Authorities seek to balance investors’ right to restitution with the State’s fiscal interests.
According to Bloomberg, during a hearing at the High Court of London, British authorities announced their intention to establish a compensation scheme for victims of a fraud orchestrated by Chinese investors, while simultaneously aiming to retain most of the bitcoins seized in 2018. The case involves 61,000 bitcoins, currently valued at $6.8 billion, representing one of the largest digital asset seizures in UK history.
During the October 15 hearing, the Director of Public Prosecutions outlined to the victims’ representatives the possibility of setting up such a mechanism, although specific details of how the compensation program will operate remain confidential. The initiative represents an attempt by British authorities to balance the right to compensation for 128,000 affected Chinese investors with the fiscal interests of the State.
The victims of the fraud argue that the UK government should not profit from their financial losses. The controversy is heightened by the fact that the value of bitcoins has risen from $1.8 billion at the time of the seizure in 2018 to the current $6.8 billion.
Origins of the fraud
The fraud was orchestrated by Zhimin Qian, a 47-year-old woman also known as Yadi Zhang, who ran a fraudulent scheme in China from 2014 to 2017. The system caused losses to victims totaling 43 billion yuan, roughly $6 billion. Its structure was similar to a Ponzi-style scam.
After converting much of investors’ money into bitcoin, Qian fled China and settled in the UK under a false identity. Together with her Malaysian associate Seng Hok Ling, she confessed to money laundering at the Southwark Crown Court in London last month. Both will face sentencing in November.
During the seizure operation, investigators recovered computer assets containing 61,000 bitcoins from a villa in Hampstead, north London. Authorities later gained access to additional digital assets worth approximately £67 million after Qian disclosed access codes and passwords for a Ledger device and two wallets. “The Ledger was found in a purpose-made concealed pocket within a pair of jogging bottoms that [Zhang] was wearing at the time of her arrest,” according to written submissions by Martin Evans KC, lawyer for the Crown Prosecution Service.
The victims’ position
Despite the announcement of the proposed compensation, lawyers representing the victims face several obstacles in the restitution process. One difficulty lies in establishing direct connections between the victims’ initial investments and the bitcoins seized by authorities.
Jack Ding, assistant managing partner at the law firm Duan & Duan, representing approximately 10,000 victims, noted that “some materials lack sufficient information to establish a clear connection.” Legal experts warn that victims are unlikely to recover the appreciated value of the bitcoins, as courts normally focus on returning the principal amount plus reasonable interest, rather than speculative gains from asset appreciation.
William Glover, director of the law firm Fieldfisher, representing a group of victims, said after the hearing that “the Director of Public Prosecutions has effectively accepted responsibility to create a form of compensation scheme for those who may be unable to seek redress through the existing statutory provisions.”
“Given the unprecedented scale of the seizure and public debate about any potential surplus, our position is clear: victims’ restitution must come first,” told Bloomberg Jackson Ng, a lawyer representing a set of investors.
According to some government officials, the bitcoins will likely be subject to prolonged legal disputes, potentially extending until 2027.
