UK Will Pay Compensation to Chinese Business Fraud Victims
The United Kingdom has decided to pay compensation to the victims of a Chinese cryptocurrency scam. However, it will keep most of the $7.2 billion fund gained in the operation.
In 2018, the United Kingdom government put an end to a major investment fraud scheme. This resulted in the seizure of 61,000 BTC. As the victims were mostly Chinese nationals, there was some confusion over who the reclaimed funds should belong to. The UK has now suggested a compensation scheme for victims is forthcoming, though it will retain the bulk of the BTC they seized.
The Rising Price of Bitcoin
Since the date of the initial seizure, the price of Bitcoin has risen exponentially. Most of the year 2018 was spent in a downtrend, and by the end of the year, the price had bottomed to around $3869 in USD. Since then, it has steadily risen and jumped massively in the last 12 months. The BTC price INR stands at 9,747,794 as of October 16th, following a downtrend from 10,278,856 on Monday, 13th. All of this has pushed the value of the haul from $1.8 billion to around $7.2 billion in USD.
The compensation announcement was discussed during a High Court hearing on Wednesday, 15th. There are around 130,000 victims, and their lawyers were informed of a possible scheme for compensation in court. Details on this have yet to be finalised and released, though the compensation has been described as providing “adequate protection” for the victims of the scam. The court also added that they would seek to compensate everyone impacted, not just those who were involved in legal proceedings that took place in the UK. This suggests they may try to recompense those in China.
The most troublesome part of this will be proving links between the investments, those who made them and the Bitcoin. Involved in this process are changes from Yuan, to Bitcoin, to Pound, along with the huge rise in value Bitcoin has had since the incident took place. It is likely that only the amount lost will be returned, and victims will not stand to gain from the price increases Bitcoin has experienced since.
The UK’s Largest Cryptocurrency Seizure
The scam was uncovered by London’s Metropolitan Police in 2017. It was investigating a possible money laundering operation being conducted by two Chinese women in the United Kingdom. Taking part between 2014 and 2017, it was first noticed by the Chinese authorities. They had been investigating suggested high-yield returns from a possible Ponzi-style scheme. The scheme used a range of false investment products, which managed to reel in $6 billion.
At the centre of this was Yadi Zhang, also known as Zhimin Qian. The accused fled her home country with the bulk of the funds, which had been converted into Bitcoin. She then entered the UK with false documents. She pleaded guilty to money laundering in the UK court, along with an accomplice from Malaysia named Seng Hok Ling, 47. Around 14 others have also been found guilty in China.
At the last hearing, the UK authorities also found that she had additional cryptocurrency assets. These were worth around £67 million, stored in two cryptowallets. Zhimin Qian was found with the access codes and ledger in a concealed pocket in her jogging bottoms at the time of her arrest.
How Could This Impact the Markets?
Despite volatility, Bitcoin still remains a strong asset in what is a fractious global economy. Binance noted that just before its recent drop, BTC touched US$126K amid record U.S. spot ETF inflows exceeding US$5.9 billion over two weeks, lifting the total crypto market cap to fresh peaks near US$4.3 trillion. Therefore, there is an argument that the United Kingdom should keep hold of the Bitcoin they have, adopting a HODL approach to its fund.
There is also speculation that this will be used to plug a gap in the country’s economy. Rachel Reeves, the Chancellor, has a large budget deficit to plug, and a haul of this size would go some way to fixing that. A sale of this size is sure to have an impact on the markets. Similar to when Germany sold its cryptocurrency in 2024, it caused markets to dip afterwards. While this was only short-term, they still definitely caused a ripple. This time, the haul will be much bigger, with Germany only selling 3,846 Bitcoin at $62,604 per coin.
It does seem unlikely this will happen anytime soon. With legal battles ensuing and compensation on the cards, the BTC may not be free for another few years, meaning it is something markets can avoid thinking about for the foreseeable future. With a US government shutdown, there are plenty more factors to worry about. Binance noted that dovish Fed policy, ETF inflows, and strong network metrics could provide a supportive setup heading into the final quarter, so these may be points to watch.
