INTERPOL Red Notices and Charges Related to Cryptocurrencies: Why Are These Cases Popping Up in South Korea, China, the United States and Other Financial Centers? | Estlund Law, PA

Also this week there is news that a cryptocurrency entrepreneur is to be prosecuted. In the case of Do Kwon, the co-creator of failed cryptocurrency TerraUSD, South Korean authorities claimed that 280,000 investors lost $40 billion when its cryptocurrency value plummeted. “The crash is also believed to have caused more than $500 billion in losses to the broader crypto market globally,” the report states.

When you see such numbers, you immediately think that someone has to pay. And when failed investments involve genuine criminal fraud or deception, authorities should seek to prosecute the culprits.

But. Cryptocurrency-related businesses and investments have created financial activity unlike anything seen in our publicly traded markets. While cryptocurrency is no longer new, cryptocurrency-related cases are fairly recent in the world’s justice systems — particularly criminal courts. They often include allegations of fraud and other financial crimes that fall under the heading of money laundering.

With each new phenomenon, new forms of law enforcement will emerge. At their core, deviant human behavior often fits neatly into one of several criminal categories, and financial crime is no exception. Regardless of the means used to commit fraud – wire fraud, mail fraud, contract origination fraud, etc. – fraud involves deceiving another in order to gain a profit. That hasn’t changed as cryptocurrency has become a normal part of our financial lives.

Cryptocurrency: a complex factual pattern + different regulatory schemes + high depreciation = change in the treatment of the defendant

What is different about the criminal charges we see in cryptocurrency cases is that jurisdictions do not always know how – or have not yet agreed on a common system – to regulate cryptocurrency-related financial transactions. Accordingly, a person may be wanted and detained for a Red Notice even if ultimately not recognized by the other INTERPOL member countries.

Another factor is that government officials tasked with prosecuting and adjudicating related allegations do not always understand cryptocurrency. In my practice, I have experienced that public prosecutors and courts lack understanding of cryptocurrencies and the associated business models, often leading to alarming reactions when large sums of money are said to have disappeared. This response can result in trials being allowed in the absence of clear criminal charges; holding suspects in custody instead of posting bail; and freeze assets without reason.

The challenge for prosecutors and courts

The factual patterns associated with cryptocurrency, its mining, blockchain activities and records, and the business models often associated with these cases can be complex. The challenge for prosecutors and the courts is to do what is becoming increasingly rare in today’s society: take the time needed to fully understand the allegations and the underlying facts before acting on them , and to decide whether a massive loss is just an investment gone awry, or the result of a genuine criminal act.

Otherwise we risk freezing, imprisoning and prosecuting innocent people’s assets.

As always, thoughts and comments are welcome.

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