Russian Police Detail Bitcoin Seizure Practices in Drug Trafficking Cases

The Russian police have gained experience in seizing cryptocurrencies from individuals accused in criminal cases related to the illegal drug trade. This was revealed by Stanislav Makarov, an investigator for particularly important cases in the department for investigating organized criminal activities in the sphere of illegal drug trafficking of the Investigative Department of the Ministry of Internal Affairs of Russia.

Seized assets may later be confiscated as illicit income or used to pay potential fines imposed by a court ruling.

According to Makarov, seizures are conducted by preliminary investigation bodies in two scenarios:

• when there is access to the cryptocurrency wallet and its seed phrase;
• when it is possible to influence the exchange of cryptocurrency stored on a custodial service into fiat.

In 2021, an accused individual agreed to voluntarily hand over cryptocurrency obtained from illegal drug trafficking as part of cooperation with the investigation.

To do this, he exchanged the coins on an exchange for fiat, arranging for their transfer in cash. A close relative of the individual received the funds and handed them over to law enforcement. The money is now seized and held in a specialized account of the Ministry of Internal Affairs of Russia.

In cases where the accused refuses to cooperate, law enforcement can independently find cryptocurrency wallet addresses and seed phrases on seized laptops. In one such case, they transferred bitcoins obtained from criminal activities to a hardware wallet created by the investigator. The assets were subsequently seized.

Currently, the device, password, and seed phrase are stored in three separate sealed packages. Only the lead investigator and the head of the investigative body have access to them.

Despite existing practices for the confiscation and seizure of cryptocurrencies, comprehensive rules for such procedures have yet to be established in Russian criminal procedural law.

In April 2022, the head of the Russian Prosecutor General’s Office, Igor Krasnov, stated the need to include digital currencies in criminal legislation for investigating cases of their theft and the possibility of seizure.

In May of the same year, a court seized the cryptocurrency wallet of the alleged administrator of Hydra but was unable to gain access to it.