INSOLVENCY AS A TOOL

How and when to use in asset recovery

BITCOIN BATTLES

Tracing and seizing cryptoassets

CDR

Commercial Dispute Resolution

COVID-19 FRAUD

Recovering assets lost in the pandemic

• www.cdr-news.com
• Spring 2021

ESSENTIAL INTELLIGENCE:

Fraud, Asset Tracing & Recovery

Contributing Editor:

Keith Oliver Peters & Peters Solicitors LLP

• 4
• WELCOME

TABLE OF CONTENTS

EXPERT ANALYSIS

New threats for 2021 and beyond
France

06
90

Andrew Mizner Commercial Dispute Resolution

Thomas Rouhette, Nicolas Brooke, Ela Barda & Jennifer Melo Signature Litigation

Insolvency used as a tool in asset recovery

10

Andrew Stafford QC & James Chapman-Booth

Guernsey

100

Kobre & Kim

Simon Florance, John Greenfield & David Jones

Carey Olsen

Cryptocurrency fraud and asset recovery

Syedur Rahman Rahman Ravelli

17

Hong Kong

Dorothy Siron Zhong Lun Law Firm

110 124 132 144

Corruption in the pandemic and the importance of

22

asset recovery
India

Angela Barkhouse Quantuma Advisory Limited

Shreyas Jayasimha & Aakash Sherwal Aarna Law

Fraud and asset tracing investigations: the role of
Ireland

28

corporate intelligence - part II

Karyn Harty & Audrey Byrne McCann FitzGerald
Alexander Davies & Peter Woglom BDO

Japan
International civil or criminal law tools that can be

Hiroyuki Kanae, Hidetaka Miyake & Atsushi Nishitani

42

used to aid in asset recovery

Anderson Mōri & Tomotsune

Olga Bischof & Theodore Elton Brown Rudnick

Jersey

Confiscation proceedings and civil recovery:

152
48

Marcus Pallot, Richard Holden & Daniel Johnstone

Carey Olsen

proportionality and abuse of process

Colin Wells 25 Bedford Row

Luxembourg

160 168 178 188

Max Mailliet E2M – Etude Max Mailliet

COUNTRY CHAPTERS

Singapore

Lee Bik Wei & Lee May Ling Allen & Gledhill

Bermuda

56

Keith Robinson & Kyle Masters Carey Olsen

Spain

Héctor Sbert & Maria de Mulder Lawants

British Virgin Islands

63

Alex Hall Taylor QC, Richard Brown, Tim Wright &

Switzerland

Simon Hall Carey Olsen

Dr. Claudia Götz Staehelin, Dr. Florian Baumann & Dr. Omar Abo Youssef Kellerhals Carrard

Cayman Islands

72

Jan Golaszewski, Denis Olarou, Sam Dawson & Peter

United States

Joe Wielebinski, Toby Galloway & Matthias Kleinsasser Winstead PC

Sherwood Carey Olsen

198

England & Wales

79

Keith Oliver & Amalia Neenan Peters & Peters

Solicitors LLP

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PREFACE

It is with great pleasure that we welcome you to

the Second Edition of the CDR Essential Intelligence

Series. Peters & Peters Solicitors LLP has been delighted to serve again as the Contributing Editor to this all-encompassing and comprehensive guide on the practice of global fraud, asset tracing and recovery litigation.

Society by Van Dijk, suggested that ‘the monitor is everywhere…it is not merely a medium for reproduc- tion which increasingly dominates mass communication’.

Perhaps this foreshadowed the rise (and rise) of ‘Zoom culture’ and the like that we are so heavily dependent on now. It is consequently ever more vital that we adapt to the pace set by the March of Technology. Nevertheless, in 2021 we have

found opportunities to flourish, to effectively

meet these new challenges head on, and as a result the fraud, asset tracing and recovery landscape has never been busier. The intention of this guide, therefore, is to provide a clear and cogent overview of the practice of fraud, asset tracing and recovery litigation in varying countries around the world, working towards global innovation and best practice through the sharing of knowledge and expertise. We would like to take this opportunity to thank the tireless efforts of our contributing authors, who include some of the

world’s leading law firms, a wide range of expert

practitioners, barristers’ chambers and forensic accountants. Their generous contributions to this project have created an invaluable holistic picture of the international legal response, which we hope will be useful for our readers both now and in years to come.
The past 12 months have been trying for us

all. According to the PwC Global Economic Crime and Fraud Survey 2020, 47% of companies world-

wide were victim to fraudulent attacks over the past two years. Another report published by the

Association of Certified Fraud Examiners estimates

that organisations lose approximately 5% of their revenue to fraud each year, which taken collec-

tively, amounts to a global figure of over $4.5

trillion. Compound this growing trend with the economic uncertainty caused by the COVID-19 pandemic. A breeding ground for fraudulent acts now prevails. Fraudsters have been quick to make use of the international mass migration to online platforms. Cyber-criminality is now one of the most prevalent issues to impact the sector. The surge in online commerce, the increasing reli-

ance on artificial intelligence and the introduc-

tion of virtual justice are but to name a few of the driving forces that have become commonplace over the past year. The 1999 book, The Network

Keith Oliver

Head of International Peters & Peters Solicitors LLP

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FRAUD, ASSET TRACING & RECOVERY 2021

• 6
• THE YEAR AHEAD

New threats for 2021 and beyond

e pandemic is not the only agent of change keeping lawyers, experts and clients on their toes this year. Technologically sophisticated frauds, cryptocurrencies and increased regulation will all require close observation

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one of many that capitalises on data exposed by breaches, alongside automated methods such as “script creation – using fraudulent information to automate the creation of an account, [or] credential

stuffing – using stolen data”, says Galloway. “The

industry is going to have to move away from usernames and passwords. Two-factor authentication is certainly better.”

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Regulation Rising

Then there are cryptocurrencies. “Cryptocurrency transactions are a concern from a sanctions perspective,” says Rahman, “cryptocurrency is harder to trace, it is easy to launder many times over, and it is by and large independent from most government regulations”. Regulators are taking notice of this new world. In February, the United States Department of the

Treasury’s Office of Foreign Assets Control

(OFAC) accepted USD 507,000 settlement from BitPay, an Atlanta-headquartered Bitcoin payment provider, to settle charges that it allowed customers in Crimea, Cuba, North Korea, Iran, Sudan and Syria to make payments in violations of US sanctions.

After

a turn of events which no-one could have foreseen when Fraud & Asset Tracing 2020 was published, many of the past decade’s business certainties have been challenged, as the pandemic has created global economic uncertainty and led to greater reliance on online systems. There will, of course, be frauds stemming from COVID-19 itself, such as fake treatments, the supply of fake or non-existent personal protective equipment (PPE) and corruption by government

officials, all of which are expected to emerge in

high numbers later in 2021. The increased pressure on online business has also led to greater risks, and in an era when tech-

nology is moving incredibly quickly and the finan-

cial markets are vulnerable, businesses have to be more alert than ever. On top of the existing dangers of ransomware attacks and fraud emanating from the dark web, one growing threat comes from push apps – mobile applications which allow the makers to send noti-

fications. Fraudsters are infiltrating businesses and

using push apps to trick staff into illicit payments, explains Syed Rahman, a partner with United

Kingdom firm Rahman Ravelli. “Before you

know it the clients are chasing their tail, because they paid an invoice and it has all gone wrong.” Perhaps even more sophisticated is what Toby Galloway, based in Texas as co-chair of securities litigation and enforcement for Winstead, calls “synthetic identity fraud”.
“The fraudster uses a combination of real and fake information to create an entirely new identity”, combining details gleaned from data breaches

with false information and using artificial intelli-

gence to create “Frankenstein faces”, combining “facial features from different people. This creates a humongous challenge for businesses that rely on

facial recognition technology as a significant part

of their fraud detection and prevention compliance strategy”.
The United Nations has warned that North Korea is stockpiling Bitcoin to pay for its weapons programme, while it has been suggested that Venezuela is using cryptocurrency to bypass sanctions. With regulators catching up, companies which operate in this space must be aware of their increasing liability. “Cryptocurrency moves in milliseconds, extremely quickly and everybody is having to play catch up with it,” Rahman continues. When it comes to fraud however, Angela Barkhouse,Caribbeanmanagingdirectorforadvisory firm Quantuma, argues that it is a misconception that assets can be made to disappear through cryptocurrency exchanges. “Transactions are publicly recorded and available in a ledger and yes, there are ways and means of hiding or obscuring

the trail of money flows, but actually they are still

traceable in very many circumstances,” and good

firms are finding it easier to quickly identify and trace the assets, whereas traditional fiat currencies

are more problematic.

Market Concerns

Regulators will also be looking at more conventional markets. Rahman warns of rising abuse of special purpose acquisition companies (SPACs), which allow businesses to bypass the regulatory requirements of the initial public offering (IPO) process. The SPAC shell company goes through
Although understanding of this area is still developing, it is a fast-growing form of fraud,



FRAUD, ASSET TRACING & RECOVERY 2021

• 8
• THE YEAR AHEAD



the offering, then acquires the company which

was intended for the floatation, meaning that the

target company has not had to comply with IPO regulations. While SPACs themselves are nothing new, “you are going to see a lot of misleading statements to raise funds for the company that they are trying to take public. You are going to see accounting fraud because of how the money was raised. You are going to see an increase of fraud in the share market through SPACs”, Rahman explains, warning investors to beware.
“At the moment, SPACs are legitimate as they have been around for a while, but there will be regulatory issues for investors because they almost bypass the regulatory points through a traditional IPO process,” he adds. In the US, there is concern about abuse of the Coronavirus Aid, Relief, and Economic Security (CARES) Act and any future stimulus packages. Already there have been prosecutions for what

Galloway calls “the low-hanging fruit” such as falsified claims. But those will be replaced by cases

“that are a little more grey”, such as applicants who

“almost qualified for [protection] but fudged some

numbers to get a loan”, and he expects government agencies to proactively prosecute, as they did after

the 2008 financial crisis. “There is going to be an

increased level of assertiveness or aggression [from

regulators], there is definitely going to be an uptick

in enforcement activities.” ever-evolving areas such as cryptocurrency,” he says. An advantage of the new technology is its use for asset tracing. Barkhouse heralds the increasingly advanced tools that go beyond e-discovery and predictive coding. “You really do have to be at the forefront of it as a data scientist to be able to obtain the information, extract it and interpret it in a way

that is beneficial for asset tracing, recovery and

investigations,” particularly as data leaks become more prevalent. “Data itself is becoming the key to investigations. The analysis of data, being able to interpret it, and being able to use it in a way that can be easily explained for evidence is something that is moving forward but which I see being enhanced further in the next couple of years.” Clients are making more requests for asset tracing before litigation has even begun, “you really do need to understand where the money has gone and if your alleged fraudsters still have your assets and where they have invested them, rather than going straight into litigation and paying

expensive legal fees only to find that the assets

have dissipated beyond a reasonable recovery”, says Barkhouse. Insolvencies will be on the rise following the pandemic, and while the range of bailout, stimulus and furlough packages may make that less than expected, notes Barkhouse, restructuring could become very busy: “I expect to see an increase in contentious or dispute-related insolvencies, where

companies or investment funds have financial

exposures and liquidators need to understand why companies are in that position, other than as a result of simply operational or working capital pressures. As a result of that, you will see much more dispute resolution and investigations in insolvency related matters.” Finally, with the UN due to meet this year

and make firm commitments to anti-corruption

measures, 2021 could see amore balanced approach between civil recovery and criminal prosecution of fraud. Barkhouse hopes for greater scrutiny and collaboration between governments, particularly between civil and common law jurisdictions, and with the private sector on asset recovery.
Meanwhile, publicly listed companies that

are regulated by the Securities and Exchange

Commission (SEC) and also received loans can expect scrutiny over whether they met the require-

ments and filed correct applications.

The regulatory scrutiny extends into cryptocurrencies. In January 2021, the UK Financial

Conduct Authority (FCA) announced that all

cryptoasset companies must be registered. “This year is going to be the year where effectively all

[crypto firms] will have to start putting their ducks

in a line, and towards the end of the year or the beginning of next year you are going to see a lot more enforcement from the FCA,” says Rahman. That also puts scrutiny on the tracing of cryp-

toassets. Rahman highlights Ion Science & others

v Persons Unknown in the High Court of England and Wales, which is considering fraud in relation to an initial coin offering (ICO) and whether cryptoassets can be considered as common law property and where they are located.
Despite all the potential changes brought by technology, the pandemic and governments, much remains the same, she concludes:
“Ultimately, setting aside COVID and regime change, the law is the law, the law doesn’t actually change too much, it may be tweaked, may be improved, but in terms of asset recovery, you are still relying on the same principles you used

“Courts are becoming increasingly flexible and

they are willing to ensure that they are assisting victims of fraud, in particular when it comes to

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10 INSOLVENCY & ASSET RECOVERY

INSOLVENCY
USED AS A
TOOL IN ASSET
RECOVERY

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Andrew Stafford QC

Kobre & Kim

place. And, now, the severe disruption caused by COVID-19 has presented new opportunities for cynical judgment debtors to seek to frustrate enforcement efforts across the globe. The judgment creditor’s position has arguably been weakened further by Brexit: the eleventh-hour deal struck with the EU is silent on the question of cross-border recognition and enforcement of civil judgments, meaning that, for the time

being at least, it is likely to become more diffi-

cult, time-consuming, and costly to enforce an English judgment within the European Union.

In this article, we address one of the specific

tool-sets available to lawyers specialising in judgment enforcement: insolvency tools. It is important to note that the insolvency framework is a targeted vaccine, not a panacea, and so will not be suitable in every case. And, like any specialised tool, it has greater utility in experienced hands than those of a novice. To understand how, when and where to deploy insolvency tools, it is important to take account of the alternative enforcement mechanisms, and to think about the need for recovery strategies generally. As we discuss below, practitioners and clients alike should be alive to the (sometimes extraordinary) steps taken by governments around the world to help shield their businesses from knock-on effects of the pandemic, including by implementing temporary changes to procedures under the insolvency regime. These methods

may tilt the playing field. Each jurisdiction will have its own specific measures which will need to be identified and navigated.

James Chapman-Booth

Kobre & Kim

hen this article was first

published in last year’s edition, masks were the reserve of comic book heroes, toilet roll was a widely available

• commode-ity, and
• a

W

“zoom” referred to a spirited weekend drive down a winding country lane. The phrase “the new normal” had not yet forced its way into the public lexicon, and the closest thing many of us had experienced to a “lockdown” was a “lock-in”. Sadly, the past year has seen life in many respects turned on its head. But some things have not changed. In litigation, winning a favourable judgment or award is still a high for the lawyer but, from the client’s perspective, a judgment by itself remains just a piece of paper (and an expensive one, at that). The client’s objective is to receive money, and as swiftly as possible. Yet, collecting that money can be as hard-fought, as lengthy, and as costly

a process as winning the award was in the first

No claimant should start litigation (or arbitration) assuming that the defendant, if defeated, will meekly pay up. Some – perhaps many – will do so. The defendant may be solvent and reputable but, even so, the collection challenges might incentivise the defendant to hold out for a ‘better deal’. Worse, there are some judgment 

FRAUD, ASSET TRACING & RECOVERY 2021

12 INSOLVENCY & ASSET RECOVERY

A final and enforceable judgment will establish the defendant as a judgment debtor, and the claimant as an

unsecured creditor. This principle underpins the use of the insolvency process as an asset recovery tool



debtors which are not reputable, have structured their assets in a robust manner, and which are of dubious solvency. For these disreputable judgment debtors, the judgment creditor’s collection challenges align with the judgment debtor’s predisposition to hold out.

To make things more difficult for the

claimant, the judgment enforcement landscape is becoming increasingly complex. The Court of

Appeal’s recent decision in Strategic Technologies PTE Ltd v Procurement Bureau of the Republic of China Ministry of National Defence [2020] EWCA

Civ 1604 has (subject to further appeal) closed the door to those hoping to register and enforce in England a “judgment on a judgment” (i.e., a judgment obtained by a common law action for the purposes of enforcement in Commonwealth Jurisdiction B of a money judgment obtained in Commonwealth Jurisdiction A). enforcement more than a year before the judgment is delivered, and sometimes as early as the pre-action stage). Of course, if a pre-judgment freezing order, or interim receivership, has already been granted by the court, the collection strategy has already been partly addressed – renew the relief so that it operates post-judgment, and (in the case of a freezing order) close in on the

assets identified and frozen. However, this type

of relief is the exception rather than the rule. More often than not, the visible facts have not warranted the grant of a freezing order or an interim receiver, yet the client nevertheless has a legitimate anxiety that the defendant will not

pay without a further fight, or that, while the

litigation was still pending, the defendant (now judgment debtor) will have taken steps to render itself more enforcement-proof.
And, from a practical perspective, technological innovations such as electronic banking and faster payment schemes mean that assets can be acquired, transferred, and disposed of more easily than ever before. Consequently, judgment debtors are able to move their assets further

afield, faster, with less effort and in ways that can be more difficult to track using conventional

methods. With a click of a mouse, or even the tap of a smartphone screen, a delinquent judgment debtor can acquire a new shell company,

convert their fiat currency to a readily transfer-

rable cryptocurrency, or empty multiple bank accounts in mere seconds. New bank accounts,