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What does a cryptocurrency disclosure and preservation order look like?

 

The Federal Court of Australia made these cryptocurrency orders on 21 October 2021 (varied on 1 November 2021) amongst a series of interim orders. It described the orders as being of a quite significant nature.

Orders

Asset prevention orders

10. … pursuant to section 1323 of the Corporations Act, until further order, the First and Second and Third Defendants, by themselves and their servants, agents and employees are restrained from:

  1. removing, or causing or permitting to be removed from Australia all or any of the Property of any of the Defendants;
  2. selling, charging, mortgaging or otherwise dealing with, disposing of and/or diminishing the value of all or any of the Property of any of the Defendants;
  3. causing or permitting to be sold, charged, mortgaged or otherwise dealt with, disposed of, or diminished in value, all or any of the Property of any of the Defendants;
  4. without limiting the terms of sub-paragraphs (a) to (c) above, incurring liabilities including, without limitations, liabilities incurred either directly or indirectly, through the use of a credit card, a credit facility, a drawdown facility or a re-draw facility; and
  5. without limiting the terms of sub-paragraphs (a) to (d) above, withdrawing, transferring or otherwise disposing of any monies or Digital Currency available in any account with any bank, building society, cryptocurrency exchange, recorded in any blockchain or other financial institution (in Australia and elsewhere), in which the Defendants have any legal or equitable interest.

11. … without limiting the terms of Order 10 above, the First and Second and Third Defendants are to do all things necessary to effect forthwith, or at least before 5:00 pm AEST on …, the transfer of control over any and all Digital Currency held by the Defendants to the Receivers, including but not limited to providing the Receivers with:

  1. all relevant credentials and passwords for access to any cryptocurrency held by the Defendants, including but not limited to, the public and private keys and / or seed string for any soft or cold wallet held or controlled by the Defendants;
  2. any and all authentication devices required to facilitate access, operation or control of any cryptocurrency held or controlled by the Defendants;
  3. all relevant credentials and passwords for access to the authentication devices or systems, including email, SMS or mobile apps, that facilitate access, operation or control of cryptocurrency held or controlled by the Defendants;
  4. any cold wallet device containing cryptocurrency held or controlled by the Defendants together with that device’s access code.
  5. Direct assistance in the form of instructing an ASIC officer as to the use of the defendants’ electronic devices to effect the transfer of the balance of Digital Currency held or in the control of the defendants to the Receivers, such assistance to be provided at the offices of the plaintiff in Brisbane at a time to be agreed but no later than 5:00pm on ….

The information to be provided by the Defendants to give effect to this Order may, amongst other means, be provided to the Receivers in person, by contacting the Receivers by telephone … or by email addressed to ...

In these Orders:

Corporations Act: means the Corporations Act 2001 (Cth).

Digital Currency: means property, as defined under section 9 of the Corporations Act, that is a digital currency, virtual currency, cryptocurrency or similar.

Property: means property as defined under section 9 of the Corporations Act, including, by virtue of subsection 1323 (2A) of the Corporations Act, any property held otherwise than as sole beneficial owner, and for the avoidance of doubt includes Digital Currency.

Sources

Australian Securities and Investments Commission v A One Multi Services Pty Ltd [2021] FCA 1297 (21 October 2021) (Derrington J)

Order_JUSTICEDERRINGTON_DOC3 (asic.gov.au) (1 November 2021)

Background

ASIC Media Release 21-289MR ASIC obtains Federal Court orders against unlicensed investment scheme A One Multi Services | ASIC - Australian Securities and Investments Commission (4 November 2021) is reproduced in full:

ASIC has moved to shut down unlicensed financial services business A One Multi Services Pty Ltd (A One Multi), which is suspected to be engaging in unlawful activity.

ASIC successfully obtained interim orders and injunctions from the Federal Court in Queensland against A One Multi and its Gold Coast-based directors Aryn Hala and Heidi Walters to protect investors.

It is alleged Mr Hala represents to investors that he can help them invest their superannuation in a self-managed superannuation fund (SMSF) and then loan the money in their SMSF to A One Multi. ASIC alleges Mr Hala told investors that they would receive annual investment returns of over 20%.

Between 1 January 2019 to 30 June 2021, more than 60 consumers deposited approximately $25 million into A One Multi’s accounts. ASIC alleges that Mr Hala has used more than $5.7 million of A One Multi’s money for his and Ms Walters’ personal benefit, including through acquiring real property and luxury vehicles in their names. In addition, more than $2.4 million has been transferred from A One Multi to buy crypto-assets.

On 21 October 2021, the Court found there was a need to protect the investors, and potentially others, and made the following orders:

  • an order putting A One Multi into the receivership of John Ross Lindholm and Timothy James Michael (the receivers);
  • asset preservation orders against Mr Hala, Ms Walters and A One Multi;
  • an order requiring Mr Hala to transfer crypto-assets in his name to the receivers;
  • orders requiring the disclosure of information to ASIC against each of Mr Hala, Ms Walters and A One Multi, including in relation to the crypto-asset holding;
  • travel restraint orders for Mr Hala and Ms Walters.

On 25 October 2021, the first tranche of crypto-assets held in Mr Hala's name was transferred to the receivers.

On 1 November 2021, the Court made further orders requiring the defendants to attend an ASIC office to facilitate the transfer of remaining crypto-assets held or controlled by the defendants to the receivers.

The orders were made pending a final hearing into the conduct of Mr Hala, Ms Walters and A One Multi.

ASIC moved swiftly to obtain the orders given ease with which crypto-assets can be transferred or transacted.

ASIC’s investigation into Mr Hala, Ms Walters and A One Multi remains ongoing.

Further Notes:

In his judgment of 21 October, 2021, Derrington J made these comments concerning cryptocurrency accounts:

18 Of significance in this case is the large amount of money which has been transferred into cryptocurrency accounts. On the basis of the investigations undertaken to date, it appears that Mr Hala may have in his possession “Bitcoin” to a value of between $7 million to $22 million. There is the potential that he has other funds in other cryptocurrency accounts.
19 The significant difficulty for ASIC is that, by its nature, cryptocurrency is easily transferred and moved about. Moreover, it can be moved only by persons possessed of particular codes. Presently, such codes appear to be in the possession of Mr Hala and Ms Walters.

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