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An breakdown of the process.
Adam Morallee, Partner
“We first got into working with cryptocurrency assets through our search and seizure and freezing order practice. So, over the last 20 years (and the last 6 years since I’ve been in Brandsmiths) I’ve spent a lot of time getting orders from the court, getting injunctions, recovering people’s property and stopping other people using certain bits of property. We have clients who are insurers, and we asked them: “What is the big problem you’ve got going on at the moment?” They said we’re paying out a lot of ransoms in the cryptocurrency world.
So, we went about trying to establish a jurisdiction, a product whereby we could go to court and freeze the crypto asset when it had got into the hands of the ransomers. The way it usually went was, a company would receive a request to pay a ransom, otherwise all the data would be exposed to the public. If they did pay the ransom, they would be provided back with the key to unlock their data. If they didn’t pay the ransom, all their data would become public. So, what happens is, in that situation, the company turns to their insurer and says ‘I need to pay a ransom.’ The insurer then pays the ransom, goes to the ransomers and they can’t get the cryptocurrency back, because cryptocurrency was very much seen as a currency to be used by criminals. However, it’s actually a very bad currency to be used by criminals because it’s completely traceable on the blockchain, effectively it’s public information.
So we saw that and thought, we can see where the cryptocurrency goes, when you pay it somewhere and then once it gets onto a public exchange, we think we can go to the exchange at that point and asked for it to be blocked. We can write to them, we can speak to them, go and get a court order and ask for it to be blocked.
So when we took the AA case that’s what we did. We waited for the ransom to be paid, once it was paid we contacted the exchange, the exchange held onto it. We then went to court, got a court order, and froze the funds there. If you don’t freeze the funds at the beginning of a case like this, then it’s very difficult to get any sort of recovery.”