Case Study
FTI Technology Serves as Third-Party Expert and Witness in Complicated Cryptocurrency Fraud and Racketeering Lawsuit
When a technology company sought to validate its suspicions that a business partner was engaging in fraud and racketeering against the company, its legal counsel retained FTI’s Blockchain Advisory and Cryptocurrency Disputes, Investigations and Litigation (CDI&L) practice to investigate.
Situation
Amid global expansion, a technology company providing cryptocurrency hardware, software and services entered into an ownership agreement with a set of secondary partners to provide back-end software for order fulfillment and payments processing using cryptocurrency.
Over time, the company’s CEO suspected inappropriate activities and theft of money from the company. The CEO had little visibility into the back-end software and the inner workings of the system which made it difficult to prove wrongdoing.
An initial lawsuit over company funds held in a partner’s account ensued, followed by additional claims of fraud and racketeering and a total of 22 charges filed against the partners.
Our Role
The client reached out to FTI to investigate the flow of cryptocurrency funds through the back-end software, and to trace the accounts to which company money had been sent.
FTI’s CDI&L team led the effort and provided the following:
- In-depth evaluation of the partners’ back-end payments software, blockchain infrastructure and general flow of business.
- Discovery of manual entries created in the system, confirming the ability receive commissions and payments – directly countering defendants’ testimony.
- Evidence confirming permissions were in place for direct payments, and cryptocurrencies had been stolen in this way.
- Investigation into the defendants’ previous dealings to determine the validity of the racketeering charge and whether the partners had intentionally set out to defraud the company. The team found that they had engaged in similar behavior with other companies in the past.
- Assisted in creation of various subpoenas to gather required ownership identification of wallets and accounts.
Our Impact
Discovery of Key Evidence: FTI’s deep expertise in cryptocurrency infrastructure and investigations provided the client with validation of its claims and discovery of evidence to support fraud, racketeering and other charges against the defendants.
Insight into the Flow of Funds: By conducting forensic analysis of transactions within the client’s complicated payments system, FTI provided counsel with insights to confirm that unauthorized debits and payments were issued between various wallets.
Cryptocurrency Asset Tracing: FTI traced payments to and transfers between numerous private digital wallets and helped the law firm in their issuance of subpoenas to the cryptocurrency exchanges to determine the owners of those wallets.
Expert Testimony: To date, FTI has provided an expert report and testified in depositions, showing that illicit activity did occur, and in a manner consistent with racketeering.
Discovery of Key Evidence: FTI’s deep expertise in cryptocurrency infrastructure and investigations provided the client with validation of its claims and discovery of evidence to support fraud, racketeering and other charges against the defendants.
Insight into the Flow of Funds: By conducting forensic analysis of transactions within the client’s complicated payments system, FTI provided counsel with insights to confirm that unauthorized debits and payments were issued between various wallets.
Cryptocurrency Asset Tracing: FTI traced payments to and transfers between numerous private digital wallets and helped the law firm in their issuance of subpoenas to the cryptocurrency exchanges to determine the owners of those wallets.
Expert Testimony: To date, FTI has provided an expert report and testified in depositions, showing that illicit activity did occur, and in a manner consistent with racketeering.