Milano: Fraud in the Bitcoin World, Fraudulent Bankruptcy of Cryptocurrency Management Companies

Yesterday morning, the Special Unit of Currency Police and the military of the Provincial Command of the Guardia di Finanza of Milano, under the direction of the public prosecutors of Department I (“economic criminal law”) of the Public Prosecutor's Office of Milano, have carried out a precautionary custody order in prison issued by the Judge for Preliminary Investigations of the Court of Milano against the two acting administrators of a cryptocurrency exchange.

The investigations originated from the development of suspicious transaction reports about the anomalous operation of the exchange platform, together analysis of over 700 complaints filed by customers, in the face of failure to return invested sums. After the platform's interruption of operations, the investigations conducted had led to the declaration of opening of judicial liquidation by the Court of Milano towards all companies belonging to the Group.

The work carried out by the investigators of the The Special Currency Police Unit and the Economic and Financial Police Unit Group of Milano has allowed us to quantify the size of the disaster in about 66 million euro, in the face of over 18 thousand customers and to ascertain how, since its incorporation in Italy, the company management has been characterised by continuous dispositive actions carried out on the customers' fiat and virtual currency availability, having never been adopted, by the administrators, no segregation in the management of the company's crypto assets from those of its clients, neither from a management point of view nor from an accounting level.

This is one of the first major investigations into the world of BITCOIN, which had to penetrate the cross-border mechanisms of intangible assets. The complexity of the investigations is demonstrated by the fact that the Prosecutor's Office presented three requests for liquidation against the parent company Digital Rock Holding spa, TRT srI and Onedime srI, all accepted by the Court of Milano, which has opened a group liquidation with the appointment of a curator; curatorship which has in turn arranged a technical consultancy from Deloitte; have been formulated two requests for rogatory letters (USA and SWITZERLAND) and two European investigation orders in Lithuania and Ireland – partly already flare – which allowed to reconstruct the availability of resources abroad by the suspects and movements abroad; the request to the USA was recently integrated and transmitted through the Ministry of Justice.

Among other things, they were subjected to Cryptocurrency seizure found in USB sticks for a value of 500.000 €.

The alleged crimes they concern fraudulent bankruptcy, false corporate communications, fictitious capital formation and patrimonial infidelity.

It should be noted that the criminal proceedings are in the preliminary investigation phase and that the responsibility of the accused will be definitively ascertained only if an irrevocable sentence of conviction is issued.

These investigations demonstrate, as the world of cryptocurrencies can be dangerous for savers precisely because of the difficulty investigators have in locating illicit activities and their proceeds, resulting in recovery difficulties, in a still uncertain regulatory reality.