It is no news that in some jurisdictions there have been cases where virtual currencies being criminal proceeds were seized, confiscated, and even auctioned off by courts or law enforcement agencies. Are there like cases in Taiwan?
Some Taiwanese law enforcement agencies have created virtual accounts (or "wallets") to hold virtual currencies seized from suspects. For example, in a theft of electricity case of 2018 where the stolen electrical power was used for Bitcoin mining, Taiwan's Criminal Investigation Bureau (CIB) detained 5.41249743 Bitcoins mined by the suspect, "after deducting the transaction fee of 0.0002 Bitcoins incurred in storing the seized Bitcoins into a Bitcoin hardware wallet." Chia-Yi District Prosecutors Office v. Chang, 107 Yi 869, Chia-Yi District Court (November 2019).
There is no public information available yet as to whether the Bitcoins in this case were transferred to the CIB-controlled wallet through the suspect's cooperation or the CIB had controlled the suspect's wallet through other means, e.g. by obtaining his digital credentials stored in computers already seized.
Under Taiwan's Criminal Code and Code of Criminal Procedures, proceeds of crime not yet duly returned to the victim shall be announced to be confiscated by a court judgment. If and when a judgment on confiscation becomes non-appealable, the ownership of the confiscated proceeds is automatically transferred to Taiwan's Treasury (which does not hold a digital wallet though), and most criminal proceeds already seized but not in the form of circulable currencies are sold via public auctions with prosecutors playing the role of auctioneer. Despite this, the victim or a third party having a claim on the confiscated proceeds may request for recovery or delivery of the proceeds or the sold price, but the request need be made within one year after the judgment becomes non-appealable.
To the writer's knowledge, seized virtual currencies have been put on the auction block only once in Taiwan. In an auction session held at the Taichung Prosecutors Office on December 25, 2018 (which is not a holiday in Taiwan), a total of 110 Bitcoins were up for bidding, all detained during a criminal investigation of a fund fraud in which part of the unlawful gains had been converted into Bitcoins. As the investigation proceeding was ongoing, the Bitcoins had yet to be confiscated. However, alarmed by the price crack of Bitcoins in September 2018, the Prosecutors decided to immediately convert the 110 Bitcoins into physical currency. Unfortunately, no one made a bid, as the defendant insisted that the starting price should stay at US$5,000 per coin, turning down the Prosecutors' wise suggestion of following the market price that day plus some discount. The market price that day never exceeded US$4,030.7 per coin.
There are cases where courts announced confiscation of virtual currencies which were never seized. For example, in a judgment rendered by the Taipei District Court in November 2019, roughly 94 Bitcoins were announced to be confiscated for being ransoms extorted by the defendant by sending emails threatening websites (most of them based in Mainland China or HK) with distributed denial-of-service (DDoS) attacks. Taipei District Prosecutors Office v. Chen, 108 Shen-Yi-Qi 61, Taipei District Court (November 2019). As the virtual currencies were never seized in this case, a proviso was included in the holding on confiscation, saying "if the entire or partial confiscation is impossible or not appropriate, the value thereof shall be collected from the offender," which is in fact a verbatim reproduction of the text of Article 38-1(3) of the Criminal Code. It is left unclear though what the valuation date shall be: shall the value of the Bitcoins be determined as at the date of ransom payment (mainly in late 2016) or the date of judgment (November 27, 2019)? The market price difference is higher than tenfold.
Definition of Criminal Proceeds
Also under the Criminal Code, "The proceeds of crime ... mean any property derived from or obtained directly or indirectly, through the commission of an offence." Article 38-1(4). Readers may have noticed that this definition closely follows Article 2(e) of the United Nations Convention Against Corruption.
Can the Bitcoins seized by the CIB in the above-mentioned theft of electricity case meet this definition? The answer given by the first-instance verdict is "no." The judge indicated:
Although the defendant, by using the stolen electrical power to drive the mining machines to verify blockchain transactions, obtained Bitcoins ... as reward, the defendant did not get the Bitcoins simply due to his theft of electricity. Nor does the mere fulfillment of the elements of an electricity theft offence generate any Bitcoin. Therefore, the Bitcoins are not returns or profits from the theft, nor the proceeds from the stolen electrical power... Rather, the Bitcoins were obtained contingent upon the operation and calculation performed by the mining machines and other equipment the defendant procured with a large sum of money. As electricity, heat and other forms of energy can be converted ... to serve a wide range of usages, the accompanied economic benefits may grow without limits [suppose no conditions are applied.] For example, [suppose] the stolen electrical power is used to drive a pump that instills oxygen into the defendant's fish farm. [Under the CIB's theory,] the shoal bred in the fish farm owing to the pumped oxygen would likewise be considered as proceeds of crime, but by this standard the scope of confiscation will go simply too far and become unforeseeable to the defendant.
Whether this holding has been appealed to the higher court is yet unknown. What we do know is that Taipower the victim power grid company has announced that it would bring a civil lawsuit against the defendant for electricity fee loss estimated at around NT$65 million. Taipower probably has motioned the civil court to seize the Bitcoins in the CIB's custody so as to protect its civil claims.
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