Crypto exchange given go-ahead to track stolen assets in UK court ruling

A London court has ordered cryptocurrency exchanges including Binance, Coinbase, Kraken and Luno to hand over customer details to a rival operator to help it track $10.7mn in stolen funds.

In a ruling on Tuesday, the High Court ordered six exchanges, all based outside the UK, to disclose customer information including names, bank accounts and card details, subject to some redactions.

The judge said “steps should be taken before the scent goes colder” to trace $1.7mn of the money that was tracked to 26 accounts, all of which were owned or operated by one of the six exchanges. The funds were in digital currencies including Bitcoin, Ripple, Tether and Ethereum.

The legal action brought by the UK-based exchange is one of the first applications of new court rules designed to help victims of cyber fraud track their assets overseas. The name of the exchange was not disclosed to avoid “tipping off” the thieves, according to the ruling.

The UK exchange asked the court to intervene after it was hacked in 2020. It had initially sought help from UK law enforcement, but when that proved fruitless, the group hired crypto tracing experts. They tracked $1.7mn to accounts owned or operated by one of the six exchanges, lawyers for the UK exchange told the court.

Courts and law enforcement authorities are racing to catch up with the sharp rise in crypto frauds. In the UK, data from police unit Action Fraud showed that the total value of reported crypto frauds increased by a third in the 12 months to September 2022. Last year, criminals stole about $6.2bn, according to blockchain research group Chainalysis, up 80 per cent from 2020.

In this case, the court used new rules that enable English judges to order foreign companies to hand over documents. The rules have been hailed by lawyers as particularly helpful to victims of cryptocurrency frauds, where parties involved are often anonymous.

Victims who turn to the law for assistance often lack even the most basic information about the person who stole their cash or where they are based.

Lawyer Syed Rahman, who represented the UK exchange, said: “The case is a huge step forward for those who are trying to recover assets that have been taken fraudulently and moved across borders.”

The ruling concluded it would be “impractical and contrary to the interests of justice to require a victim of fraud to make speculative applications in different jurisdictions” in order to track down their assets.

Binance declined to comment. Kraken, Luno and Coinbase did not immediately respond to requests for comment.