TLDR – Commercial Cryptoasset Recovery (CAR) services are still in their infancy. While blockchain explorers are available, risk and attribution – also known as off-chain – data is key to understanding any individual case’s odds of recovery. That said, big data analytics, risk and attribution data only get you so far.
Last post I discussed the importance of identifying the right legal partner with the expertise and international relationships required to improve the odds of a private civil judgment and recovery action. In today’s post, I take a high-level look at what recovery could look like and closing out a case.
Missed the first post and want to get started? I set the stage here.
The last stage of what can be a lengthy process is the satisfaction of a successful judgment through restitution to the victims of the cryptoasset fraud.
This is where the selection of the right legal partner can be key as foreign jurisdiction tracing and recovery of attachable assets by law enforcement and prosecutors may require months, if not years. Successful tracing and recovery efforts of the attachable assets will often depend upon assistance from within the foreign jurisdiction, a process which can be delayed by legal culture, court capacity, official priorities and the lack of relationships with legal and law enforcement counterparts able and willing to provide the necessary assistance.
Cryptoassets can be laundered in recognizable ways once converted to fiat; placement, layering and eventual integration will be familiar to AML practitioners in many cases.
Your legal partners’ relationships will be key to navigating the foreign jurisdiction’s process for restitution to the victim. Necessary steps may include working with law enforcement or regulatory authorities to freeze identified assets while an administrative or civil process is pursued in the jurisdiction.
Once a restitution order is secured, enforcement of those orders may result in a value-based approach to compensation rather than a specific property-based approach as cryptoasset transactions – for most virtual currencies – is largely unidirectional, so the victim will never really receive their original tokens, only the value lost through the fraud.
- Please note that this is a gross oversimplification of a very complicated and often lengthy asset recovery process and should not be construed as legal advice.