UK Judge Says Chinese Law Applies to Claims Over £4B Bitcoin Fraud

A UK High Court judge has ruled that Chinese law, not English law, must govern the claims of victims to more than 61,000 BTC recovered from a multibillion-pound fraud.

But while the decision settles an important preliminary legal question, it does not determine whether the victims can establish ownership of the cryptocurrency or how much, if anything, they may recover.

How Qian’s Fraud Led to the High Court Dispute

This case arises from investment scams arranged by Zhimin Qian in China from 2014 until July 2017. They involved about 10 schemes via the company known as “Tianjin Lantian Gerui Electronic Technology” and others, which included digital currencies, elderly care services, and consumer products. The company lacked authorization to offer financial products and Qian confessed that there was a need for such an authorization under Chinese law.

According to an audit, there were at least 128,409 investment contracts related to the scams; however, as per the court, the number of contracts is not equal to the number of people who were victims of this crime. The total amount of funds collected was approximately 40.23 billion yuan, which is almost £4.1 billion, or over $5 billion.

Most of these funds were used to pay off the previous investors in the schemes whereas some of them were converted into assets, including Bitcoin. More than 100,000 BTC were purchased through a Huobi trading account before Qian left the country in July 2017, crossing into Myanmar to evade arrest.

She arrived in London that September and, together with her associate, Wen, started converting the Bitcoin into other assets. However, she later came under investigation by the Metropolitan Police, who seized four separate devices containing more than 61,000 BTC found in a safety deposit box and a property where the two accomplices were living at the time.

As CryptoPotato reported in October last year, Qian pled guilty at Southwark Crown Court of having possession of criminal property in the form of cryptocurrency. The case established the background to the subsequent dispute over who has the legal right to the recovered assets.

Victims instituted a civil proceeding under Section 281 of the Proceeds of Crime Act 2002, which allows claimants to ask a court to declare the recovered property is theirs, with Justice Turner’s judgement addressing a preliminary question: whether those claims should be assessed under English law, Chinese law, or a combination of both.

Why Chinese Law Matters to Victim’s Claims

According to the judge, Chinese law applies, and he rejected four arguments advanced by applicants seeking to rely on English legal principles. He found that the contracts, investor payments and Bitcoin purchases were rooted in China, and that the location of the cryptocurrency in England did not change which law governed the underlying rights.

Justice Turner also rejected the suggestion that English law should apply by default because the content of Chinese law had not yet been presented in court. As he explained, identifying the applicable law comes before establishing what the law says. The judgement states that applicants’ claimed proprietary rights “must be assessed by reference to Chinese law.”

That distinction matters because Section 281 requires victims to establish an ownership interest in the property, rather than simply show that they lost money in the fraud. The court has not yet determined whether individual applicants have such rights under Chinese law, nor how much they might recover.