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Seized cryptocurrency can lead to financial windfall for law enforcement

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When police seize narcotics, cash, and other valuables from individuals during an arrest, a common question is asked – where do those valuable items go? Well, in the United States, there is a legal mechanism known as “civil asset forfeiture” that enables law enforcement officials to seize property they believe were involved in certain crimes. It is important to note that this forfeiture can take place even if you are not ultimately convicted of a crime. Both state and federal law enforcement authorities have the ability to seize property and even go so far as to partner up through a system called “equitable sharing.” Payouts to state and local agencies through equitable sharing have increased nearly 250 percent in the span of 12 years, according to a report published by the Heritage Foundation.

The U.K. appears to be embracing a similar system where law enforcement reap financial benefits from seized property. For example, police in the U.K. raised nearly $300,000 by auctioning off a convicted hacker’s cryptocurrency haul, according to CNBC.com. The seized assets, which featured large shares of bitcoin, ripple and ether, raised more than £240,000 ($295,150) when they were sold off by the U.K.’s Eastern Region Special Operations Unit (ERSOU). This was the first time a British police force auctioned any form of cryptocurrency as part of an asset recovery order. 

The crypto assets were seized from a hacker who supplied online personal data and hacking services in exchange for thousands of pounds worth of cryptocurrency,” according to the ERSOU. It was also reported that the buyers of the cryptocurrency during the auction were approved “ethical users of cryptocurrency,” with each participant’s background checked by a specialist, according to the aforementioned CNBC article. 

Photo by André François McKenzie on Unsplash

Although this was the first auction of its kind in the U.K., this type of event is becoming more common. In fact, there have been a series of seized crypto sales that have gone ahead internationally.

Prosecutors in the United States have previously auctioned off seized bitcoin and cryptocurrency assets, with the U.S. Marshals Service raising more than $18 million from a bitcoin auction in 2018, according to Coindesk.

Federal Laws Concerning Cyber Crimes

Hacking into a computer is a federal offense and generally illegal in all 50 states. Depending on the case, penalties may include a multi-year prison sentence and being ordered to pay large fines (along with having your assets seized and sold at auction, as described above). 

One of the touchstone laws prohibiting the act of hacking into someone’s computer is the Computer Fraud and Abuse Act of 1986. There are various forms of computer fraud and cybercrimes that are deemed illegal pursuant to 18 U.S.C. § 1030, including:

  • Knowingly accessing a computer without prior authorization for the purpose of procuring data related to national security, financial records of a financial institution, or information about a federal agency or department;
  • Intentionally accessing a government computer without prior authorization and changing how the compute operates;
  • Knowingly accessing a “protected” computer intent on committing fraudulent acts and procuring something of value from the protected computer; and
  • Knowingly damaging a computer that causes a public health or safety threat, physical injury, damage to a government computer system, or at least $5,000 in losses to one or more individuals within a one-year period.

Potential Penalties

Depending on the circumstances of your particular cybercrime case, the penalties for violating the Computer Fraud and Abuse Act, or a related federal law, can be quite severe and life-altering. For example, a conviction typically involves having to serve a prison sentence between 1 and 20 years, along with having to pay a large penalty. 

If you were charged with allegedly committing a cybercrime in the United States or U.K., it would be prudent to speak with a lawyer to discuss your legal options. As you can see by the potential penalties, a criminal charge related to hacking or another cybercrime is extremely serious.