The South East Regional Organised Crime Unit (SEROCU) successfully orchestrated the return of approximately £1.9 million ($2.3 million) worth of stolen cryptocurrency to its rightful owners — with the assistance of crypto exchange Kraken.
Some £2.4 million ($2.9 million) in crypto funds were seized under the Proceeds of Crime Act following a 2018 scam involving the IOTA MIOTA +0.60% cryptocurrency, according to a statement. It was the first time the legislation was used in the country to seize crypto from an exchange.
In order to pay back the stolen funds to the victims lawfully, SEROCU had to first overcome challenges in converting the crypto assets to GBP, working with the UK's financial regulator, the Financial Conduct Authority, the National Police Chief’s Council and Kraken — an FCA registered exchange — to enable the return.
"Kraken provided significant expertise and support that enabled SEROCU to convert the stolen cryptoassets into GBP so they could be returned to victims. Kraken also liaised with the FCA to ensure the processing of stolen assets was done lawfully, consistent with Kraken’s FCA registration," SEROCU stated.
"The victims, of which there are many across the world, have patiently waited for five years for this to happen and it is thanks to my team’s innovation and collaboration, particularly with Kraken, without whom this may not have been possible," Detective Inspector Rob Bryant, of SEROCU's Cyber Crime and Cryptocurrency Unit, added.
"As a crypto provider that takes its security protocols and compliance measures seriously, we're pleased SEROCU and the NPCC engaged Kraken to facilitate a transaction that enabled these victims to be compensated," Lana Sinelnikova, UK Head of Compliance at Kraken, said. "This is testament to the emphasis Kraken places on acting in accordance with the highest AML and KYC standards."
The curious IOTA-based case
The case revolved around Wybo Wiersma, who was sentenced to four and a half years in prison in January for the theft in 2018. Wiersma, based in the Netherlands, created a fraudulent website that generated predetermined IOTA seed phrases for wallet generation, allowing him to later transfer tokens held by victims using the site to himself without their consent, according to SEROCU. The stolen assets were moved across various trading accounts before being seized.
In court, the judge mandated Wiersma pay £2.1 million ($2.6 million), with a portion of this sum covered by the seized cryptocurrency. The remaining amount was ordered to be distributed among the victims, who currently number between 50 and 60 individuals globally.
"Scammers always find new ways to exploit their victims, and will continue to use these tactics until they prove unsuccessful. In recent years some have relied on the excitement of crypto to deploy commonly used social engineering tactics, such as we saw here," Sinelnikova said.
"For crypto to reach mass adoption, more people need to have confidence in the technology and players within the ecosystem. For that reason, we urge those who plan to participate in crypto to educate themselves about the ecosystem, including common red flags that scammers use, so they can avoid falling victim to similar crimes," Sinelnikova added.
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