Cardium Law’s can-do attitude and international legal network are instrumental as it pursues cases of crypto fraud across the globe.

Crypto is high-risk. Unfortunately, too few people are well-informed about what they are doing when they transfer or invest money using cryptocurrencies. Many get scammed.

Stolen money is washed through crypto wallets and different exchanges, passing through different legal jurisdictions as it goes, making it difficult to track down the money or the perpetrators.

That’s compounded because crypto isn’t regulated by any financial authority.

“When we get people coming to us with these problems, the biggest challenge is they don’t know who stole the money and, secondly, it is going to cost more money to trace who stole it and the crypto wallet it ended up in,” explains Cardium’s Chris MacQueen.

Practical thinking

The firm, which specialises in the property and construction sector, prides itself on being more practical and less legal thinking than conventional law practices. It applies its problem-solving skills to the practicalities of engaging with crypto exchanges.

Take the challenge of financing an international investigation that might take two years or more to reach its conclusion.

The trick here is to pool together similar cases with multiple victims of the same fraud that collectively have enough value to get a funder interested in financing the operation.

One way other law firms do this is to advertise: ‘Have you been defrauded by XYZ scam? Join our class action.’

Different approach

Cardium’s approach is different as Chris MacQueen explains: “The way we work is where someone has been defrauded by a rogue company, we aim to put that company into insolvency and install our liquidator.”

Now that Cardium controls the company, it can turn it into a weapon against the criminals responsible.

Firstly, it works out how much money has gone through the business and who it is owed to. That scales up the claim from one individual’s loss of perhaps £50,000 to something typically into the tens of millions.

Using this strategy, Cardium is currently investigating a £2.5m action which could balloon to £200m.

Critical mass

Once a claim reaches critical mass, it can attract a funder to back the cost of the investigation.

Now the hunt can begin.

The challenge is to find an individual behind the rogue company and to seize their assets.

A crucial factor comes in the form of regulated crypto exchanges.

Since 2019, the UK’s Faster Payments Services (FPS) has allowed people and companies to transfer funds between banks and regulated crypto exchanges.

This opens a door for Cardium’s investigation team into the otherwise unregulated world of crypto.

Court orders

With cases involving funds in conventional banks, the team can use court orders to obtain information from the banks to help with its investigations.

Normally, this wouldn’t apply with unregulated crypto exchanges but because regulated crypto exchanges have a relationship with FPS, they will voluntarily provide information to investigators who have a court order.

That gives investigators access to all the information they hold for the wallet that has been used to turn crypto into real (fiat) money. With that, they can track down a person responsible. That is not the end of it, though, because that person is often a stooge, a go-between with few assets of their own that Cardium could seize.

The team now raises a series of court orders against banks along the money trail to track where the loot went. This is called layering.

Freezing injunction

The process continues until investigators get to a person with enough assets to make a freezing injunction against them and obtain an order to recover the money owed to people by the original rogue company.

“Once you find someone responsible with sufficient assets, it’s easy. What defence do they have? None really,” says Chris MacQueen. “There’s a paper trail leading to them.”

That trail can be convoluted, however. For example, an individual in the US might be defrauded by a crooked English company, his stolen money turned into crypto, withdrawn from a bank in Bermuda and wind up in China.

IR Global

Chris MacQueen, who is qualified to practice law in New York as well as the UK, points to the practice’s membership of the IR Global legal network and its black book of connections built up by attending international conferences.

“We can harness local expertise to navigate the legal systems in jurisdictions worldwide,” he says.

It is not a quick process. It takes time to build the stockpile of cases and to find funding for the investigation, which will often only be for the first stage, requiring further rounds of funding as the case progresses.

One complication is that fraudsters are often in difficult jurisdictions such as China. Cardium has a connection in that country with a Chinese practice, Cyan Law, which helps.

Overseas law enforcement

The UK firm can also work with local law enforcement overseas to see if the perpetrator has also committed fraud in the country where they are living.

“If they have, which is often the case as fraudsters behave that way, they will likely be prosecuted by the local authorities and the overseas claims, including ours, will be included in the case,” explains Chris MacQueen.

Sometimes just the threat of prosecution is enough to recover funds because the fraudsters know in regimes such as China they will face very long jail terms.

Ransomware

A variation on this kind of fraud is ransomware where the perpetrator locks up a company’s IT system and requires payment in cryptocurrency sent by the victim over blockchain.

Now there’s a large amount of money moving quickly.

“In these cases, it’s vital to trace and grab it before they can transfer it,” says Chris MacQueen. “Because funds can move rapidly through crypto and conventional financial systems, we have to act fast.”

That means making urgent applications for court orders one after another.

“In this example, we’re chasing the money whereas in the other example, we’re chasing the fraudsters because the money is long gone,” concludes Chris MacQueen.