London's High Court ruled on Monday that Chinese law governs victims' claims to the 61,000 BTC — roughly $5 billion at the current price of about $83,200 per CoinGecko — that UK authorities seized from convicted fraudster Zhimin Qian. The decision materially improves the UK government's position to keep one of the largest crypto seizures on record.

Justice Mark Turner sided with the Director of Public Prosecutions, who heads the Crown Prosecution Service and brought the case. He found that the fraud, the victims' payments and the investment contracts all took place in China. "The relevant damage occurred in China. The Applicants parted with their money in China," Turner wrote.

The judge reached the same conclusion under every legal route he considered, holding that the governing law "is Chinese law." Because the Bitcoin was bought in China, he added, tracing the coins into England cannot revive property rights the victims lost under Chinese law at the moment of purchase.

Why the choice of law matters

English law had been seen as substantially more favorable to the victims, the Financial Times reported, because it could have let them argue the coins directly belonged to them. Chinese law is expected to set a higher bar.

Thousands of victims have applied under the Proceeds of Crime Act to have portions of the Bitcoin declared theirs. To succeed, each must demonstrate a proprietary interest in the coins, Turner wrote, because the law creates no broader compensation scheme for people who lost money to crime.

The scheme behind the haul

Qian received a prison sentence of more than 11 years last year after pleading guilty to fraud and money laundering charges over a Ponzi scheme that targeted investors in China between 2014 and 2017. According to the ruling:

• At least 128,409 investment contracts were entered into.
• Victims paid in roughly RMB 40.2 billion, about £4.1 billion.
• Around RMB 34.1 billion was paid back out to some victims.

What happens next

Monday's judgment does not decide who keeps the Bitcoin. Questions about the content and proof of Chinese law, and how it applies to the claims, are matters for a later stage, Turner wrote. Prosecutors have previously said victims could be compensated through a redress scheme run from China.

"There will be a further hearing to determine the application of the law and if any of the victims are able to establish an an interest in the bitcoin," the CPS said in a statement.

Law firm Fieldfisher, which represents the claimants, is pursuing an appeal, according to the FT.

The stakes extend beyond the courtroom. Unnamed Treasury officials privately raised last year whether the seized Bitcoin — worth about $7 billion at the time of Qian's trial — could help fill a shortfall in UK public finances, the FT reported. An appeal and a substantive hearing on Chinese law now stand between the claimants and any recovery, meaning the fate of the 61,000 BTC likely won't be resolved for years.

By Daniel Okafor