Prosecutor says there is no precedent for handling profits obtained through cryptocurrencies
In a strange case, the Swedish government had to pay the equivalent of $1.5 million in Bitcoin to a convicted drug dealer after the value of the illegally obtained digital asset soared while he was in prison.
The case has highlighted that prosecutors must not only become familiar with how cryptocurrencies work but also establish procedures for dealing with illegal funds held in digital assets.
A Swedish court convicted the dealer two years ago after he was caught selling drugs online and was found to have illegally obtained 36 Bitcoins from those sales. Prosecutor Tove Kullberg proved the crime and argued that the illegally earned Bitcoins — at the time valued at 1.3 million Swedish kronor (about $149,000) — should be confiscated.
However, the prosecutor used the fiat value of the Bitcoins when bringing the original claim. “It is in many ways regrettable,” Kullberg told Swedish radio. “It has led to consequences I could not have foreseen at the time,” she explained.
Bitcoin’s price has nearly increased tenfold over the past two years. As a result, when the Swedish enforcement authority decided to auction off the illegally obtained Bitcoins, they only needed to sell 3 Bitcoins to recover the court-ordered penalty of 1.3 million kronor.
The remaining 33 Bitcoins were returned to the dealer, even though he admitted the funds were earned illegally by selling drugs online. The 33 Bitcoins are now worth roughly $1.5 million.
The prosecutor noted that there is no precedent in Swedish legal history for how Bitcoin gains should be handled in court.
She added that the proceeds of the crime should have been recorded as 36 Bitcoins regardless of the cryptocurrency’s fiat value at the time of the proceedings. The unusual outcome could also have been avoided if the auction had been carried out immediately after the conviction.
“I think we should probably invest in internal training for the prosecution service, because cryptocurrency is going to be a factor we deal with much more than we do today,” Kullberg said.
“The more knowledge we build within the organization, the fewer mistakes we will make,” the prosecutor concluded.