Canadian authorities are in the news after the Royal Canadian Mounted Police (RCMP) confiscated over $56 million CAD (approximately $40.6 million) in cryptocurrency from TradeOgre.
TradeOgre is a centralized exchange known for its trading without Know Your Customer (KYC) requirements.
According to the RCMP, the seizure is “the largest cryptocurrency seizure in Canadian history,” and was also confirmed to be the first time that Canadian law enforcement has dismantled a whole crypto exchange platform.
The exchange had not been live since late July, leaving users without access to their funds for over two months.
According to the RCMP, the exchange did not register with the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC) and was reportedly used for money laundering on a large scale.
Users Outraged Over Seizure of Innocent Funds
The RCMP maintains that the majority of funds transacted on TradeOgre come from criminal sources, which has led to backlash from ordinary users of the exchange.
Users who believed they had been unfairly penalized stated they lost legitimate savings because of the actions of a small number of users.
Privacy advocacy and crypto supporters point out that using a non-KYC exchange is not banned in Canada. They also state that simply using a non-KYC exchange does not make users criminals.
For example, Taylor Monahan, the security lead at MetaMask, criticized the RCMP’s decision, saying they “stole money from innocent parties without notice or due process.”
Similarly, Firo co-founder and former lawyer Reuben Yap stated that he questioned what would happen to funds that came from legal operations, saying the broad seizure was “theft from many innocent users.”
Also Read: U.S. Secret Service Amasses Nearly $400M In Seized Crypto Assets Amid Growing Crypto Seizers
Asset Recovery Expected to Be Complicated and Costly
Experts caution that innocent TradeOgre users may have a lengthy and complicated path to reclaiming their money.
Reuben Yap pointed to a history lesson in the U.S.’s confiscation of BTC-e in 2017, when strict deadlines and extensive requests for documents ultimately meant that some were unable to successfully reclaim their assets.
To make a claim, users would likely need to provide detailed on-chain evidence to support their claims of ownership of their balances, as well as off-chain evidence: that the user’s email was theirs, that their profile was theirs, etc.
This process could take some time, maybe months or years, depending on caseload, local laws, etc.
Another complicating factor is the issue of valuation: governments will typically value any confiscated asset at the moment of seizure.
So, there is a chance in most cases that valid claimants will miss out on all future appreciation in price, even in the event of a successful claim against the government.
Also Read: UK FCA And Met Police Seize Seven Illegal Crypto ATMs, Arrest Two In London
Seizure Part of a Growing Global Trend
The RCMP’s action against TradeOgre occurs at a time when government seizures of crypto associated with illegal activities abound.
On July 16th, American and Mexican authorities seized more than $10 million in crypto purportedly linked to the Sinaloa Cartel, which was also related to drug seizures, including approximately 44 million fentanyl pills and 65,000 pounds of methamphetamine, according to UnoCrypto.
After that, on July 29, we reported that the FBI seized 20.2 bitcoins (valued approximately $2.4 million) from the ransomware group.
Also, U.S. prosecutors have now instituted a civil forfeiture, which may result in the seizure of funds associated with the ransomware group into the U.S. Strategic Digital Asset Reserve.
In all of these instances, we are seeing a global trend towards regulating, monitoring, and confiscating crypto assets associated with crime, while the debate surrounding privacy rights, user protections, government overreach, and power continues to heat up.