Criminal Assets Bureau -v- Mannion,  IEHC 729 (2018)
|Docket Number:||2016 11 CAB|
|Party Name:||Criminal Assets Bureau, Mannion|
THE HIGH COURT
PROCEEDS OF CRIME[2016 No. 11 CAB]
CRIMINAL ASSETS BUREAUAPPLICANT- AND -
JUDGMENT of the Hon. Ms. Justice Stewart delivered on the 17th day of December, 2018.
In these proceedings, the applicant (hereafter referred to as the Bureau) seeks orders pursuant to s. 3 of the Proceeds of Crime Act 1996 (as amended) over the property specified in the schedule attached to the notice of motion dated 28th July, 2016. The property comprises of 2,013.96 Ether, known in currency terms as Ethereum, which was contained in a cryptocurrency wallet found on the respondent’s computer. As of 28th July, 2016, the contents of the wallet were worth approximately €24,852. The respondent currently resides in Wheatfield Prison, following his conviction for offences contrary to ss. 3, 15 and 15A of the Misuse of Drugs Act 1977. On 21st December, 2015, he received a six and a half year sentence for those offences from the Circuit Criminal Court sitting in Dublin, a sentence which was upheld on appeal.
On 5th November, 2014, members of An Garda Siochana searched a property situated on South Circular Road. That search uncovered a number of controlled drugs stored at the premises. The respondent was arrested at the premises, taken into custody and interviewed on multiple occasions. His home was also searched. During interview, he admitted that the premises was being used as a drug distribution centre for the sale of controlled substances over the Darknet. He admitted that he traded on the Silk Road and Agora websites using the alias of “The Hulkster”. The Hulkster was paid in Bitcoin for the sale and supply of these drugs. Following on from this search and seizure, the Bureau issued proceedings and sought orders over funds held by the respondent (CAB v. Neil Mannion (2015/15CAB), hereafter referred to as the first set of proceedings). Those funds included monies contained in bank accounts, credit cards, debit cards, gift cards, sums of cash and a substantial amount of Bitcoin. An order pursuant to s. 2 of the 1996 Act was made by Fullam J. on 12th October, 2015. A consent agreement was drawn up by the parties and Fullam J. made an order pursuant to s. 3 of the 1996 Act on 22nd February, 2016. Those proceedings were thereby “stayed and settled”. The Ethereum did not feature in that first set of proceedings. A s. 2 order in respect of the Ether was made by Fullam J. on 27th July, 2016, as part of this second set of proceedings.
Following the respondent’s arrest, numerous electronic devices were seized from his home and from the property located at South Circular Road. These devices included laptops, phones and removable storage devices. A forensic image of each device was made by the Computer Crime Investigation Unit of An Garda Siochana. These images were then delivered to Bureau Financial Crime Analyst No. 2 (FCA2) for inspection. FCA2 swore an affidavit on 22nd July, 2016, in which they explained the manner in which the respondent’s computer system operated. The respondent relied on a number of software programmes to facilitate his illegal activities, including Truecrypt software, the TOR network, Bitcoin and Ethereum. Much like Bitcoin, Ethereum currency is a blockchain technology with programmable transaction functionality. It began trading on 30th July, 2015, two months before a s. 2 order was made in the first set of proceedings by Fullam J.
FCA2’s inspection, which occurred in November, 2014, uncovered cryptocurrency wallets containing the Bitcoin that formed part of the subject matter of the first set of proceedings. The wallet containing the Ethereum was also uncovered. However, at that time, Ethereum was not trading as a currency, meaning that the contents of the wallet could not be redeemed in the normal way. Its monetary value effectively equated to the 1 Bitcoin for which it had been originally purchased, which was worth approximately €350 at that time. The Ether was purchased with and converted from Bitcoin on 5th August, 2014, at a time when the respondent was, by his own admission, heavily involved in the sale and supply of illegal drugs over the Darknet. There is a statutory minimum value threshold required by ss. 2(1)(b) and 3(1)(b) of the 1996 Act, which must be met before an order pursuant to the 1996 Act can be made in respect of an item of property. At the relevant time, this minimum value threshold was €13,000 (The Proceeds of Crime (Amendment) Act 2016 lowered this threshold to a minimum of €5,000, as of 12th August, 2016). Based on the evidence adduced before this Court, it would appear that the failure to meet this threshold was not the reason the Ether was left out of the first set of proceedings. Rather, the Bureau’s concerns seem to have been based on practicality, as a non-trading currency has no established forum in which to sell it and realise its value. In light of these concerns, the wallet’s presence on the respondent’s system was merely noted during FCA2’s inspection and no further action was taken in respect of it.
In late May, 2016, after the consent order had been made by Fullam J., FCA2 carried out a case review of the original investigation material, so as to ensure all matters had been properly addressed before the papers were sent for archiving. In the course of completing that review, they re-examined the cryptocurrency wallet containing the Ether. FCA2 noticed that Ethereum had commenced trading and that the Ether could be sold for a significant sum of money. This issue was brought to the attention of other Bureau officials and FCA2 was directed by then Assistant Garda Commissioner Eugene Corcoran, who was also Chief Bureau Officer (CBO) of the Bureau at the time, to seize the contents of the wallet. FCA2 transferred the Ether from the wallet stored on the respondent’s computer to a wallet under the sole control of the Bureau.
The respondent swore affidavits on 13th September and 10th November, 2016. The first affidavit was sworn for the purposes of gaining access to the Ad Hoc Legal Aid Scheme. Fullam J. made an order granting him access to the Scheme on 17th October, 2016. A similar application had been made and granted during the first set of proceedings. The second affidavit sets out the respondent’s side of the case. He avers that he contested the first set of proceedings on grounds that he had legitimate funds from past employment and investment which should not be seized by the Bureau. The consent agreement reached between the parties in those proceedings included the following terms:
(a) Consent to an order pursuant to s. 2(3) of the 1996 Act releasing 50% of the funds contained in the respondent’s Dundrum Credit Account;
(b) Consent to various orders pursuant the 1996 Act over the remaining assets listed in the Schedule to the agreement, including a disposal order; and,
(c) Full co-operation with the Bureau in their attempts to realise the full value of the assets contained in the Schedule.
The respondent avers that he understood this consent to act as a settlement in full and final discharge of any liability he had to the Bureau. In his view, he had consented to a search of his computer by the authorities during the course of the initial criminal investigation in November, 2014, but had not consented to an indefinite power of search vested in State officers. He therefore challenges the basis on which his computer was accessed after the investigation had concluded.
The respondent avers that Ethereum was trading prior to July, 2015, albeit at a extremely reduced rate of value when compared to the value it currently has. Notwithstanding his failure to volunteer information about the Ether or draw An Garda Siochana’s attention to it, he argues that the wallet was readily discoverable. He refers back to the transcripts of his numerous interviews with members of An Garda Siochana, in which he outlined the sources of his income and the manner in which his business was carried out. He avers that any Bitcoin secured through illegitimate activity was transferred onto prepaid debit cards and was not used to purchase the Ether in question.
Detective Garda Mark Gallagher swore an affidavit on 15th November, 2016, in which he highlights that the respondent’s laptop was seized under a warrant secured from a District Court Judge pursuant to s. 26(1)(b) of the Misuse of Drugs Act 1977/84, thereby rendering his consent irrelevant. He also avers that the respondent’s laptop was not continuously operated by the authorities, as it was a forensic image of the computer that was interrogated for the purposes of the review. Allegedly, the seizure of the Ether was also conducted in a manner that did not require access to the respondent’s computer. The respondent’s averment at para. 16 of his affidavit is also highlighted, wherein he states that the proceeds of his drug trafficking formed a part of his investment in Bitcoin. Det. Garda Gallagher challenges the suggestion that the Ether was bought with legitimately procured Bitcoin, as the respondent has failed to produce evidence as to how said legitimate Bitcoin was purchased and how it is to be differentiated from his illegitimate Bitcoin. Even if such legitimate Bitcoin did exist, Det. Garda Gallagher asserts that it is tainted by the money laundering process of substitution, as he could never have accrued these legitimate funds if he had not used illegitimate funds to fund his daily lifestyle.
Detective Chief Superintendent Patrick Clavin, who is the current CBO of the Bureau following the departure of Assistant Commissioner Corcoran, swore an affidavit on 15th November, 2016. He avers that he has reviewed all the material in this case and firmly believes that the Ether constitutes directly or indirectly the proceeds of crime. He proffers that belief to this Court as evidence under s. 8 of the 1996 Act.
Both parties served notices to cross-examine the...
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