What’s the case about?
The New South Wales Supreme Court made restraining orders and custody and control orders under the Proceeds of Crime Act 2002 (Cth) in respect of property which included Bitcoin and Ether.
Background
The Commissioner sought orders pursuant to the Proceeds of Crime Act 2002 (Cth) (POC Act), including restraining orders, custody and control orders and ancillary orders. The Commissioner sought those orders on the basis that there were reasonable grounds to suspect that the first defendant had committed offences under section 601ED(5) of the Corporations Act 2001 (Cth) (Corporations Act) and under section 400.9(1) to the schedule to the Criminal Code Act 1995 (Cth).
The Commissioner alleged that the first defendant was the Australian national promoter of BitConnect. The Commissioner suspected that:
- the first defendant committed an offence of operating a managed investment scheme that was required by section 601ED(1) of the Corporations Act to be registered, but was not registered; and
- the first defendant had dealt with money with a value in excess of $100,000 which was reasonably suspected of being the proceedings of crime.
In respect of issues relating to cryptocurrency, the first defendant argued that:
- anything related to cryptocurrency or advice in relation to cryptocurrency is not a financial service within the meaning of the Corporations Act. As he was not providing a financial service, he could not be guilty of an offence;
- dealing in cryptocurrency is not dealing in “money” within the Corporations Act. The only form of cryptocurrency which is a financial product is Bitcoin futures.
Court’s consideration
Justice Cavanagh noted that the definition of managed investment scheme in the Corporations Act refers to people contributing money or money’s worth as consideration to acquire rights to benefits produced by the scheme – that is, the definition did not require dealing in a financial product.
The defendant argued that Bitcoin or cryptocurrency was not money. His Honour noted that having regard to the broad meaning which may be given to “money’s worth”, the submission that Bitcoin was not money does not necessarily provide an answer to the suspicion relating to the Corporations Act offence. His Honour’s judgment noted:
[54] Mr Bigatton says that bitcoin or any cryptocurrency is not money. As I have said, whether or not that be so, the definition of managed investment scheme refers to money’s worth. There does not appear to be any case as yet which has been determined, or at least the parties have not referred me to any case which offers guidance on the submission made by Mr Bigatton that bitcoin is not money. He has not referred me to any case in support of his submission.
[55] Further, having regard to the broad meaning which may be given to “money’s worth” (see, for example, Brookfield Multiplex Ltd v International Litigation Funding Partners Pte Ltd (2009) 180 FCR 11; [2009] FCAFC 147 at [91], [207]–[210], [234]–[238]), the submission that bitcoin is not money again does not necessarily provide an answer to the suspicion relating to the Corporations Act offence.
Ultimately His Honour was satisfied that there were reasonable grounds for suspecting that the first defendant was operating a managed investment scheme that was required to be registered.
The property over which the Commissioner sought restraining orders included Bitcoin owned by and in a wallet of the first defendant and Ether and Bitcoin held in Independent Reserve accounts and wallets.
The relevant sections of the POC Act required that there be reasonable grounds to suspect that the “property” is the proceeds of an indictable offence or instrument of a serious offence. The Court’s reasons gave no express consideration as to whether cryptocurrency was property for the purposes of the Act, however as His Honour made restraining and custody and control orders pursuant to the POC Act, the Court proceeded on the basis that they were property.
The Commissioner also sought ancillary orders pursuant to the POC Act, including that the first defendant provide a list of all passwords, passcodes, security codes and all necessary information to enable any storage facility or wallet containing cryptocurrency to be accessed. His Honour also made those orders.
Take aways:
- The Court proceeded on the basis that Bitcoin and Ether were property for the purposes of the Proceeds of Crime Act 2002 (Cth) and made restraining and custody and control orders in relation to them.
- The Court considered whether cryptocurrency was money or money’s worth, however did not determine the point.
- The judgment includes detailed restraining and custody and control orders relating to cryptocurrencies.
Where can I find the case?
Commissioner of the Australian Federal Police v Bigatton [2020] NSWSC 245
Proof of Case 