In an episode of what can only be termed as “most expensive legal mistakes,” the Swedish government is being forced to return over $1.4 million worth of Bitcoin to criminals. That is after a confession that the money was gained from proceeds of selling drugs.
It seems that the criminals were accepting Bitcoin as payment for drugs, hence the pricey stash of digital cash.
However, in a strange turn of events, the convicted criminal will still profit from Bitcoin’s tenfold appreciation over a period of 2 years in which they have been serving a prison sentence. The mistake? The prosecutor, Tove Kullberg, converted the BTC to its equivalent value in Swedish kronor that was then worth $149,000.
Legal error plus two-year delay led to huge payday
In what could be one of the most fascinating HODL stories yet, a drug dealer was arrested in 2019 and 36 BTC was seized as proceeds of crime. The case was prosecuted and the drug dealer was handed a sentence of 2-6 years.
Legally, all the proceeds of the crime should have been confiscated by the state, and that is what happened. However, by converting the fiat value of the seized BTC, the court effectively allowed that the crime only earned 1.3 million kronor or about $149,000.
In the meantime, the 36 BTC seized were gaining value as BTC surged. After 2 years of processing the confiscated BTC, the Swedish Enforcement Authority finally got around to auctioning the digital assets.
Thanks to the increased value of BTC, the authority only had to sell 3 BTC to recoup the 1.3 million kronor sanctioned by the court. The rest, 33 BTC worth just under $1.5 million at the time of writing, was returned to the owner.
As Kullberg told Swedish Radio, “It is unfortunate in many ways. It has led to consequences I was not able to foresee at the time.”
No legal precedence
Prosecutor Kullberg was not to blame. There was simply no legal precedence for handling digital assets, and BTC is not legal tender. Ideally, the seized assets should have been put down as “36 BTC” with no conversion. That way, the full amount would have gone over to the state.
As the case was the first in Swedish legal history in which Bitcoin was seized, the country will need to take rapid measures to train its legal personnel on how to deal with cryptocurrency assets.
So far, Australia has not had such legal challenges. Since 2013, the state has been seizing cryptocurrency assets linked to criminal activities and began auctioning them off in 2016. Australia has one of the most robust anti-cyber crime laws and was the first outside of the USA to auction seized Bitcoin.
The most recent one saw over $8.49 million seized and two people arrested over suspected connections to the now-defunct Silk Road black market site.
The law needs to catch up
In June 2021, El Salvador became the first country to declare Bitcoin to be legal tender. Other countries such as Paraguay are taking steps towards the same goal, while many others are already decriminalising cryptocurrency and crypto trading to attract profits from the digital assets.
As cryptocurrency and other digital assets continue to gain massive popularity, legal systems here in Australia and all over the world need to catch up quickly. That’s the only way to avoid such expensive, albeit unwitting, mistakes as what took place in Sweden.
As Kullberg put it,
“I think we should probably invest in an internal education in the [prosecution] authority, as cryptocurrency will be a factor we’ll be dealing with to a much greater extent than we are today.”
