Nearly £2 million of stolen cryptocurrency to be paid back to victims
Around £1.9 million worth of stolen cryptocurrency is to be paid back to victims of theft as a result of work by the South East Regional Organised Crime Unit (SEROCU).
On 27 January this year, 40-year-old Wybo Wiersma, of Het Weike, Goredijk, the Netherlands, was jailed for four and a half years for theft.
In January 2018, he transferred IOTA tokens to himself without the consent of the owners.
IOTA cryptocurrency requires users to have an 81 character ‘seed’ made up of capital letters and the number 9, to control their ‘tokens’.
All of the victims had used the website iotaseed.io, a fraudulent site created by Wiersma, to generate what they believed to be a random ‘seed’. However, these seed phrases were predetermined by Wiersma enabling him to take control of the tokens.
The tokens were then transferred to numerous cryptocurrency trading accounts.
Under the Proceeds of Crime Act, SEROCU seized around £2.37million in cryptocurrency from a cryptocurrency exchange. This was the first time in the country that this legislation was used to make a seizure from an exchange.
At court, Wiersma was ordered to pay £2.1million, some of which was paid from the seized cryptocurrency. The rest was ordered to be returned to the victims. So far between 50 and 60 victims have been identified worldwide.
In order to return the currency to the victims, SEROCU had to overcome significant challenges in being able to convert the cryptocurrency to Sterling (GBP).
To ensure this was done lawfully and in line with national policy, officers worked with the Financial Conduct Authority (FCA), the National Police Chief’s Council (NPCC) and Kraken Digital Asset Exchange, an FCA registered cryptoasset exchange.
Kraken provided significant expertise and support that enabled SEROCU to convert the stolen cryptoassets into GBP so they could be returned to victims. Kraken also liaised with the FCA to ensure the processing of stolen assets was done lawfully, consistent with Kraken’s FCA registration.
Detective Inspector Rob Bryant, of SEROCU’s Cyber Crime and Cryptocurrency Unit, said: “This has been a complex and challenging investigation which SEROCU took ownership of in late 2018 from our Law Enforcement colleagues in Germany.
“Throughout the course of this investigation we have had to innovate to overcome the complexities of cryptocurrency.
“As the senior investigating officer I am incredibly grateful for the support and guidance that I have received from a broad range of partners. I knew that the complexities would not end once Mr Wiersma had been convicted of theft and we have had a great challenge in establishing a way to return the stolen funds to the victims of this crime.
“The victims, of which there are many across the world, have patiently waited for five years for this to happen and it is thanks to my team’s innovation and collaboration, particularly with Kraken, without whom this may not have been possible.
“I am delighted that we are finally able to return the stolen funds and we can bring closure to the victims.”
Assistant Chief Constable Tim Metcalfe, National Police Chiefs’ Council Lead for Cryptocurrency, said: “Policing is dedicated in ensuring we use the full extent of the law and our relationships with industry leaders to bring back what has been stolen, so that the victims are delivered justice.
“This particular case is one of innovation and collaboration between the police and private sector, which has resulted in victims finally being able to get their money back.”
Lana Sinelnikova, UK Head of Compliance at Kraken, said: “As a crypto provider that takes its security protocols and compliance measures seriously, we’re pleased SEROCU and the NPCC engaged Kraken to facilitate a transaction that enabled these victims to be compensated. This is testament to the emphasis Kraken places on acting in accordance with the highest AML and KYC standards.
“Scammers always find new ways to exploit their victims, and will continue to use these tactics until they prove unsuccessful. In recent years some have relied on the excitement of crypto to deploy commonly used social engineering tactics, such as we saw here.
“For crypto to reach mass adoption, more people need to have confidence in the technology and players within the ecosystem. For that reason, we urge those who plan to participate in crypto to educate themselves about the ecosystem, including common red flags that scammers use, so they can avoid falling victim to similar crimes.”
Matthew Barber, Police & Crime Commissioner for Thames Valley, said: “I am delighted to see the outstanding work of the SEROCU in seizing and returning high-valued cryptocurrency from the hands of scammers.
“As the first operation of its kind in this country, Op Hyphen has ensured that fraud victims from across the world will see the return of nearly £2m of cryptocurrency.
“Scammers will continue to seek new and innovative ways to exploit victims. This operation demonstrates that the SEROCU will continue to be innovative in order to disrupt organised crime groups and keeping our communities safe.”