Fraud/White Collar

Showing: 1 - 10 of 13 Articles

Marketing of Cryptoassets – UK’s Financial Conduct Authority Issues ‘Final Warning’

Regardless of whether you are in the UK, or the type of technology you use, companies marketing ‘qualifying cryptoassets’ to customers in the UK will need to comply with the financial promotions regime of the Financial Conduct Authority (FCA), the UK’s financial regulator.

United Kingdom: Injunctive Relief Against Persons Unknown – The Ransomware Edition

On 11 July 2023, the English High Court handed down its decision on the claimant’s application in Armstrong Watson LLP v. Persons Unknown, granting judgment in default and final injunctive relief. Specifically, the court granted the claimant permanent injunctive relief against persons unknown – a group of unidentified hackers – for purposes of restraining the use and disclosure of confidential information that had been acquired by the hackers via a ransomware attack and to require deletion or delivery up of that information.

Economic Crime and Corporate Transparency Bill

There have been extensive discussions on what the Economic Crime and Corporate Transparency Bill could mean for the conduct of business in the UK (for our views, see this 26 April 2023 On the Record blog post). Now, the government intends to use the bill as a vehicle to materially expand the historical trigger for corporate criminal liability – namely, the ‘identification principle’.

Failing to Prepare is Preparing to Fail

Economic crime has risen to such a level that UK Finance, a trade association for the UK banking and financial services sector, considers financial fraud to be a “national security threat”. Over £750,000,000 was stolen from banking customers by fraudsters in the first half of 2021 alone, which represents almost a 30% increase from the same period in 2020. In response to this fraud epidemic, the UK Government promises that the Economic Crime and Corporate Transparency Bill (the ‘Bill’), which is currently being ushered through parliament, will implement key reforms necessary to support regulators with their fight against fraud.

Time to Cotton On: Managing Supply Chain Risks

Potential criminal activity in international supply chains can create reputational, civil, and criminal risks. This can be particularly difficult to manage when there are many links in the chain from the source of raw materials to the final product.

One regular question is whether revenue and profit generated from tainted supply chains can be regarded as the proceeds of crime; if so, anti-money laundering legislation may be engaged. This has been considered in a recent High Court case, arising in the context of a special interest group challenging a law enforcement decision not to launch an investigation into alleged supply chain criminality.

‘Party To’: the Scope of Section 213 of the Insolvency Act 1986

In Tradition Financial Service Ltd v Bilta (UK) Ltd & Others, the Court of Appeal considered the scope of section 213 of the Insolvency Act 1986 and, specifically, whether those beyond the small group of individuals with controlling or managerial functions of the liquidated company could be ‘party to’ the carrying on of a company’s businesses with intent to defraud creditors.

Stolen Cryptoassets: Further Guidance on Injunctions and Jurisdiction

In Osbourne v Persons Unknown & Others, the High Court of England and Wales confirmed that there is ‘at least a realistically arguable case’ that non-fungible tokens are to be treated as property as a matter of English law and that their inherently unique nature makes them suitable objects of prohibitory injunctions.

The Court also held that it is ‘strongly arguable’ that when a cryptoasset is stolen from a victim located in England, a constructive trust arises that is governed by English law. Further, if that cryptoasset is subsequently transferred to others, the question of whether they are constructive trustees is also a matter of English law. As such, the Court has jurisdiction over claims against those subsequent recipients of the stolen cryptoasset regardless of their location.

Court of Appeal decides that cryptoasset software developers may have a duty to help recover bitcoin

The Court of Appeal has decided that cryptoasset software developers may owe fiduciary duties or a duty of care to help recover bitcoin which is inaccessible as a result of criminal activity.

This is not a final decision. The Court has simply decided that the claim, against foreign defendants, is arguable and can go to trial.

Crypto Exchange Found to Hold Stolen Assets on Trust for Victim of Crypto Crime

In Jones v Persons Unknown & Others the High Court made several rulings of interest in the developing area of crypto fraud litigation.

After granting judgment in favour of the claimant for claims of deceit and unjust enrichment against fraudsters, the court went on to rule that a crypto exchange controlling the wallet holding the claimant’s stolen Bitcoin was a constructive trustee. The court ordered the fraudsters and the exchange to deliver up the Bitcoin to the claimant.

The decision that an exchange is a constructive trustee in these circumstances remains controversial and will likely be tested in future contested litigation where the stolen funds have been deposited and then withdrawn from an innocent exchange. Contested cases may also explore the question of whether and in what circumstances stolen crypto assets can be traced through intermediary accounts, particularly where they have been mixed with other assets that are not part of the fraud.