How we seized, converted and retained £1.2m worth of Bitcoin
Seizing £1.2 million worth of Bitcoin from a drug dealer in UK first? #Priceless!
We have become the first police force in the country to retain Bitcoin we seized from a criminal using it to hide his illegal assets.
Whilst other forces have seized Bitcoin before, Surrey Police are the first UK law enforcement agency to then convert into sterling and retain the money following a Proceeds of Crime Act hearing today, Thursday 19 July 2018.
Seregjs Teresko, 31, was charged with money laundering and drugs offences in April 2017 when we found a cannabis factory at an address he was allegedly kidnapped from in Virginia Water. When his home address in Cobham was searched we discovered evidence of Bitcoin activity along with large amounts of cash and luxury goods.
The Economic Crime Unit (ECU) seized 295 Bitcoins under the Proceeds of Crime Act (POCA) and converted them to the value of £1,246,279.33. In total the court ruled he must forfeit £1,447,935.70 - including the Bitcoin, the cash and luxury goods we found, along with an additional £13,150.
What it bitcoin?
Bitcoin is an electronic cryptocurrency, transferred via digital payment systems; it is used legitimately by people all over the world. Bitcoin isn’t regulated by a central authority and for this reason it is popular with criminals as it is hard to trace. The value of bitcoin is extremely volatile and the rate rapidly fluctuates.
How did we discover the hidden Bitcoins?
In April 2017 we received a report of a kidnap in Virginia Water. Members of the public called us after they saw a man being bundled into a car and a woman also contacted us to say she believed her partner was in danger.
We attended and found a large and sophisticated cannabis factory. We then identified the man in question as Seregjs Teresko and searched his home address in Cobham. Officers found and seized cash amounts of £220,575.02, €30,075 and ฿14,040 (Thai baht).
The following day, Teresko contacted us to say he was fine and was unwilling to explain what had happened. Considering the suspicious amount of cash at his home and suspected links to the cannabis factory, he was arrested and charged. In October 2017 Teresko pleaded guilty to money laundering, cultivation of cannabis and the possession/control of articles for use in fraud at Kingston Crown Court. He was sentenced to nine years and three months imprisonment.
Following the arrest we carried out a more detailed search of Teresko’s home and a number of bank and credit cards in multiple names, counterfeit European identity cards, expensive clothes, watches and jewellery were seized. The discovery of a large amount of electronic equipment, including a cryptocurrency wallet used to provide access to a Bitcoin account, was a crucial stage in the investigation.
We also discovered a safety deposit box at a high street bank, linked to Teresko, which was searched and led to a further seizure of £20,000 in cash, high value jewellery and gold bars.
How did we access the Bitcoin wallet?
At this stage it was unknown what was inside the Bitcoin wallet - if anything. With the support of the South East Regional Organised Crime Unit (SEROCU), who provided us with legal, tactical and technical assistance, we made a successful application at Magistrates Court under section 47 of POCA to seize the contents of the wallet.
To our astonishment, the account contained 295 Bitcoins which were moved into a wallet controlled exclusively by Surrey Police. This was the first time that this specific POCA legislation was used in the UK to seize cryptocurrency.
Shortly after, an application by the CPS was made to grant us legal permission to restrain (control) and realise (convert) the Bitcoins. It was ruled that the Bitcoins were ‘realisable property’, so we decided to convert the Bitcoin into pound sterling, enabling the amount to be confiscated under POCA.
How did we convert the Bitcoin?
Following appropriate due diligence we sold the Bitcoins to an international exchange for the value of £1,246,279.33 using the exchange rate at the time. Also seized was jewellery including high-value watches and gold bars, which were valued in excess of £50,000, and a BMW 5 series, a Range Rover Evoque.
The total value of the cash seized from Teresko’s house in Cobham and safety deposit box amounted to £263,744.81 and was forfeited separately.
A successful confiscation hearing on Thursday, 19 July 2018, found that Teresko had benefited from his criminal activity in the sum of £2,058,612.65, the Court ruled that he must forfeit £1,447,935.70 and also pay an additional £13,150 within three months. Failure to pay this amount will result in a default sentence of an additional 10 years imprisonment.
Information from the investigation team
Detective Inspector Matthew Durkin, of the Economic Crime Unit, said:
“It appears Teresko was a member of an organised crime group and bitcoin was one of the methods he chose to launder criminal assets.
“I hope this sends a clear message to criminals using bitcoin to fund illegal activities; it’s not an anonymous as you think, we are able to trace you and we will prosecute.
“This is a ground-breaking, innovative achievement and we are very pleased to be the first UK police force to have achieved this.
“We were working in unchartered territory and the support of SEROCU, CPS and the National Crime Agency has enabled us to set a precedent and pave the way for future cases in Surrey and across the country.”
Detective Inspector Rob Bryant, Head of Cyber and eForensics at the South East Regional Organised Crime Unit (SEROCU), said:
“We were delighted at the outcome and that we were able to support and work with Surrey Police on this case. We know organised criminals are increasingly moving to dark web offending and digital currency to hide their criminal activity. This case is an excellent example of local, regional and national collaboration and the specialist technical support SEROCU can provide in these types of investigations.”
Senior NCA officer, Phil Larratt, who assisted Surrey Police with the investigation, said:
“This case demonstrates the importance of partnership work across UK law enforcement; the NCA worked closely with Surrey Police and the South East Regional Cyber Crime Unit (SERRCU), providing tactical advice and practical assistance to one of the UK’s first cryptocurrency seizures.
“Although the vast majority of cryptocurrency use is legitimate, we know that the technology is used by criminals to launder significant amounts of criminal property. Notoriously cryptocurrencies are the payment method of choice on the dark web but we are also starting to see more traditional crime groups use the Bitcoin network to store and transfer value.
“As this investigation demonstrates, these assets are not beyond the reach of UK law enforcement and we will work with local, regional and international partners, academia and the private sector to understand and counter the threat posed by the criminal uptake of cryptocurrencies.”
Nick Price, Head of CPS Proceeds of Crime, said:
“The CPS secured an order permitting the restrained Bitcoin to be converted into pounds, before a confiscation order was made – the first time the Proceeds of Crime Act has been used in this way.
“Our dedicated Proceeds of Crime team restrained the criminal proceeds at an early stage for the purposes of this confiscation order to ensure that Teresko’s crimes do not pay.”