Swiss Federal Court Rules on Selling of Seized Crypto Assets
The criminal justice authorities may seize the assets of a defendant as part of a criminal investigation. The public prosecutor is under a duty to store these assets in an appropriate manner until they can ultimately be liquidated.
Assets that can lose value rapidly or that are expensive to maintain, together with securities or other assets with a stock market or market price, can however be liquidated immediately.
Following these principles, the Office of the Public Prosecutor of the Canton of Zurich has ordered that the seized crypto assets of a defendant be liquidated during pending proceedings. In so doing, it instructed the custodian of the tokens to convert the crypto assets into Swiss francs and to transfer the proceeds to the Office of the Public Prosecutor.
The defendant sought to prevent this, arguing that realizing the assets in such manner would potentially result in a significant portion of their value being obliterated. Because his account held relatively high market volumes in various virtual currencies, he claimed that selling these assets at once and, in their entirety, would reduce their value to zero.
In its judgment of October 18, 2021, the Swiss Federal Court upheld the defendant’s appeal. When liquidating seized assets in pending criminal proceedings, the interests of the person concerned must be protected to the greatest extent possible, and the result of the liquidation must be as favorable as possible.
According to the Swiss Federal Court, the specific circumstances, the nature of the assets, and the market situation must all be taken into account. When ordering the assets to be liquidated before the seizure is confirmed in a final court decision, prosecuting authorities must act appropriately and competently, and must exercise due care.
If there is a foreseeable risk that the manner of the liquidation will have an effect on the proceeds that can be generated, the prosecuting authority must take measures to mitigate potential losses as far as possible. If it does not have the requisite knowledge for this, it should appoint a suitable external expert.
The exact way crypto assets should be liquidated in such a scenario and the liability borne by the authorities towards other market players when selling such assets remain to be figured out.