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Regulatory scrutiny of the use and management of cryptocurrency and other digital assets such as utility tokens and non-fungible tokens (NFTs) (collectively, cryptoassets) is rapidly growing on both sides of the Atlantic. With increasing governmental enforcement and private litigation involving cryptoassets, it is vital for individuals and businesses whose activities involve these assets to understand the broad legal framework for enforcement and the types of disputes and legal actions into which they could be drawn. Even if they are not the targets of enforcement actions or parties to legal proceedings, they may have to respond to subpoenas or other court orders. While most of the enforcement actions and litigation to date has involved cryptocurrencies, some have involved NFTs and other types of digital assets.

This article analyzes tools and procedures that enforcement authorities in the U.S. and U.K. may use to seize and forfeit cryptoassets and provides an overview of related regulatory developments in these jurisdictions.

Cryptocurrencies and other digital assets constitute a growing share of global financial assets. As of April 2022, cryptocurrencies were purportedly worth almost $2 trillion, the U.S. Securities and Exchange Commission (SEC) estimated. Despite the recent volatility in cryptocurrency markets and the decline in the value of some cryptocurrencies in May and June of 2022, cryptoassets remain widely held and retain significant value. As of June 2022, cryptocurrencies were still valued at just under $1 trillion, with cryptocurrency prices showing signs of recovery according to reports by Reuters in June 2022 and August 2022. In February 2022, Her Majestys Revenue and Customs (HMRC) estimated that approximately 10% of U.K. adults own or have owned cryptoassets, and 68% of those are likely or very likely to acquire more.

The meteoric rise in the use and management of cryptocurrency in recent years has led to an increase in related crime. According to data provider Chainanalysis, $1.9 billion worth of cryptocurrency was stolen from January 2022 through July 2022, compared to just under $1.2 billion at the same point in 2021. Per the Chainanalysis 2022 midyear report, much of this illicit activity can be attributed to the rise in funds stolen from decentralized finance (DeFi) protocols, with North Korea-affiliated groups alone having stolen an estimated $1 billion of cryptocurrency from DeFi protocols as of July 2022. Fraudsters may deploy a range of strategies, including ransomware attacks, hacks or deception to steal from unsuspecting victims, or use cryptoassets to launder criminal proceeds.

Against this backdrop, both U.S. and U.K. law enforcement agencies have increasingly used the tools at their disposal to combat cryptocurrency-related crime. For example, in February 2022 the U.S. Department of Justice (DOJ) announced the seizure of $3.6 billion worth of bitcoin in connection with the 2016 hack of Bitfinex the largest financial seizure ever.

Similarly, in July 2021, Londons Metropolitan Police seized 180 million of cryptocurrency in connection with suspected money laundering and, more recently, the U.K.s National Crime Agency (NCA) reported that it confiscated around 26.9 million in cryptocurrency assets between April 1, 2021, and March 31, 2022.

In the U.S., cryptoassets have been the focus of much attention by enforcement authorities in recent years. At the federal level, this is mainly the purview of the SEC, DOJ, the Commodity Futures Trading Commission (CFTC) and the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury.

In February 2022, the DOJ formed the Virtual Asset Exploitation Unit (VAXU) within the Federal Bureau of Investigations (FBI), which is dedicated to blockchain analysis and virtual asset seizure. VAXU is expected to work closely with the DOJs National Cryptocurrency Enforcement Team (NCET), which was launched in October 2021.

In addition, in March 2022, Attorney General Merrick Garland launched a new interagency taskforce dubbed KleptoCapture to hold accountable corrupt Russian oligarchs. The task forces mission explicitly includes targeting the use of cryptocurrency to evade sanctions or launder money, with a focus on asset seizure.

In May 2022, the U.S. District Court for the District of Columbia upheld the DOJs criminal complaint against an unnamed U.S. citizen who allegedly helped customers evade U.S. sanctions by funnelling more than $10 million of bitcoin through a virtual currency exchange from the U.S. to a country that is subject to U.S. comprehensive sanctions. In so doing, the court adopted for the first time the Office of Foreign Assets Controls (OFACs) recent guidance on sanctions compliance obligations, saying that virtual currency is subject to OFACs regulations, and financial services providers to whom U.S. sanctions regulations apply include virtual currency exchanges.1

Overview of Cryptoasset Forfeiture by US Authorities

U.S. authorities have increasingly used asset forfeiture as a tool in crypto-related enforcement proceedings, seizing several billions of dollars of cryptoassets in recent years. For instance, since 2015, the U.S. Internal Revenue Service Criminal Investigation (IRS-CI) has seized over $3.5 billion in cryptocurrency, and, as of December 2021, the U.S. Marshals Service held $919 million in cryptocurrency.

In April 2022, federal prosecutors working with local Florida law enforcement obtained forfeiture of $34 million worth of cryptocurrency tied to illegal dark web marketplace activities. The IRS-CI, Department of Homeland Security (DHS), FBI, U.S. Postal Inspection Service (USPIS) and U.S. Drug Enforcement Agency (DEA) jointly investigated this case.

U.S. prosecutors are expected to pursue increasingly aggressive civil forfeiture actions targeting cryptoassets. In these cases, the government can transfer the funds in question instantaneously, whereas transfers involving fiat currency or personal property can take much longer, making crypto-related forfeiture an appealing mechanism for authorities.

In order to forfeit cryptoassets, U.S. authorities generally first trace the cryptoassets and transactions using publicly available blockchain information and analytics tools to identify relevant information, such as the dates and amounts of transactions and the origination and destination public address(es). If needed, agents can then issue subpoenas to financial institutions, virtual-currency exchanges or other third-party intermediaries to obtain relevant records.

This approach got a boost in 2020, when the U.S. Court of Appeals for the Fifth Circuit held in United States v. Gratkowski that federal agents did not need to first obtain a warrant based on probable cause to subpoena bitcoin records.2 In Gratowski, the federal agents used forensic software to extract suspicious addresses from the bitcoin blockchain and then subpoenaed a virtual currency exchange to trace the customers who had made bitcoin payments to those suspicious addresses.

The court held that a person generally has no legitimate expectation of privacy in information he voluntarily turns over to third parties, treating bitcoin records kept by the exchange in the same way as customer financial records kept by banks in that bank records are not subject to Fourth Amendment protections.3 The court further held that Gratowski did not have a privacy interest in his information on the bitcoin blockchain since that information is available to every bitcoin user, making it possible to determine the identities of the bitcoin address owner by analyzing the blockchain.4

Armed with this data, authorities can establish the assets nexus to criminal activity and its location information that is required to obtain a search warrant authorizing seizure of the asset. Subsequently, authorities may seize the cryptoasset using such a warrant, or through another method that otherwise fulfils the governments obligations under the Fourth Amendment (searches and seizures), such as with the owners consent. Forfeiture proceedings are then required so that the title to the seized assets can be permanently transferred to the government. Cryptoassets can be forfeited via administrative, civil judicial or criminal judicial forfeiture, as discussed below.

U.S. authorities are increasingly working with cryptoasset and blockchain analytics firms to use advanced technologies to uncover illicit activity and identify linked actors, in addition to crime proceeds and other forfeitable assets. Since 2017, federal agencies including the DEA, DHS, IRS, FBI and CFTC have spent millions of dollars on third-party cryptoasset tracing and blockchain analytic tools.5

These technologies have already been put to use at a large scale. For example, in November 2020, using blockchain forensics, the DOJ and IRS identified and retrieved, through a civil forfeiture action, $1 billion worth of illicit bitcoin stolen from Silk Road more than seven years earlier.

More recently, in February 2022, the U.S. District Court for the District of Columbia held that the governments use of reliable blockchain analysis software that traced the flow of stolen digital currency to the investigations targets supported probable cause for a search warrant.6 The court further highlighted that such software was becoming commonplace for law enforcement to track financial crimes, noting that this sort of analysis had demonstrated an unprecedented rate of success when compared to human informants, bolstered by the softwares lack of incentive or capacity to lie.7

This ruling was in accord with the New York State Department of Financial Services April 2022 guidance stating that cryptocurrency firms should use blockchain analytics tools to help mitigate and manage financial risk, and to meet AML and sanctions-related compliance requirements.

U.S. authorities are also working to increase cooperation with foreign authorities to identify and trace cryptoassets that may be subject to forfeiture. For example, on 5 April 2022, the DOJ announced the seizure of Hydra Market, the worlds largest and longest-running darknet market. The Hydra servers and cryptocurrency wallets containing $25 million worth of bitcoin were seized in Germany by the German Federal Criminal Police (the Bundeskriminalamt), in coordination with multiple U.S. agencies, including the DEA, DHS, USPIS, FBI, IRS, DOJs Office of International Affairs, the U.S. Attorneys Office for the District of Columbia and the NCET.

Administrative Forfeiture

Many federal law enforcement agencies are authorized to seize cryptoassets valued at less than or equal to $500,000 at the time of seizure via an administrative forfeiture procedure without judicial approval. The agency involved seizes the asset, provides notice to potential claimants, and processes any claims to the assets. Any timely and legally valid claims are referred to the U.S. Attorneys Office, which must then commence a civil forfeiture action in federal court. In the absence of any such claims, the agency can complete the forfeiture without judicial involvement. Assets with a timely and legally valid claim to them, or those valued at more than $500,000, must be forfeited via a civil or criminal forfeiture action.

The DEA, DHS and USPIS have all successfully seized and obtained legal title to cryptocurrency via administrative forfeiture in the past.8

Criminal Forfeiture

Criminal judicial forfeiture actions are in personam (against the person) actions against a defendant where only property in which the defendant has a true interest may be forfeited. A criminal forfeiture proceeding starts by adding a forfeiture allegation to a charging document and requires that the defendant be convicted of an offense that allows the forfeiture of property. The government must establish by a preponderance of the evidence the requisite connection between the crime of conviction and the asset. Crimes such as those involving money laundering and various types of fraud and counterfeiting allow criminal forfeiture. A separate ancillary proceeding follows to determine any third-party ownership interests in the property that the government seeks to forfeit.

In what is believed to be the largest cryptocurrency fraud ever charged criminally, in November 2021, a district court granted the DOJs request to liquidate $57 million in cryptocurrency seized from Glenn Acaro, the top North American promoter of the cryptocurrency bitconnect. Acaro pled guilty to participating in a conspiracy that defrauded investors of over $2 billion. In the charging document, the DOJ sought criminal forfeiture pursuant to 18 U.S.C. 982(a)(2)(A) and 28 U.S.C. 2461(c) of the fraudulently obtained proceeds in Acaros possession, the majority of which were held in cryptocurrencies, including bitcoin, ethereum, litecoin, dash and several others.9

Civil Judicial Forfeiture

Civil judicial forfeiture actions are in rem court proceedings brought against property that was derived from or used to commit an offense, rather than against a person who committed an offense. Unlike criminal forfeiture, no criminal conviction is required. The government must still prove that the property was linked to criminal activity by a preponderance of the evidence.

This proceeding allows the court to gather everyone with an interest in the property and resolve all the claims to it in one proceeding.

Not only does this procedure require a lower burden of proof; it allows the government to reach more property than criminal forfeiture. This includes property of criminals located outside the U.S., such as terrorists and fugitives. It also permits recovery of assets held by deceased defendants, or where no defendant can be identified since the action is against the asset itself.

The governments notice requirement for in rem forfeiture proceedings can be met if the government attempts to provide actual notice. In United States v. Twenty-Four Cryptocurrency Accounts, for example, it was held that the government provided sufficient notice to the public and to potential claimants of its forfeiture action in rem against cryptocurrency accounts allegedly used in connection with a child pornography website where the government had sent direct notice via certified mail or email to potential claimants who could be identified by currency exchange information; sent notice an additional time when emails or certified letters were returned as undeliverable; and posted a public notice on an official government forfeiture website for 30 consecutive days.10

The IRS and DHS enlisted the help of South Korean law enforcement to seize the servers and related materials, which were located in South Korea. A review of the seized materials revealed bitcoin transactions, which allowed law enforcement to obtain a warrant and seize all 24 related cryptocurrency accounts.11 The court granted the governments motion for default judgment for the forfeiture of all 24 accounts.

In the U.K., regulation of cryptoassets has likewise become a focus for regulators and law enforcement agencies. Under the FCAs scrutiny, crypto-related firms now face a new requirement to register in the U.K., and cryptoasset firms must comply with anti-money laundering (AML) regulations, and are subject to the FCAs enforcement powers. Between January 10, 2020, and October 20, 2020, alone, the FCA opened 39 inquiries into cryptoasset businesses. In March 2022, the FCA announced that, between September 2021 and March 2022, it had opened 300 investigations into unauthorized cryptoasset operators. Echoing the FCAs commitment, the U.K. Serious Fraud Office (SFO) announced in its 2021/22 Business Plan that the growth of cryptocurrency would be one of its key focus areas.

In March 2022, U.K. regulators issued a joint statement signaling that financial sanctions do not differentiate between cryptoassets and other types of assets. The statement made clear that the use of cryptoassets to circumvent economic sanctions is a criminal offense under the Money Laundering Regulations 2017 and regulations made under the Sanctions and Anti-Money Laundering Act 2018. The FCA confirmed that it had written to all registered cryptoasset firms and those holding temporary registration status to highlight the application of sanctions to various entities and individuals.

More recently, the May 2022 Queens Speech outlined a new Economic Crime Bill under which the authorities will gain more tools to halt illicit finance in the U.K., including the power to seize cryptoassets. No implementation timetable has been provided yet.

Criminal Forfeiture

There are a number of tools available to U.K. law enforcement to address cryptoasset-related crime. These include orders to restrain, seize, forfeit and confiscate assets, as well as orders to obtain information about potential wrongdoers.

Law enforcement can secure a restraint order under s41 Proceeds of Crime Act 2002 (POCA) to prohibit a person from dealing with any realisable property held by them, provided that certain conditions are met. This includes, for example, where a criminal investigation or proceedings relating to an offense have started in England and Wales and there are reasonable grounds to suspect that the alleged offender has benefitted from his criminal conduct.

A restraint order freezes assets wherever in the world they are and prevents assets from being moved or dissipated. Given the nature of the order, it is usually obtained without notice to a defendant. Non-compliance with a restraint order is a contempt of court, and in extreme cases, may be treated as perverting the course of justice.

In a mark of flexibility, courts have found cryptocurrency to meet the definition of realisable property for the purposes of POCA. In the recent case of Lavinia Deborah Osbourne v (1) Persons Unknown (2) Ozone Networks Inc. trading as Opensea [2022],12 the High Court recognized NFTs as legal property over which a freezing injunction could be ordered, thereby extending to NFTs the courts previous framing of cryptocurrencies as proprietary assets. The NFTs here were two unique digital artworks, stolen from the claimants digital wallet in January 2022, and traced to two wallets. An urgent freezing order was granted in March 2022, freezing the assets until the end of proceedings. This landmark case confirmed that NFTs should be treated as standalone assets, separate from the underlying pieces that they represent.

English courts have been willing to grant not only restraint and freezing orders relating to cryptoassets, but also confiscation orders where certain conditions are met, namely:

When making a confiscation order, the court must decide whether the defendant has a criminal lifestyle and whether he has benefitted from general or particular criminal conduct.

In R v Teresko [2018],13 the defendant was convicted of drug and money-laundering offenses. In related restraint proceedings, the police were permitted to restrain the defendants cryptoassets and convert seized bitcoin into sterling. The court subsequently made a confiscation order over the defendants bitcoin, worth 975,000.

Similarly, in R v West [2019],14 the defendant was convicted of hacking into company databases, selling the data on the dark web and converting the funds into cryptocurrency. He was ordered to pay a confiscation order that included cryptocurrency valued at 922,978.

Together, these examples reflect that English courts are prepared to use conventional tools in novel contexts in aid of criminal justice.

However, challenges may arise when it comes to enforcement. For example, successful seizure of cryptoassets usually depends on obtaining the owners private key. Prosecutors are likely to have greater success in obtaining a private key where it is held by a bank or crypto exchange on a persons behalf. However, where the key is held by the individual owner, the prosecutor may have to rely on the cooperation of the defendant or further court proceedings.

In Ireland, the so-called Fishing Rod Case15 demonstrated the challenges that can arise in seizing cryptoassets without the private key. A defendant hid the key for his cryptoassets, worth an estimated 45 million, in a fishing box that was thrown away by his landlord while he was in police custody. While the digital wallets were seized by the Irish state, without the secure key, the assets are unobtainable.

Another key challenge is the issue of anonymity. Cryptoassets are attractive for unlawful conduct because they can be held and transferred anonymously. Unless there is proof a defendant is dealing or concealing illegal cryptoassets, the court may find it difficult to make an order. In Teresko, the key for the defendants bitcoin wallet was found during a search of his property, and in West, the defendant was arrested while he was using his computer, allowing the police to access his virtual wallet and provide evidence to the Crown Prosecution Service.

It is not just cryptocurrency that can be seized. On February 13, 2022, Her Majestys Royal Customs (HMRC) used its POCA powers to seize NFTs as part of a 1.4 million VAT fraud investigation that involved around 250 allegedly fake companies. HMRC was the first U.K. agency to seize an NFT. HMRC Deputy Director Economic Crime Nick Sharp said this confiscation case should deter the view that cryptoassets serve to hide money from HMRC.

Civil Asset Recovery Enforcement Actions

Alongside the criminal orders under POCA, U.K. law enforcement also has the power to recover assets in the civil courts on the civil standard (i.e., balance of probabilities) under POCA. A prosecutor can seek a civil recovery order, which provides that specific property is recoverable on the basis that is represents the proceeds of unlawful conduct. In effect, this is a confiscation order without the triggering conviction.

DPP v Briedis and Reskajs [2021]16 is a prime example of this procedure in action. There the Director of Public Prosecutions sought a freezing order under s245A POCA (civil recovery powers) against two respondents covering cash in various currencies, money in bank accounts, personal items and cryptocurrency. The court was satisfied that cryptocurrencies fell within the wide definition of other intangible property under POCA s316(4).

That case referred to the reasoning in AA v Persons Unknown [2019],17 in which the claimant paid a bitcoin ransom to a hacker in exchange for decryption software and, following recovery of the encrypted files, the claimant took steps to recover the ransom. Given that the court in this case was prepared to recognize cryptocurrency as property under POCA provisions related to property freezing orders, it is likely that a civil recovery order could also have been obtained over it.

Going further, if a prosecutor obtained a civil recovery order, it could, in theory, also obtain an Unexplained Wealth Order (UWO) on cryptoassets pursuant to s362A POCA. However, they are unlikely to be the tool of first choice, given that cryptoassets are less readily identifiable than a tangible asset. A UWO application requires a description of the property and the suspected owner, which may be difficult in cryptoasset cases.

The trend toward greater regulation of cryptoassets and more enforcement in cases of wrongdoing is likely to continue as authorities respond to the growth in cryptoasset use. Commenting on the high degree of fraud involving the asset class, SEC Commissioner Hester Peirce said at a conference in May 2022 that the United States has dropped the regulatory ball and has got to get working to target fraud and play a more positive role in cryptocurrency innovation.

To manage cryptoasset-related legal and compliance risk stemming from efforts to seize and forfeit cryptoassets, organizations can take a number of steps including:

Trainee solicitor Clara Rupf contributed to this article.

_________________________

1 In re: Criminal Complaint, No. 1:22-mj-00067, 2022 WL 1573361, at *3 (D.D.C., 2022) (citing U.S. Dept of the Treasury Sanctions Programs Related to Digital Currency Transactions); see also OFAC Enters Into $98,830 Settlement With BitGo, Inc. for Apparent Violations of Multiple Sanctions Programs Related to Digital Currency Transactions, U.S. Department of Treasury (Dec. 30, 2020).

2 United States v. Gratkowski, 964 F.3d 307 (5th Cir. 2020).

3 Id. at 310-11 (citing to United States v. Miller 45 U.S. 435, 439-40 (1976)).

4 Id. at 312.

5 Felix Mollen, Coinbase Secures Another Millionaire Deal With the US Government To Let Them Use Its Blockchain Analytics Software, CryptoPotato (June 8, 2020); Danny Nelson, Coinbase Offers US Feds New Crypto Surveillance Tools, CoinDesk (June 5, 2020); Danny Nelson, Inside Chainalysis Multimillion-Dollar Relationship With the US Government, CoinDesk (Feb. 10, 2020).

6 Matter of Search of Multiple Email Accts. Pursuant to 18 U.S.C. 2703 for Investigation of Violation of 18 U.S.C. 1956, No. 20-SC-3310 (ZMF), 2022 WL 406410 (D.D.C. Feb. 8, 2022).

7 Id. at *13.

8 See, e.g., FOR SALE Approximately 4,041.58424932 bitcoin, U.S. Marshals Service (February 2020 auction); Roger Aitken, U.S. Marshals to Hold Bitcoin Auction for $50 Million Worth of Cryptocurrency, Forbes (January 12, 2018).

9 United States v. Glenn Arcaro, No. 21CR02542-TWR. (S.D. Cal.), Complaint.

10 United States v. Twenty-Four Cryptocurrency Accts., 473 F. Supp. 3d 1 (D.D.C. 2020).

11 Id. at *3-4.

12 The full High Court judgment is yet to be published.

13 R v Teresko (Sergejs) [2018] Crim. L.R. 81.

14 R v West [2019], unreported, 28 September 2019, Southwark Crown Court.

15 DPP v Collins [2020], unreported, February 2020.

16 DPP v Briedis and Reskajs [2021] EWHC 3155 (Admin).

17 AA v Persons Unknown [2019] EWHC 3556.

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Cryptoasset Seizures and Forfeitures: US and UK Enforcement Overview - JD Supra

As a lawyer for the past 40 years, it troubles me the way our freedoms are being slowly eroded by the actions of our government and agencies. The Fourth Amendment was set in place to protect people from the intrusion of government into their homes and lives without some serious oversight by the courts. Before we became independent from British rule, it was common for the agents of the King to storm into homes in search of subjects whose thoughts and actions may have been contrary to the best interests of the Crown. I thought the Constitution and the Bill of Rights solved that problem and gave us back the peace of mind to be free from the troublesome intrusion of law enforcement agents.

Recent events have shown how nave I had become in the comforting words of the Fourth Amendment, and its assurances that I would be free from unreasonable searches and seizures. How dare the FBI raid the home of our former commander in chief on only the affidavit of sworn law enforcement officers and the scrutiny of a federal judge! Does this set a precedent that means anyone who evades taxes, attempts to undermine an election, sexually assaults women, manipulates the value of their assets to reduce taxes, aides and abets the overthrow of our democracy and its election system, and illegally steals top secret documents, will be subject to investigation? Is that what we have become as a country? Who knows what could happen next if this form of police overreach is allowed to exist. Our courts and jails could be flooded with a glut of politicians and their cronies and enablers.

We could suddenly find ourselves in the cross-hairs of a search warrant after having stolen corporate secrets from our employers, or simply embezzled money. Who wants to be under the gun from police just because they keep their drug stash at home instead of in a warehouse. This opens the door to all kinds of unreasonable law enforcement actions for drug searches, espionage, illegal possession of firearms, tax evasion, harboring criminals, exploitation of illegal aliens the list goes on. Personally, I dont want to wake up some day and discover that I could be held accountable for keeping nuclear secrets in my locked gun cabinet. Wake up, America, and stand up for your rights!

Chuck McMurryCarp Lake

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Letter: Could any of us now be subjected to the 4th Amendment and all it entails? - Cheboygan Daily Tribune

Left: attorney John Pierce, during an interview with Tucker Carlson; right, Lloyd Casimiro Cruz, Jr., inside the Capitol on Jan. 6.

A high-profile lawyer defending multiple people accused in the Jan. 6 attack on the U.S. Capitol says that the federal search warrants used to trace one of his clients to the building are unconstitutional and that the case against his client should be dismissed.

The motion falls days after a similar Fourth Amendment challenge failed in a separate case related to the attack on the U.S. Capitol.

John Pierce, in a motion filed Saturday on behalf of client Lloyd Casimiro Cruz, Jr., argues that any evidence obtained from the search warrants that the FBI obtained on the day of the attack is so-called fruit from the poisonous tree so poisonous, the legal theory goes, that it cannot constitutionally be used in a criminal prosecution.

Cruz, who is from Missouri, is accused of joining the mob of Donald Trump supporters at the Capitol on Jan. 6. Prosecutors say he drove with friends to Washington on Jan. 3 to attend Trumps so-called Stop the Steal rally, during which Trump exhorted the crowd to march to the Capitol as Congress certified Joe Bidens win in the 2020 presidential election, a constitutionally-mandated process that marks the peaceful transition of power from one U.S. presidential administration to the next. The riotous crowd ultimately overwhelmed police, grinding the certification to a temporary halt and forcing lawmakers and staff to either leave the building or shelter in place.

According to court documents, Cruz told federal investigators that he recorded some of the destruction and chaos at the Capitol that day using a GoPro camera, which he later shared with investigators. Cruz faces four trespassing and disorderly conduct charges that have come to be known as the standard misdemeanors in Jan. 6 cases. Penalties range from six months to one year in jail if convicted.

The FBI ultimately tracked Cruz down through location data obtained from AT&T and Google through search warrants obtained on Jan. 6.

Per the FBI statement of facts in support of the probable cause warrant for Cruz:

According to records obtained through a search warrant for records in the possession of Google, a mobile device associated with I**********@g****.com was present at the U.S. Capitol on January 6, 2021. Google estimates device location using sources including GPS data and information about nearby Wi-Fi access points and Bluetooth beacons. This location data varies in its accuracy, depending on the source(s) of the data. As a result, Google assigns a maps display radius for each location data point. Thus, where Google estimates that its location data is accurate to within 10 meters, Google assigns a maps display radius of 10 meters to the location data point. Finally, Google reports that its maps display radius reflects the actual location of the covered device approximately 68% of the time. In this case, Google location data showed that a device associated with l**********@g****.com was within the U.S. Capitol Crypt at 2:17:27 p.m. on January 6, 2021. Google records showed that the maps display radius for this location data was less than 100 feet, which encompasses an area that is partially within the U.S. Capitol building. Google reported a recovery telephone number ending in 5584 for l**********@g****.com.

According to records obtained through a search warrant for records in the possession of AT&T, on January 6, 2021, in and around the time of the incident, the cellphone associated with a telephone number ending in 5584 was identified as having utilized a cell site consistent with providing service to a geographic area that included the interior of the United States Capitol building.

Login Internet Protocol (IP) address information provided by Google, and research in public records, were used to identify LLOYD CASIMIRO CRUZ, JR., residing in Polo, Missouri, as the subscriber of telephone number ending in 5584. I was requested to conduct logical investigation to identify the individual in possession of the referenced device within the U.S. Capitol building, and to conduct investigation to identify potential criminal offenses that were committed, on January 6, 2021.

In the probable cause affidavit, the FBI agent who interviewed Cruz said that the defendant shared a picture with him that apparently places him inside the Capitol building at the time of the riot.

Cruz stated he observed himself on surveillance footage from inside the U.S. Capitol building posted on One America News Networks website, the FBI affidavit says. Cruz took a screen shot of this image on this website with his cell phone. I took [a] photograph of this screen shot[.]

The AT&T and Google search warrants that led to the FBIs investigation and, ultimately, Cruzs arrest, Pierce argues, were illegal, and any evidence derived from those search warrants violates his clients constitutional rights.

[T]he entire complaint against the Defendant originated with an unlawful blanket general warrant of cellphone location data, which plainly lacked requisite specificity, Pierce writes in his motion, filed Saturday. Investigators then used such metadata to identify Cruz, rather than first having probable cause to identify Cruz and probable cause to believe Mr. Cruz had committed an offense, as required by the 4th amendment [sic].

Investigators then tracked down Cruz and obtained statements from him, as well as other evidence, Pierce continued. All of this evidence is fruit of the poisonous tree. Accordingly, this case must be dismissed en toto [emphasis in original, using the Latin phrase for in its entirety].

According to Pierce, the timeline of the FBIs investigation supports his claim:

1. The FBI began its investigation into (later to be identified) Cruz, without any probable cause to suspect Cruz of any crime;

2. The FBI used two blanket general warrants (of both Google and AT&T) to scour through cell phone and other digital metadata to then identify Cruz as a potential suspect crime (although what crimes, if any, the FBI did not know);

3. Even after identifying Cruz as a potential suspect via these general warrants, the FBI lacked probable cause to arrest him for any specific crime;

4. The FBI then flew to Missouri to question Cruz to determine if there was any probable cause to charge Cruz with a crime or crimes; and

5. Only upon questioning Cruz and getting Cruz to provide other evidence did the FBI have probable cause to charge Cruz with any crime (two misdemeanors).

Pierce, who is known for representing right-wing causes clbres including, before he was fired from the defense team, acquitted Kenosha protest gunman Kyle Rittenhouse and the very image of the riot Jacob Chansley describes the FBIs search warrant in dramatic fashion, implying that something significantly more nefarious is afoot.

The warrants in this case plainly lacked probable cause with any particularity regarding the person and things to be searched or even the crimes to be alleged, Pierce writes. Indeed, it is plain that this case was initiated by one of the worst general warrants in American history. Counsel suspects that there may be other January 6 defendants who were similarly identified by these general warrants and asks the Court to utilize its inherent powers to open a more wide-ranging inquiry into the FBIs use of these unconstitutional warrants.

Pierce also asks to put the agents involved in the warrants to answer questions under oath.

Cruz requests an evidentiary hearing in which all agents responsible for these warrants shall be made to appear, testify, and provide all supporting affidavits and/or documentation, Pierce writes, emphasizing this request in all-bold typeface.

Pierces motion comes days after a ruling from the Chief U.S. District Judge denying another Jan. 6 defendants request to suppress evidence on similar grounds. On Thursday, Beryl Howell, a Barack Obama appointee, denied Matthew Bledsoes motion to suppress evidence on Fourth Amendment grounds, finding that Bledsoe who prosecutors say live-streamed extensively from the Capitol that day did not have a reasonable expectation of privacy location data that Facebook ultimately provided to the FBI.

Cruzs case is before Senior U.S. District Judge Reggie B. Walton, a George W. Bush appointee. It is unclear when he will rule on the motion; a status conference in the case is set for Tuesday.

The recent filing of two motions seeking to either suppress or dismiss charges on Fourth Amendment search and seizure grounds may signal yet another coming fight in Jan. 6 cases in which judges could reach a variety of conclusions. Previously, several defense attorneys in Jan. 6 cases have filed motions to dismiss a particular federal obstruction charge levied against many accused rioters, and most but not all D.C. District judges have rejected these efforts.

The judges are less aligned when it comes to the issue of so-called split sentences efforts by federal prosecutors to have defendants convicted of certain Jan. 6 misdemeanors serve both jail time and probation. Some judges have said that such sentences are allowed, but others have disagreed, leaving a split on the bench.

The DOJ declined to comment about Pierces motion to Law&Crime.

Read the motion, below:

[Image of John Pierce via screengrab; image of Lloyd Casimiro Cruz, Jr., via FBI court filing.]

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Conservative Lawyer Who Formerly Represented Kyle Rittenhouse Tees Up Potential Fourth Amendment Issue in Jan. 6 Case - Law & Crime

Former President Donald Trumps lawyer said Tuesday that the 45th president will attempt to challenge the legality of the FBI raid on Mar-a-Lago based on his Fourth Amendment rights.

In terms of what we do in the future, you know, theres this Fourth Amendment like you brought up, theres a fourth amendment issue here; the warrant was way too broad, Trump attorney Alina Habba told Fox News on Tuesday night.

Habba then pointed to the judge in the case,U.S. District Judge Aileen Cannon, who was appointed by Trump in 2020. Cannon is not the same judgeU.S. magistrate Judge Bruce Reinhartwho signed off on the FBI warrant.

Last week, Cannon signaled in a court filing that she will likely sign off on appointing a special master to review documents that were taken from Mar-a-Lago. Department of Justice (DOJ) lawyers said this week that a filter team has already looked into the documents and added that what appears to be attorney-client privileged information was taken.

We do have judge Cannon, whos the federal judge thats taken up this case, Habba said. Theres a hearing on Thursday. I think that that will be giving us some judicial oversight that is much needed at this point.

So at this point, I think the best thing weve done is weve gotten a judge in place who does look like theyre going to be active, Habba said, adding that soon, we do need to move forward with filing to invalidate the warrants due to Fourth Amendment issues.

The Fourth Amendment guarantees a right to privacy and protectsindividuals from unreasonable searches and seizures by the government.

But we dont have all the information yet. We still dont even have a completely unredacted affidavit. They wont share it with the legal team, let alone the public seems to know more than we do, Habba added. So its a problem. And I think that the FBI is going to have major problems.

The affidavit, which DOJ officials sought to block from being released, was ordered unsealed by Reinhart last week, although it was significantly redacted. Few new details were provided, although it stated the DOJ has probable cause to believe that allegedly classified documents and materials were being kept at Mar-a-Lago.

Trump, meanwhile, has said he declassified the materials at Mar-a-Lago, pointing to an executive order and statements he made in late 2020 and early 2021 when he was still in office. A day before departing the White House, Trump signed an order to declassify some FBI Crossfire Hurricane materials.

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Jack Phillips is a breaking news reporter at The Epoch Times based in New York.

See the original post:
Trump Lawyer Reveals What Argument Former President Will Make in Court - The Epoch Times

This is my second venture this year into review of law reviews. For the first on another of my favorite subjects, artificial intelligence, see the May 2022 blogs, Robophobia: Great New Law Review Article Part 1, Part 2 and Part 3 and Professor Woods article, Robophobia. Woods, Andrew K., Robophobia, 93 U. Colo. L. Rev. 51 (Winter, 2022). These highly intelligent, engaging law professor attorneys, Woods and Stuart, give me renewed hope for the profession in general and, especially, for the key areas of technology law.

About Professor Allyson Hynes Stuart

Professor Stuart has written many other articles of interest to readers, including:

Allyson Stuart has also served as Of Counsel for the Crystal law firm, since 2015. The firm has an intriguing slogan: Lawyers for Lawyers and International Matters. The firm says that it is primarily a transactional law firm that offers some litigation services.

To conclude the personal introduction, Allyson, like me, has her own YouTube Channel, focusing on legal instruction. Professor Stuarts videos, made in 2013, are on what she calls flipping the classroom. They address most first semester Contracts issues as well as some difficult aspects of Evidence.

Introduction to Professor Stuarts Article

Privacy in discovery has been largely ignored in rules of civil procedure and left to the courts and lawyers to come up with their own solutions. The result is a hodge-podge of case law and local rules. This area of the law is, as Professor Stuart aptly describes, buried in surprising obscurity. Her article is a much needed unearthing and organization of the law. As Professor Stuart explains in her introduction after discussion of federal civil procedure rule changes:

Amid all these changes, little attention has been paid to privacy as opposed to time and expense.10 The Rules do not provide for explicit protection against discovery based on privacy,11 with the exception of redaction of personal information under Rule 5.2.12 There has long been the idea that privacy protection exists against government searches and seizures, but that there is no such concept in civil discovery.13 However, close analysis of cases reaching back to the adoption of the Rules shows that federal courts have in fact used privacy rationales to protect against discovery in many areas. District courts in particular have developed an interpretation of the Rules that protects litigants and non-litigants from discovery; courts have developed certain categories of protected information based on a balancing of the right to privacy against the need for the information in the context of the litigation.14 This law derives from Supreme Court precedent, from public policy represented in federal and state statutes, and from discretionary judicial application of the Rules. This Article unearths this body of law from its surprising obscurity. With a firm grounding in the foundations and justifications for federal protection of privacy in discovery, and in light of recent Supreme Court doctrine, the Article describes how privacy arguments can address increasingly intrusive discovery demands.

Overview of Professor Stuarts article, A Right to Privacy for Modern Discovery

After an Introduction, A Right to Privacy for Modern Discovery begins with a historical overview of privacy in civil discovery, including the landmark case of Hickman v. Taylor, 329 U.S. 495 (1947). Professor Stuart observes that discovery protections can be divided into two broad categories. One is protection for information or communications deemed confidential, including attorney-client, trade-secret, business records, tax returns. The other is protection for personal privacy reasons, which professor Stuart explains:

is based on Supreme Court interpretation of the constitutional right to privacy in intimate or otherwise highly personal matters, including marriage, contraception, sexual activity, medical information, family relations, and other personal information. In addition, the Constitution protects against compelled disclosure of information that would violate a persons First Amendment rights, such as freedom of association.

As to the Constitution based privacy protection provided to discovery in civil proceedings (criminal proceedings are not discussed directly in this article), Professor Stuart notes three broad areas:

Next the article considers the public policy of privacy in discovery and identifies three basic grounds:

As to the balancing used to provide privacy to litigants, four factors are considered:

The next section is Privacy in Modern Discovery, discussed in detail below, followed by the Conclusion. The Privacy in Modern Discovery section, which is the real meat of the article, is divided into three main parts:

Discovery Today

Professor Stuarts Privacy in Modern Discovery section begins, as noted, with the Discovery Today overview (II.A.). Most readers here will already be familiar with these topics and discussion, so I will not go into them in depth. One important insight she provides pertains to the omission of privacy as an express factor for proportionality consideration under the Rule 26(b), FRCP.

While the Rules revisions generally addressed the tremendous rise in ESI volume and costs with emphasis on judicial intervention, cooperation, and reduction in scope, they did not give specific attention to issues of privacy.219 However, as discoverys intrusiveness has pervaded not just vast storage databases and email but chronicles of individuals personal lives, privacy has received more attention. Commentators have advocated for privacy to be a factor in the proportionality equation,220 and courts have followed suit.221 Privacy has also featured prominently in recent Fourth Amendment case law, which has in turn influenced discovery decisions.

In a recent email exchange with Allyson Stuart on the interesting point of Rule 26(B), I pressed her on whether she thinks the Rule should be changed again. Here is her response, which, I should add, she gave me permission to include in this blog post:

I have mixed feelings about yet another revision to the Frankenstein that is Rule 26. As it is, many practitioners fail to pay attention to the revisions, treating the scope as still including anything that would lead to the discovery of relevant evidence and failing to recognize that proportionality is nothing new. I think instead the culture needs to be curbed, and attorneys should not try to obtain a vast amount of e-discovery simply because it is accessible. The casual nature of email, text and some social media content make them catnip for attorneys, but I really believe there is a chilling effect on litigation because of it. In particular, if the only relevance for certain discovery is impeachment value, it should be weighed less strongly against competing privacy interests. All that said, I would love it if the word privacy were included in the proportionality factors.

Authors Correspondence 8//9/22 with Professor Stuart

I love how she describes Rule 26 as a Frankenstein. The question remains should privacy be added as another body part to the proportionality considerations. In a video conference with Professor Stuart on August 23, 2022, she expanded on this point. Here is the relevant excerpt, which, I should again add, Allyson Stuart gave me permission to record and publish.

See video here.

Video Credit: Ralph Losey

Aside from Rule 26(b) and including privacy factors as part of a proportionality analysis, another hot issue today practitioners is cell-phone discovery. It is found at II.A.2.a. Professor Stuarts article and case citations and discussion on this point are a helpful starting point for your research. Be sure to look at the article itself for the all-important footnotes.

As the Supreme Court has recognized, cell phones are ubiquitous.222 Courts find a strong privacy interest in the content of those devices, particular when a party seeks a forensic examination of the phone.223 Like inspection of litigants hard drives and other computer systems,224 inspection of cell phones implicates privacy rights, privileged communications, and non-relevant information.225 Courts are therefore reluctant to order litigants to submit their cell phones to their opponent for purposes of forensic examination absent necessity for purposes of finding highly relevant evidence, or proof of spoliation.226 Courts also find a strong privacy interest in cell phone records.227 Courts have been strongly persuaded by recent Supreme Court Fourth Amendment doctrine in finding privacy rights in this data.228

Professor Stuarts discussion of case law is also very interesting in the Fitbit and Internet of Things sub-sections of Discovery Today (II.A.2.c.&d.). She points out that:

All of these subjects of modern discovery push the boundaries of privacy. Technology enables the gathering and storage of vast amounts of information that create digital chronicles of individuals personal lives. This phenomenon has been the focus of recent Supreme Court decisions in the Fourth Amendment context.

The next section of the article, II.B., is entitled Supreme Court Case Law on Privacy and Technology. This is very interesting, especially considering the Supreme Court bombshell case on abortion that came down after her article. Dobbs v. Jackson Womens Health Organization, 597 U.S. _ (2022). I will go into all of this, along with criminal law considerations, and another video interview, in Part Two of this blog. Professor Stuart has some very insightful analysis of the Dobbs opinion and privacy, so stay tuned.

See the article here:
The Right to Privacy in Modern Discovery: a review of another great law review article Part 1 - JD Supra