Court orders confiscation of Binance crypto account linked to suspected fraud

A court has ordered the confiscation of virtual money held in an account in a cryptocurrency exchange after it concluded that the activity in that account was not regular.

The Chairperson of the Assets Recovery Bureau and the Police Commissioner filed a non-conviction-based confiscation against an account with USER ID 35650310 held on Binance in September 6, 2023.

The action is used when the alleged perpetrator of a crime has either fled the country or does not live in Malta anymore, has died or died while facing criminal proceedings.

In such actions, the government must prove that a crime was committed and that the property was derived from or used in the commission of the crime.

The action may be used to recover property in a wide variety of cases, including drug trafficking, terrorism and terrorist financing, money laundering, arms trafficking and any other crime liable to imprisonment of not less than ten years.

The application was filed following an investigation of a report where a person claimed they had been defrauded when investing money on www.bitpaxosglobal.com which was purportedly offering investments in virtual currency at high investment rates.

The victim was enticed into investing and started off with an amount in bitcoin equivalent to $555 at the rate of 7% daily. After 24 hours, the victim received $593.84 or $38.84 in profit on the invested amount.

A second $850 investment was done and similarly the victim made a $59.50 in profit in 24 hours.

A third investment was made in an amount in bitcoin equivalent to $2,415, and the victim made a profit of $241.91 bringing the amount up to $2,656.91.

Convinced that it was a good deal, the man proceeded to make his fourth investment, but this time using Ethereum Blockchain in an amount equivalent to $2,685. However, after the investment was made, the man realised that double the amount was taken away from him.

The victim  immediately contacted the website and was told it was his fault for clicking twice and therefore making two separate investments. He was also informed that when an investment is made on the website, this was final and one cannot cancel it.

The man then waited for a return on the investment but no money was returned to him.

When he inquired with the website on what had happened, the man was informed that his status was unknowingly changed to “representative status” and his relationship with the website was subjected to new conditions.

In order to get the money back, he was asked to deposit an additional $3,000. He did not accept and the amount was reduced to $2,000 and $1,000. It was then that he suspected he had fallen victim to fraud and filed a police report.

The police began investigating the case and established that the website had only been set up three months before the victim started investing. It was also established that the website’s domain had been registered only for a year, and whoever was behind it, had no intention to keep running the website.

Several factors including the basing coding used on the website, the hard-coding of the clients, purported deposits and withdrawals, and claims by the website that it had been around for a year, raised suspicions.

The police concluded that it had been set up with fraudulent intentions aimed at deceiving people who were not IT literate.

The police also analysed two blockchains that had been identified by the investigators on which the transfers in Ethereum blockchain and Bitcoin blockchain took place.

Assistance was requested from Binance with regards to the Bitcoin blockchain and the know-your-client documents were handed over to the police.

On June 7, 2022 Binance noticed suspicious activity on the account in question and froze the account. The account had virtual currency equivalent to €8,835.

The police sought information from Nigeria through letters rogatory since the account was linked to an IP address registered there. They remained unanswered.

The owner of the account, Sulaiman Boljai Ayoola, contacted Binance after his account was frozen and insisted that he was a trader of virtual currency. The police replied to him informing that he was a suspect and was given a digital copy of his rights and the transactions that they had been investigating.

Ayoola replied providing the police with screenshots and insisting that he was an “innocent” trader. However, the screenshots only showed excerpts of the chats and the police suspected that they had been modified. Moreover, they did not substantiate his claim that he was innocent.

On September 18, 2022, the police sent questions to Ayoola and informed him that in the absence of a credible explanation, he was suspected of committing fraud and money laundering. Months later, he replied that what he had said so far was enough to show that he was not involved in fraud.

The ARB chairperson and the police commissioner requested the court to declare that the USER ID 35650310 administered by Binance and all the virtual currency in it is subject to confiscation and forfeited in favour of the government.

The court in its confiscation observed that Ayoola did not provide an address for summons in connection with the non-conviction based confiscation and never contested the confiscation.

It also observed that despite Ayoola was asked to answer questions typically asked in the know your client procedures but he did not provide them with any information except that the money was his and he needed it to treat his mother.

The court observed that the owner of the account did not contest the confiscation request, and after reviewing the documents and the report prepared by the police, the court declared that it showed illegal practice by the owner of the account, who refused to give the necessary information in particular on the source of funds.

The court upheld the request and declared that the account is subject to confiscation and ordered that the account and the virtual money held on it is forfeited in favour of the government.

Mr Justice Giovanni Grixti presided.

Lawyers Julian Farrugia and Carina Bugeja Testa from the State Advocate's office appeared for the ARB chairman and the Police Commissioner.