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A U.K judge has ordered Binance, the embattled global cryptocurrency exchange, to freeze a trading account suspected of involvement in a £1.9 million fraud scheme and name the individual or individuals who control it.

The High Court in London’s ruling in favor of Fetch.ai, a decentralized machine learning company based in Cambridge, England, came weeks after the company launched civil proceedings to recover its assets after fraudsters hacked into its accounts on the Binance platform that held Bitcoin, Binance Coin, Tether and the company’s own digital token, FET.

Restrictions on Fetch.ai’s trading accounts prevented the perpetrators of the June 6 attack from siphoning cryptocurrency directly. They instead traded the assets at a fraction of their value to a second account that an unknown third party held at Binance, in the first leg of what court documents described as a “pump and dump exercise.”

The fraudsters then sold the assets at their proper value and moved their profits out of Binance to an unknown destination, leaving Fetch.ai with £1.9 million in losses, the latter company claimed.

Presented with the evidence, Judge Mark Pelling QC granted a worldwide freezing order last month to restrain the stolen assets, wherever located, and ordered Binance to identify the party or parties behind the trading account to which they initially moved.

“I am satisfied that there is a real prospect that, if an order is made … that will lead to the location and preservation of such of those assets as have been removed from that account and passed on or converted so as to become traceable assets,” Pelling wrote in the ruling published Thursday.

Fetch.ai’s case, the latest in which a U.K. judge has granted injunctive relief in a dispute over cryptocurrency, further solidifies digital tokens’ status as property in English law and cements the High Court’s role as an avenue for victims of such schemes to recover their losses.

The court granted its first freeze against cryptocurrency in September 2018 after Nebeus, a London-based trading platform, failed to prove that it still held £1.5 million in Ethereum and Bitcoin for a client who feared her funds had disappeared.

Nine months later, Liam Robertson, chief executive of U.S.-based cryptocurrency investment firm Alphabit Fund, secured a freezing order on more than £1 million worth of bitcoins he claimed had been stolen from him in a spearphishing attack.

The High Court then ordered Bitfinex, an exchange registered in the British Virgin Islands, to freeze 96 bitcoins held in a wallet controlled by the suspected perpetrators of a ransomware attack and identify the person or persons who held them.

“The English courts have a vast array of asset recovery tools and are showing a particular willingness to adapt these tools in cases concerning cryptocurrency,” Syed Rahman, an attorney in London representing Fetch.ai, told ACAMS moneylaundering.com.

Fraudsters on the march

The Financial Conduct Authority warned in June that Binance has served customers in the United Kingdom despite not having permission to operate in the nation.

The FCA’s notice overlapped with decisions by Barclays, TSB and several other U.K lenders to suspend payments to Binance and Kraken, a California-based exchange, amid a spike in cryptocurrency-related investment scams and other cyber-enabled frauds during the novel coronavirus pandemic.

On Monday, the accounting firm Grant Thornton, the Asset Reality consultancy and several legal practices in London launched the Crypto Fraud and Asset Recovery network, or CFAAR, to share knowledge on handling cryptocurrency-related legal disputes and finding stolen digital tokens.

Investment fraud, Ponzi schemes and romance fraud have emerged as the most prevalent types of cryptocurrency heists during the pandemic, CFAAR member Carmel King, a director at Grant Thornton in London who specializes in asset recovery, told moneylaundering.com.

One group of perpetrators posed as asset recovery specialists to their own victims, offering to help find their stolen cryptocurrency in return for an additional investment, King said.

Blockchain analysis played a pivotal role in locating the assets stolen in the Bitfinex heist and other online thefts, with the High Court broadly accepting the highly technical evidence underpinning the legal claims that followed.

“Blockchain technology can identify the hops [between wallets] and, to a degree, overcome mixers and tumblers,” said King. “We tend to see the fraudsters looking to get the cash back out again, and there you’re looking at the usual approaches: the use of legal entities and third parties [money mules], and offshore banking to hide the assets.”

Corporate records, data gleaned from social media platforms and other sources of intelligence on alleged fraudsters and the links between them can help develop claims against their “real world” assets, King said. “You don’t always have to recover the crypto.”

In an ongoing case, Ion Science, an English company that manufactures technology for detecting gas leaks, petitioned the High Court last month to recover hundreds of thousands of pounds worth of bitcoins that fraudsters allegedly bilked from it and transferred to the U.K. subsidiary of Kraken.

Ion Science alleges that from February to October 2020, unknown parties induced the company into investing the bitcoins into initial coin offerings for two new purported cryptocurrencies, Uvexo and Oileum, which it later learned did not exist. The company also transferred a second tranche of bitcoins to an account at Binance as part of the scheme.

The High Court granted Ion Science’s application for a worldwide freezing order and a proprietary injunction to restrain the assets in December, and ordered Binance and Kraken to identify the person or persons who controlled the digital wallets to which the technology company transferred the bitcoins.

Rahman, the London-based attorney representing both Fetch.ai and Ion Science in their respective cases, said that Kraken complied with the Dec. 21 order while Binance did not.

Eight months later, amid intense regulatory scrutiny in several jurisdictions, Binance plans to abide by the High Court’s order to identify the third party behind the account that served as a waypoint for the assets stolen from Fetch.ai and freeze any funds that remain on hand.

“We’re starting to see now that the more reputable exchanges are starting to comply,” Rahman said. “If they don’t, it causes them a whole raft of issues in relation to their ability to operate and [show] they actually have proper AML [anti-money laundering] controls.”

Contact Koos Couvée at kcouvee@acams.org