A UK High Court judge has ruled that Chinese law, not English law, should govern victims’ claims over more than 61,000 BTC recovered following a multi-billion pound fraud.
But while the ruling settles an important preliminary legal question, it does not determine whether victims can establish ownership of the cryptocurrency or how much, if any, they can recover.
How Qian’s fraud led to the High Court dispute
This case stems from investment scams organized by Zhimin Qian in China from 2014 to July 2017. They involved approximately 10 schemes through the company known as “Tianjin Lantian Gerui Electronic Technology” and others, which included digital currencies, elderly care services and consumer products. The company did not have authorization to offer financial products and Qian admitted that such authorization was necessary under Chinese law.
According to one audit, there were at least 128,409 investment contracts linked to these scams; however, according to the court, the number of contracts is not equal to the number of people who are victims of this crime. The total amount of funds raised was approximately 40.23 billion yuan, or nearly 4.1 billion British pounds, or more than $5 billion.
Most of these funds were used to repay previous investors in the projects, while some of them were converted into assets, including Bitcoin. More than 100,000 BTC were purchased through a Huobi trading account before Qian left the country in July 2017 for Myanmar to escape arrest.
She arrived in London in September and, with her associate Wen, began converting Bitcoin into other assets. However, she was later investigated by the Metropolitan Police, who seized four separate devices containing more than 61,000 BTC found in a safe and at a property where the two accomplices lived at the time.
As CryptoPotato reported in October last year, Qian pleaded guilty at Southwark Crown Court to possessing criminal property in the form of cryptocurrency. The case set the context for the ensuing dispute over who has the legal right to recovered assets.
The victims brought civil proceedings under section 281 of the Proceeds of Crime Act 2002, which allows claimants to apply to a court for a declaration that recovered property belongs to them, with Mr Justice Turner’s opinion. judgement answer a preliminary question: whether these claims should be assessed under English law, Chinese law or a combination of the two.
Why Chinese law matters for victims’ claims
According to the judge, Chinese law applies and he rejected four arguments put forward by the applicants seeking to rely on English legal principles. It found that contracts, investor payments and purchases of Bitcoin were rooted in China and that locating the cryptocurrency in England did not change the law governing the underlying rights.
Mr Justice Turner also rejected the suggestion that English law should apply by default because the content of Chinese law had not yet been presented to the court. As he explained, identifying the applicable law precedes establishing what the law says. The judgment states that the property rights claimed by the plaintiffs “must be assessed by reference to Chinese law.”
This distinction is important because Section 281 requires victims to establish an ownership interest in the property, rather than simply demonstrating that they lost money in the fraud. The court has not yet determined whether the individual plaintiffs have such rights under Chinese law, or how much they could recover.
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