UK police win right to convert bitcoin to cash, £1.2 million seized
13 Aug 2018

A Surrey detective marked a legal breakthrough for his team, after the courts granted him permission to convert bitcoin seized from the criminal underworld.

The drama unfolded when a ‘wealthy’ man was suddenly bundled into a car, leading the police to a stunning stash of criminal goods.

By Neil Root

When Surrey Police received calls from members of the public who had witnessed a man being aggressively bundled into a car in leafy Virginia Water on 8 April 2017, they responded by treating it as a suspected kidnapping, and this was also confirmed when the man’s partner also called to say that he was in danger.

The man was soon identified as Seregjs Teresko, a 31 year-old Latvian national.

There was no sign of Teresko, so the police searched his rented property in nearby Cobham, for which he paid £2,500 a month, and to their great surprise discovered an industrial-scale cannabis factory inside.

Large amounts of cash-approximately £220, 572, 30,000 Euros and 14,000 Thai Baht were also found. Yet another search of storage facility in Weighbridge, Surrey, unveiled more of Teresko’s drug equipment.

Teresko reappeared with facial injuries the following day, but refused to offer any explanation as to what had occurred, only saying that he had ‘fallen over a barrier’, and he was arrested and charged with drug offences.

A further search of his home on 10 April 2017 revealed credit cards in multiple identities, fake European ID cards, expensive clothes including a striking pair of pink Gucci ladies’ stilettoes, a Rolex watch worth £12,000 and a Tag Heuer watch.

Teresko’s bank safety deposit box in Cobham’s high street also revealed another £20,000 in cash (making the total amount of seized cash £263,744.81), high value jewellery, including a £9,500 necklace and gold bars.

High-end watches and quality jewellery are effective money laundering purchases, as they keep their value and are of course easily mobile.

Two vehicles were also seized from Teresko, a BMW 5-Series and a Range Rover Evoque.

Additionally, Teresko had a great deal of electronic equipment at his property, which was analysed by technical experts.

Crypto find

A cryptocurrency wallet was soon unearthed, which would give access to a Bitcoin account, but the police had no idea at this stage whether anything was deposited within it.

There are hundreds of different cryptocurrencies (Ripple and Cardano are two other prominent ones), which was invented in 2009 although the inventor is still unknown, but thought to be Japanese.

By far the most well-known cryptocurrency is Bitcoin, and this has become a very useful tool for criminals hiding their illegal proceeds.

Virtual cash has many benefits for those stashing their loot, and is also the preferred method of payment on the Dark Web, where drug, weapon and ‘hitman’ transactions have taken place for some years now.

Bitcoin and other forms of cryptocurrency can store money and make payments without bank authorisation and such money movements through mainstream channels flag up money laundering transactions to law enforcement.

Added to this, cryptocurrencies are by definition encrypted, and are not easy to track or access, and the only way is through the digital wallet in which the cryto-account is stored, and which is accessed through an app, USB.

Two keys- the Private Key and the Public Key- are required to enter gain access to a wallet, and that was the task of the Surrey Police, Economic Crime Unit (ECU) in entering Teresko’s wallet.

Back in 2014, the government backed the money laundering cyber-protection scheme, and regional cyber-crime units were created.

Skills of officers in these units have grown enormously since then, and Surrey Police has a very strong cyber-crime unit under the umbrella of its’ Economic Crime Unit.

This is of course necessary, as the use of cryptocurrency in hiding illegal assets has continued to grow, and detecting and tracking down those assets is vitally important in the seizure of criminal assets, and ever-tightening police funding needs to and continues to be invested in this area.

Hurdles ahead

The senior investigating officer for Surrey Police ECU, Detective Inspector Matthew Durkin, was under no illusions about the size of the task he faced, both technically and legally.

In the press conference about the case, DI Durkin stated that “You can’t hide your assets just because it’s cryptocurrency. We will come after it and seize it. We had to be legally audacious.”

Supported legally, tactically and technically by the South East Organised Crime Unit (SEROCU), on 5 September 2017 Surrey Police ECU made an application under Section 47 of the Proceeds of Crime Act (POCA) to seize the contents of the Bitcoin wallet, although at that stage, it was still unknown if it contained anything.

The application was granted, and when the wallet was opened on 12 September, it was found to contain two Bitcoin accounts, one empty, but the other containing 295 Bitcoins- valued on that day at £900,000.

These criminal proceeds were seized and moved into a digital wallet created by Surrey Police.

This was the first time that POCA legislation had been used to do this, Durkin said.

The Crown Prosecution Service (CPS) then made an application to a judge on behalf of Surrey police to enable the conversion of the Bitcoins into cash.

After reviewing the case, the judge ruled that this digital cash whilst virtual in that form was ‘realisable property’, and the ECU decided to convert the Bitcoins in Teresko’s account into sterling, and the value at conversion on the international exchange had risen to £1,246,279.33, due to the volatility of the market.

Cryptocurrency values are of course volatile, and they are often tied to the value of the US dollar, or even in one case, the price of Venezuelan oil.

But Durkin had suffered one last moment of stress in this taxing case while he was converting the Bitcoin- he admitted that he was ‘petrified and shocked’ when for the space of two-and-a-half hours the Bitcoins disappeared from the computer screen as anti-money laundering checks were being made on the international exchange.

But the Bitcoins soon reappeared and were converted, and DI Durkin could breathe easily once again.

Court victory

Teresko was sentenced to nine years and three months in prison, having pleaded guilty to money laundering, cannabis cultivation and the possession and control of articles for use in fraud.

But whilst Surrey Police had the Bitcoin assets in sterling now, the money could not be spent on good causes until the Proceeds of Crime Act hearing was held in court on 19 July 2018, at which authorisation was finally given to do so.

Once almost £65,000 has been paid to Teresko’s landlord for the damage he caused to the rented property with his cannabis factory, the rest of the seized assets will go to Surrey Police community projects.

DI Matt Durkin highlighted the importance of this case in tracking criminal proceeds and digital money laundering.

“It appears Teresko was a member of an organised crime group and Bitcoin was one of the methods he chose to launder criminal assets. I hope this sends a clear message to criminals using Bitcoin to fund illegal activities; it’s not an anonymous as you think, we are able to trace you and we will prosecute.

“This is a ground-breaking, innovative achievement and we are very pleased to be the first UK police force to have achieved this. We were working in unchartered territory and the support of SEROCU, CPS and the National Crime Agency has enabled us to set a precedent and pave the way for future cases in Surrey and across the country.”

Read more:

The compliance and KYC link between banks, bitcoin and exchanges

EU regulators warn cryptocurrency investors could lose all their money

Switzerland issues regulatory guidance for ICOs

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