Case Study
FTI Technology’s Blockchain and Digital Assets Experts Assist Counsel and Law Enforcement in Handling $10 Million of Seized Cryptocurrency
When a law firm was granted receivership to manage disposition of millions of dollars’ worth of digital assets during an ownership dispute, FTI Technology provided advising and technical expertise to ensure the funds were managed securely and lawfully.
Situation
The Federal Bureau of Investigation seized more than $10 million in cryptocurrency after a defendant had attempted to keep assets that were mistakenly distributed to him as a result of a bug in a Layer 2 cryptocurrency startup’s code. When the bug triggered a transfer of a large amount of a new coin to the user’s account, the user began trading the coins to purchase millions of dollars’ worth of cryptocurrency spread across a dozen different coins on open exchanges. The startup quickly sought legal recourse to recover its misappropriated coins.
Following the FBI’s seizure of the disputed assets, a receivership was established through a law firm for the purpose of securely holding the assets with a neutral third party until a judge ruled on the case. The receivership attorney needed support throughout the entire process, from gaining court approval to serve as the receiver, coordinating transfer of assets with the FBI and taking possession of the assets, to establishing cold storage on a crypto hardware wallet.
When the court ultimately ordered the defendant to pay a fee to the startup and dispose of the remaining assets, the receiver was responsible for managing those transactions in a manner that would not manipulate or otherwise disrupt crypto trading markets, with only two weeks to complete the disposal.
Each step required numerous meetings, technical negotiations, transactions to appropriately move and manage the assets, and monitoring across exchanges to avoid the risk of crypto market watchers attempting to illicitly capitalize on any of the asset transfers.
Our Role
FTI Technology’s Blockchain & Digital Assets experts have extensive experience in securely managing large cryptocurrency portfolios and cold wallets for receiverships and other matters related to digital assets disputes and investigations. In this engagement, the team served as trusted advisors to the receivership attorney to carefully and correctly navigate a complex series of steps and transactions involving a large amount of money.
Throughout the receivership and disposal of assets, FTI Technology provided:
- Facilitation of meetings with the FBI and establishing a hardware wallet for the seized assets to be transferred to.
- Expert guidance and side-by-side support for taking possession of the seized assets from law enforcement, ensuring the $10 million were safely and legally moved to a cold wallet held in a safety deposit box belonging to the receivership attorney, for safekeeping until the court case concluded.
- Movement of the funds to a new digital assets exchange account held by the receiver, and conversion of a portion of the assets to cash to enable the defendant to pay the fee to the plaintiff, per court order.
- Careful and strategic transaction management to convert the remaining cryptocurrency back to the original coin, so that it could be disposed of, via an inaccessible burn address, according to the court’s instructions.
Our Impact
FTI Technology’s experts consulted and advised the receivership attorney across a complex series of steps and coordination with law enforcement and the courts. They ensured secure and legal management of $10 million in cryptocurrency across exchanges, numerous coins and cold storage.
The team facilitated on-time disposal of the assets according to court orders, avoiding market disruptions and preventing outside manipulation.