Crypto in bankruptcy: tracing and mapping assets
Date: | Week: 29 | Reading time: 7 minutes | Updated: Author: Simcha Schrijver
In short
Crypto in bankruptcy can often still be traced, even when the bankrupt says nothing about it. Whether assets really stayed outside the estate only becomes clear once someone works through the transactions carefully. Sometimes there turns out to be far more, sometimes the suspicion proves unfounded.
Paucitas is an independent expert firm in the Netherlands that maps out crypto assets, in hundreds of cases a year. Insolvency practitioners and their solicitors receive a report from us that anyone can follow step by step.
Get in touch with Paucitas or ring +31 20 244 5774. In a free intake you will hear what is possible with the leads in your file.
In a nutshell
Crypto does not show up on a bank statement by itself. With one lead, such as a purchase on an exchange or an address in the books, Paucitas can often follow the route of the assets. The insolvency practitioner then decides which steps to take.
You are an insolvency practitioner, or a solicitor acting for one, and you have a feeling something is missing. The records show a payment to a crypto platform, or a creditor mentions that the director liked to talk about bitcoin. The bankrupt says there is nothing left. That is an awkward position, because you want the estate complete without acting on a hunch.
We understand that doubt. In this article you can read what is possible for lawyers and insolvency practitioners, what an investigation can deliver and where the limits are.
Can crypto in bankruptcy be traced?
Often, yes. Every transaction on the blockchain stays on public record. Once there is a starting point, such as a known wallet address, a transfer to an exchange or a reference in the accounts, the route of the assets can be followed. That also applies to transactions from years ago.
That does not mean everything always comes to light. Sometimes a trail goes cold, or it cannot be established who controls an address. But in practice there is often more to uncover than anyone expected. And sometimes it turns out there really is nothing left. That too is an outcome an insolvency practitioner can work with.
Which signs point to undisclosed crypto?
There is no fixed list, and a single sign proves nothing. Still, these are pointers we come across regularly:
- payments from the business or personal account to an exchange or crypto service;
- strikingly low balances shortly before the insolvency, while turnover was healthy;
- invoices or emails about hardware wallets, mining or tokens;
- statements from creditors, staff or family about crypto.
Have you come across one or more of these signs? Then it makes sense to have it looked into. Whether it really concerns hidden assets only becomes clear once Paucitas has examined it. Unsure about a file? Put it to us, or ring +31 20 244 5774. You can call at any time, 24/7.
How does Paucitas help the insolvency practitioner?
Paucitas works everything out: the transactions, the route of the money, the parties involved, the documents and the timeline. We do all tracing ourselves, without tracing tools, and check every step. We also go through the records, emails, messages and other communication in the file, so that a complete picture emerges of where all the money went. The result is a chain reconstruction in a report that anyone can follow and understand step by step, including a judge with no knowledge of crypto.
Paucitas does not give legal opinions. The insolvency practitioner decides what the facts mean for the estate and which steps follow. We provide the evidence, the practitioner and their solicitor stay in control.
An example from practice
An insolvency practitioner found three payments to a well-known exchange in the records of a bankrupt online shop. The director said he had only “dabbled a bit” and that it had all been lost.
Paucitas followed the deposits from the exchange to a private wallet, and on from there. Part of it was still on an address linked to earlier transactions by the director. The practitioner used the report in his conversation with the director and his solicitor.
Paucitas takes privacy very seriously and never shares clients' personal details. This is a composite example: names, amounts and details have been changed. The situation is one we see in practice.
What can a reconstruction deliver?
That differs per case. Sometimes the reconstruction shows crypto still sitting in a wallet. Sometimes the trail leads to an exchange, where the practitioner can request information or cooperation through the proper channels. Sometimes the assets turn out to have gone to a third party shortly before the insolvency. And sometimes the money really was lost, for example through trading or fraud.
Paucitas does not promise any return for the estate. But after the investigation you know where the assets went and how strong each link is. That lets you decide with a clear view.
What if the bankrupt denies having access to wallets?
That happens. A wallet carries no name, so control cannot always be proven on the blockchain alone. Patterns, timing and links to known accounts do often give strong indications. Paucitas states honestly what the facts do and do not show, so nobody draws conclusions the investigation cannot carry.
For the solicitor: use in proceedings
The report sets out the method, the sources and every step, so a judge or another expert can test it. Under Part 35 of the Civil Procedure Rules, an expert's duty is to the court, and the report is written with that in mind. If an explanation is needed, Paucitas can act as an independent expert. Read more about an expert report for the court and a crypto expert in a court case. European information on insolvency is available on the European e-Justice Portal.
What does Paucitas need from the insolvency practitioner?
One lead is usually enough to start: a bank statement with a payment to an exchange, a wallet address, an email or a witness statement. In the free intake we decide together what makes sense and how far the investigation should go. The same approach works for a company insolvency and a personal bankruptcy, and is similar to what we do for crypto in divorce or crypto in an estate.
- Costs: every investigation is tailored. You receive a bespoke quote beforehand that we go through together, with no surprises.
- Turnaround: from the same day to around two weeks, depending on the number of wallets and transactions.
- Availability: you can ring at any time, we answer the form within 1 to 3 hours, and email within 24 hours, usually the same day.
Do you suspect crypto has been kept outside the estate? Get in touch for a no-obligation introduction, or ring +31 20 244 5774. Also read how we trace crypto and prove the origin of assets.
Sources: Insolvency Service; Civil Procedure Rules, Part 35.
Do you have questions about this blog?
Feel free to get in touch with Paucitas. Paucitas can be reached by phone 24/7, including evenings and weekends. Through the contact form we usually reply within 1 to 3 hours, and we answer e-mail within 24 hours.
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Frequently asked questions about crypto in bankruptcy
Can undisclosed crypto still be found after a bankruptcy?
Paucitas can often find it, because transactions on the blockchain stay on public record. With one lead from the file, Paucitas can follow the route. Whether assets really remain becomes clear from the investigation.
Does Paucitas give legal opinions on the estate?
Paucitas does not give legal opinions, but sets out the facts in a report anyone can follow. The assessment and the next steps stay with the insolvency practitioner and their solicitor.
What if only one payment to an exchange is known?
Paucitas finds that this is often enough to start. In a free intake, Paucitas looks with you at what is possible with that lead.
Can the report be used in proceedings?
Paucitas: yes. The report sets out every step and the method, so a judge or another expert can test it. Where needed, Paucitas can explain it as an independent expert.
What does an investigation cost for an insolvency practitioner?
Paucitas tailors every investigation. You receive a bespoke quote beforehand that we go through together, with no surprises. The intake is free and without obligation.
From Amsterdam, for the whole of the UK
Everything can be done fully online. Prefer to meet in person? You are very welcome at our office in Amsterdam, by appointment.
Paucitas is an independent expert firm based in the Netherlands that, for clients across the UK, investigates investment fraud and crypto fraud, establishes the origin and legitimacy of crypto assets and prepares expert reports for legal proceedings and compliance.
Your own situation
If you are reading this, you probably have a question about your own situation. That is exactly what Paucitas does.
The first step is contact by phone. You can book that call by phone or through the contact form, so you do not have to wait. In the call we look together at what can factually be established in your case and what Paucitas can examine for you.