Ping Fai Yuen, who is a U.K. resident, has accused his estranged wife of stealing a little over 2,323 bitcoin (worth around $172 million) from him in court documents. The theft is said to have taken place in 2023 when the spouse used CCTV cameras to gain access to the backup passphrase associated with a crypto hardware wallet where the bitcoin was stored. A judge recently allowed the case to go to trial after the spouse previously tried to have the case dismissed due to how bitcoin is legally classified in the jurisdiction.
While crypto hardware wallets, such as those manufactured by Ledger and Trezor, help users keep their funds secure from online hackers, that added security goes out the window in a situation where someone gains access to the associated backup recovery phrase that is intended for situations where the hardware wallet is lost or has simply stopped functioning. Notably, this issue was recently put on full display in South Korea when funds were taken from a seized crypto wallet after law enforcement posted a photo of its associated seedphrase on the internet for the world to see.
“The Claimant’s case is straightforward,” reads a U.K. court filing from last week regarding the more recent spousal theft case. “At a time when divorce was contemplated his (now estranged) wife, the First Defendant, obtained his seed phrase and “stole” the Bitcoin; either acting alone or with her sister (the Second Defendant). She did so by covertly recording the Claimant to obtain the seed phrase.”
The court filing adds that Yuen was notified of his wife’s intention to steal the bitcoin by his eldest daughter, which prompted the bitcoin holder to install audio surveillance equipment of his own in an effort to collect evidence of guilt. Additionally, the court filing contends that evidence of the wife’s guilt was collected via this audio equipment. In one of the alleged recordings, the wife is quoted as discussing the issues related to cashing out the bitcoin to traditional fiat currencies.
“You claim that your money was Bitcoin, such large amount, so many questions, how are you going to explain about it? Such large amount even 10 Banks which it’s not enough to put them into, you cannot explain how you obtain such large amount of money,” the defendant allegedly states in the recording.
Discussions were also allegedly recorded regarding the potential cashout of the bitcoin in Hong Kong, where the main defendant is a resident. The court filing says that upon original discovery of the alleged theft, Yuen confronted and assaulted the key defendant, for which he spent weeks in jail before being released on bail. He later pled guilty to three charges and was convicted, according to the filing.
The Smoke and Mirrors of True Crypto Ownership
This case of alleged theft in the U.K. brings up some of the key issues that can arise when it comes to true ownership over crypto assets. Under the “code is law” mantra that is oftentimes associated with this technology, the person who holds the private keys associated with the bitcoin is effectively the one with technical ownership over the assets. However, this philosophy becomes more complicated once real-world legal structures come into play, as anyone can be compelled to transfer bitcoin from one address to another when put under a sufficient amount of pressure.
Indeed, forcing crypto users to transfer crypto at the threat of violence has, unfortunately, become a growing trend over the past couple of years. High profile individuals associated with the crypto industry have been targeted in France on multiple occasions, and a French tax agent was also previously accused of selling personal information of well-known crypto holders to criminals for the assumed purpose of conducting such theft operations. Another recent incident occurred in Arizona where a couple of teenagers from California were said to be extorted into attempting the theft of tens of millions of dollars worth of crypto during a home invasion, echoing a previous episode of Black Mirror.
While the ability to have complete control over one’s finances is one of the most highly-touted features of crypto, these sorts of situations show that such a paradigm also puts the burden of security over those assets on the end user. Although the encryption used in Bitcoin is unbreakable (at least until a sufficiently-powerful quantum computer appears), so-called “$5 wrench attacks” are very much a serious issue in situations where crypto assets are held in a way that creates a single, physical point of failure.
