Tracing stolen crypto assets and funds using Bankers Trust Orders

Crypto and other financial fraud continues to rise exponentially.   By one estimate Losses from crypto-related crime rose 79% in 2022 and cryptocurrency theft increased 516% from 2020, to $3.2 billion worth of cryptocurrency.

Fortunately, the English law has many tools at its disposal to help identify and hold crypto and other scammers to account – including the powerful ‘Bankers Trust Order’.

What is a Bankers Trust Order?

A Bankers Trust Order originated in English legal cases in the 1980s including (but not limited to) the case of Bankers Trust Co v Shapira.

These powerful court orders require a financial institution – including a crypto exchange – to provide documentation on their customers and users, when they are thought to have committed a fraud.

Their purpose is to enable a victim to trace what has happened to the asset, where it is has been moved to, who was involved and where it is – and who is responsible.   This is achieved by the financial institution providing documentation that the victim would otherwise be unable to obtain.   This can include KYC (know your client) identification documents which all financial institutions are required to obtain – as well as account histories, ledgers and correspondence.

These orders can be particularly helpful in crypto or bitcoin fraud – or other online frauds – where tracing the passage of funds is made more difficult.

Getting a Bankers Trust Order can be a vital step in recovering stolen assets from fraudsters as victims will have access to what would ordinarily be confidential client and customer information of the financial institution.

How to obtain a Bankers Trust Order

The law on obtaining a Bankers Trust Order is clear and is derived from decided cases.

In broad terms, a court will make the order when there is evidence that assets have been misappropriated.   Courts are generally keen to help victims of fraud locate their property and to protect it from dissipation, as long as any application is set out in a clear and considered way, advancing a strong legal and factual argument.

This is the process:

• An application, supported by a witness statement and legal argument, will need to be made to the court in paper and usually argued at a subsequent hearing
• The court will need to be persuaded, that:
  • The applicant has property that has been misappropriated and
  • The information requested will lead to the location or preservation of this property
  • The interests of the applicant in obtaining an order must be balanced against the detriment and inconvenience of the financial institution complying with the order
  • The applicant must provide a promise to the court to pay the costs of the financial institution’s compliance with the order and to compensate it for any losses it suffers as a result of the order
  • The applicant must provide a promise to the court that the information provided will only be used to trace the property

Can a financial institution refuse to comply?

As a matter of law, a financial institution can certainly object, but in practice, this is rare.  It is bad PR for a financial institution or crypto exchange to not be seen to be helping victims of a crypto or other fraud.   Refusing to comply may also indicate that the financial institution does in fact have helpful documentation, which in turn actually supports the granting of a Bankers Trust Order.

Can a Bankers Trust Order be used against foreign financial institutions?

Overseas finance houses, banks and crypto exchanges may seek to argue that the English courts cannot have jurisdiction over them.   Whilst each case needs careful consideration, the starting point is that an English court can order the provision of documents.   However, such cases can be more difficult, and the court will be keen to ensure that the foreign entity is not in breach of their local laws or regulations.

What happens if there is a failure to comply with a Bankers Trust Order?

Failing to comply with a Bankers Trust Order – typically by not providing the required information – is a serious matter: it is a breach of court order, which represents a contempt of court.

Recent decisions from the courts show that the court will do ‘whatever is necessary to support its orders to ensure they are not futile’ and that ‘The Court cannot just stand by in the face of disobedience to its orders’.

The court will not hesitate to do what it can, to punish those that fail to comply and to procure compliance.

Summary

Bankers Trust Orders are one of several powerful weapons that we use to recover stolen funds, property and assets for our clients.

Our expert fraud and litigation solicitors and lawyers, led by Matthew Purcell, have recovered millions of pounds for clients, across the globe – and are always happy to provide initial guidance to new clients.