:27,440 --> 00:15:31,520
Speaker 1: sent to jail within a year, there's usually a court

241
00:15:31,560 --> 00:15:35,640
Speaker 1: hearing where judge will decide the seat what to do

242
00:15:35,680 --> 00:15:38,720
Speaker 1: with the seased assets, whether the criminal can keep some

243
00:15:38,800 --> 00:15:44,360
Speaker 1: of them, whether they forfeit them um and also how

244
00:15:44,600 --> 00:15:46,720
Speaker 1: whether they stay with the state, whether they have to

245
00:15:46,720 --> 00:15:51,640
Speaker 1: be distributed to victims. For example, the trouble that this

246
00:15:52,120 --> 00:15:54,880
Speaker 1: police force had in the case I was talking about

247
00:15:54,920 --> 00:15:58,640
Speaker 1: earlier was this law was twenty years old when crypto

248
00:15:58,680 --> 00:16:01,400
Speaker 1: didn't exist, So they had to go to a judge

249
00:16:01,400 --> 00:16:06,000
Speaker 1: and convince them that this is an asset. The most

250
00:16:06,160 --> 00:16:09,920
Speaker 1: valuable asset in the case it was. They came across

251
00:16:09,960 --> 00:16:14,960
Speaker 1: cash about two d grand in cash, watches, artwork, gold,

252
00:16:15,040 --> 00:16:19,000
Speaker 1: but the crypto was the most valuable asset. The other complication,

253
00:16:19,080 --> 00:16:22,160
Speaker 1: and we've seen that even more so, is that crypto

254
00:16:22,200 --> 00:16:24,280
Speaker 1: will be a much different price than it was when

255
00:16:24,320 --> 00:16:26,600
Speaker 1: they seized it. And and and the good thing that

256
00:16:26,960 --> 00:16:30,320
Speaker 1: police have had up until this year was it ballooned

257
00:16:30,320 --> 00:16:34,480
Speaker 1: in price, so either the state or victims got quite

258
00:16:34,480 --> 00:16:36,560
Speaker 1: a good deal out of it. And I think what

259
00:16:36,680 --> 00:16:40,680
Speaker 1: police are now really grappling with is actually that that

260
00:16:40,800 --> 00:16:44,240
Speaker 1: crypto that they've been storing for so long has actually

261
00:16:44,240 --> 00:16:48,080
Speaker 1: fallen in price now quite a lot, what actually quite

262
00:16:48,080 --> 00:16:50,960
Speaker 1: a lot? And at what point do they sell it?

263
00:16:51,640 --> 00:16:54,560
Speaker 1: They're confined by the law, but at what point do

264
00:16:54,640 --> 00:16:58,800
Speaker 1: they convert that. Do they convert it before they forfeit

265
00:16:58,880 --> 00:17:02,960
Speaker 1: to its. It's really complicated and it's really those kinds

266
00:17:02,960 --> 00:17:05,240
Speaker 1: of questions are actually outside the law, and it's about

267
00:17:05,320 --> 00:17:09,520
Speaker 1: instinct or missed And David, is it similar in the US?

268
00:17:09,560 --> 00:17:14,159
Speaker 1: In the US, assets can be forfeited when someone is

269
00:17:14,200 --> 00:17:18,639
Speaker 1: convicted of a crime, but they're seized before someone is

270
00:17:18,640 --> 00:17:20,840
Speaker 1: convicted of a crime, so they may sit there for

271
00:17:20,880 --> 00:17:24,639
Speaker 1: a year or two, three, four years while someone is

272
00:17:24,720 --> 00:17:29,600
Speaker 1: going through the judicial process. And uh, the government cannot

273
00:17:30,040 --> 00:17:34,480
Speaker 1: sell those crypto assets until after there's an order from

274
00:17:34,520 --> 00:17:38,080
Speaker 1: the judge saying it's okay to UM to liquidate this.

275
00:17:38,600 --> 00:17:40,800
Speaker 1: I was going to say, there's an interesting case in

276
00:17:40,960 --> 00:17:46,639
Speaker 1: San Francisco where someone stole sixty nine thousand, three hundred

277
00:17:46,720 --> 00:17:50,919
Speaker 1: seventy bitcoin from the Silk Road site in November of

278
00:17:51,920 --> 00:17:54,119
Speaker 1: It was worth a billion dollars that then went up

279
00:17:54,160 --> 00:17:56,680
Speaker 1: a great deal more than that, and it's fallen since then.

280
00:17:57,359 --> 00:18:00,800
Speaker 1: But there's someone referred to only as individual X who

281
00:18:00,960 --> 00:18:04,919
Speaker 1: agreed to forfeit it, and so he's not he or

282
00:18:05,000 --> 00:18:09,320
Speaker 1: she is not contesting ownership UM. But there are a

283
00:18:09,359 --> 00:18:12,920
Speaker 1: bunch of other people who are putting claims in saying, well,

284
00:18:12,960 --> 00:18:16,800
Speaker 1: they had some of the crypto that was in dispute,

285
00:18:16,920 --> 00:18:21,919
Speaker 1: and um, so the judge in San Francisco is ruling

286
00:18:21,960 --> 00:18:26,640
Speaker 1: on that dispute and he's hearing testimony and reading reports

287
00:18:26,680 --> 00:18:30,760
Speaker 1: from experts on both sides, and in every case so

288
00:18:30,800 --> 00:18:34,080
Speaker 1: far he's ruled for the government, and a couple of

289
00:18:34,119 --> 00:18:36,960
Speaker 1: the people who say that, um, some of that crypto

290
00:18:37,080 --> 00:18:40,880
Speaker 1: is there's have appealed it and the so it has

291
00:18:40,920 --> 00:18:45,040
Speaker 1: to be adjudicated at the district court level and the

292
00:18:45,040 --> 00:18:47,680
Speaker 1: appellate court level before they can go ahead and sell

293
00:18:48,200 --> 00:18:51,000
Speaker 1: all of that crypto, which is very valuable. And it

294
00:18:51,040 --> 00:18:53,639
Speaker 1: sounds like it's going to take a long time. It's

295
00:18:53,800 --> 00:18:56,920
Speaker 1: has taken almost two years so far. It probably take

296
00:18:57,160 --> 00:19:00,199
Speaker 1: I would guess another year or so, but then I

297
00:19:00,200 --> 00:19:04,119
Speaker 1: assume they're going to go ahead and sell it. Wow. Well,

298
00:19:04,160 --> 00:19:09,120
Speaker 1: thank you both for joining us on this frankly fascinating episode.

299
00:19:09,119 --> 00:19:11,600
Speaker 1: I really appreciate you both taking the time. Thank you

300
00:19:11,680 --> 00:19:15,720
Speaker 1: so much. Thank you Ellen, and thank you David. You

301
00:19:15,760 --> 00:19:18,159
Speaker 1: can find more of their reporting on the Bloomberg Terminal,

302
00:19:18,280 --> 00:19:21,880
Speaker 1: on Bloomberg dot com and on Twitter. Ellen is at

303
00:19:22,000 --> 00:19:25,280
Speaker 1: Ellen A. Milligan. That's M I L L I G.

304
00:19:25,520 --> 00:19:30,080
Speaker 1: A N and David is at David vorriacos. That's David

305
00:19:30,440 --> 00:19:36,720
Speaker 1: V O R E A c O S. On the

306
00:19:36,760 --> 00:19:40,200
Speaker 1: next episode of Bloomberg Crypto. One of the most interesting

307
00:19:40,240 --> 00:19:43,800
Speaker 1: conversations in crypto right now is all about definitions, and

308
00:19:44,000 --> 00:19:47,600
Speaker 1: especially the definition of a so called security Who betters

309
00:19:47,600 --> 00:19:50,600
Speaker 1: to tackle this than Bloomberg ompainion columnist Matt Levine, a

310
00:19:50,640 --> 00:19:54,520
Speaker 1: former practicing lawyer and investment banker who has written extensively

311
00:19:54,720 --> 00:19:59,160
Speaker 1: about securities, securities law, inside of training, all the things

312
00:19:59,160 --> 00:20:01,720
Speaker 1: that are very much top goal right now. You'll also

313
00:20:01,760 --> 00:20:04,600
Speaker 1: hear highlights from Matt's interview Sam bankmun Freed at the

314
00:20:04,640 --> 00:20:13,320
Speaker 1: recent Bloomberg Crypto swmach in New York. This is Bloomberg Crypto,

315
00:20:13,560 --> 00:20:16,840
Speaker 1: a daily podcast from Bloomberg and I Heart Radio. For

316
00:20:16,920 --> 00:20:19,160
Speaker 1: more shows from I Heart Radio, visit the i Heart

317
00:20:19,240 --> 00:20:22,960
Speaker 1: Radio app, Apple Podcasts, or wherever you get your podcasts.

318
00:20:23,760 --> 00:20:26,320
Speaker 1: Send us your comments, questions or suggestions for the show

319
00:20:26,480 --> 00:20:29,760
Speaker 1: to Crypto at Bloomberg dot next, or find us on Twitter.

320
00:20:30,000 --> 00:20:37,200
Speaker 1: We're at Crypto. The supervising producer of Bloomberg Crypto is

321
00:20:37,240 --> 00:20:41,080
Speaker 1: Vicky ver Galina. Our senior producer is Janet babin Our

322
00:20:41,119 --> 00:20:45,320
Speaker 1: producer is Sharon Burriro. Our associate producers Ozanam Siddiki and

323
00:20:45,359 --> 00:20:49,240
Speaker 1: Moses and m Desta wonder At is our engineer. Original

324
00:20:49,320 --> 00:20:54,760
Speaker 1: music by Leo Sidrn. I'm Stacy Maria Shmo. We'll be

325
00:20:54,760 --> 00:21:06,399
Speaker 1: back tomorrow. The expect the propection about the APT sting

326
00:21:06,760 --> 00:21:07,520
Speaker 1: the st