External Podcasts

Asset recovery in insolvency with the INSOL Talks podcast

Author
Lo Furneaux
Digital Content & Operations Coordinator

Our co-founder and CEO Aidan Larkin recently sat down with Ishana Tripathi from O.P. Jindal Global University (JGU) for the latest episode of the Insol Talks podcast from INSOL International.

INSOL Talks provides postgraduate students and early career academics with an interest in insolvency law research the opportunity to engage with leading professionals from the insolvency industry.

In this episode, Aidan gives Ishana an overview of asset recovery, asset tracing and seized asset management. He discusses his entry into the world of asset recovery, the role of regulatory frameworks in asset seizure and how asset recovery can be used in cross-border insolvency cases. He also talks about the impact that international co-operation and treaties such as the recent UNIDROIT interactions have had on digital or civil asset tracing and recovery.

‍


Listen to the full episode:

Episode Notes

The following text was adapted from the original show notes of the episode.

INSOL Talks presents an opportunity to hear leading professionals from across the industry in discussion with members of the INSOL Early Research Academics Committee (ERA). INSOL ERA brings together postgraduate students and early research academics with an interest in academic research in the field of insolvency law.

In this new episode, Ishana Tripathi, O.P. Jindal Global University (JGU), interviews Aidan Larkin, Asset Reality, UK.

Aidan gives an overview of asset recovery, asset tracing and seized asset management. He discusses how he came into the world of asset recovery and how asset recovery can be used in cross-border insolvency cases. He also talks about the impact international co-operation and treaties such as the recent UNIDROIT interactions have had on digital or civil asset tracing and recovery.

Make sure you listen to Aidan's podcast "Seize & Desist"

‍Mentioned in the podcast:

‍CFAAR‍

‍UK Government fact sheets‍

‍Asset Reality Website

‍‍Interviewer: Ishana Tripathi, OP Jindal Global University, India

Introduction and credits voiced by Lisa McNeil, INSOL International

Edited and produced by Harriet Norman, INSOL International

‍

Transcription

Lisa: Insol International, in conjunction with the Early Research Academics Committee, presents Insol Talks.

Ishana: Hello, and welcome to another episode of Insol Talks. I'm Ishaan Attabadi of the Insol Early Research Academics Group, and our guest today is Aidan Larkin. I'm particularly excited about this episode with Aidan because he brings wealth of insight and also brings A large amount of knowledge when it comes to the topic that we're going to discuss today, which is also a very topical issue in the global space when it comes to asset recovery, asset tracing, and bankruptcy as space in general.

Ishana: Aiden is the CEO and co founder of Asset Reality. With Asset Reality, Aiden and his team assist in management of seized assets, thereby enabling efficient recoveries and in a very timely fashion. I'm glad to have Aiden chat with us on the general topic of asset recoveries, seizing assets, and asset tracing as a subset of the broad spectrum issue of seizing assets and managing sub seized assets.

Ishana: So welcome Aiden and thank you very much for being here. 

Aidan: Thank you very much for the invitation. Delighted to be here. 

Ishana: Just for the perspective of setting the tone for some of our technical questions, as we go along the way of this podcast, let's just start with the very basic one. What is seizing assets?

Ishana: What is asset recovery? And in that subset, what is asset tracing? What are the types of assets that can be involved in such seizing of assets and asset tracing? 

Aidan: It's, it's a question that I have been probably dealing with for the last 16, 17 years, effectively. It's the, the entire term asset recovery is often quite ill defined.

Aidan: So trying to figure out how you are, what the interplay is between the different categories from things like, you know, you can't necessarily recover an asset unless you find it. You can't find it unless you trace it, and to do that involves investigations. So unless something just drops into your lap, there's always a process of, you know, what am I trying to track down?

Aidan: How do I track it down? How do I legally take control of that asset? And then from then, how does that asset become an asset that I'm actually going to, you know, seize as part of the seizure process? There's an entire life cycle that we'll jump into, but at a high level, it's a case of understanding the, the interplay between.

Aidan: Finding the asset. Otherwise, if you never find it, and if you never trace it, and if you never get your hands on it, and you never legally secure it, you're not going to have the recovery situation. And I think a lot of, a lot of that lack of clarity around our sector and your, your members and your listeners will know a lot about this.

Aidan: When we hear the word asset recovery, it's quite well understood in the private sector, you know, the, the big four audit firms, the boutique insolvency firms, the investigation heavy firms. When you say to them, I'm an asset recovery director, or I'm an IP and an asset recovery team, everyone usually knows what they're talking about.

Aidan: But if you zoom out at a global stage, I mean, I think asset recovery.com and sorry to spam that website, but I think that website, if someone checks it, is like a, a data recovery center that images hard drives and electronic items. Asset recovery in some other countries is the specific action around recovering corruption proceeds that have been stolen from one country.

Aidan: It's actually enshrined in a United Nations convention about how asset recovery is governed. That's very specifically relating to Corruption proceeds being that have been looted from a country, for example, and then you've got good old fashioned asset recovery. Whereas you have no, if I'm recovering a Ferrari on finance.

Aidan: The finance and legal charge holder wants their money back. So actually them carrying out an instruction to get their asset back and get paid and get their finance settled. Strictly, that's an asset recovery activity as well. So you've got this ill defined sector. But when I'm talking about asset recovery and my entire career to date, I've worked as a criminal investigator and now His Majesty's Revenue and Customs as a criminal tax inspector and a civil recovery team.

Aidan: We were going after the bad guys, issuing large tax debts, and then that would lead to the seizure of an asset or the appointment of an administrator or a liquidator or an insolvency practitioner. And then I sort of jumped the fence to working in the insolvency sector and then in the asset management sector.

Aidan: So actually providing assistance to the official receivers and providing assistance to the insolvency practitioners. So I've sort of sat in each of the three, and now the sort of fourth seat is sort of actually working with countries to develop better legislation around asset recovery. And I'm also a sort of part time lecturer on the subject for a couple of universities and agencies globally.

Aidan: So I very much sort of live and breathe this topic and the identification and tracing of assets is what makes asset recovery possible. And I know we're going to dive into sort of digital assets and complex assets, but fundamentally the two things coexist. And if you don't have investigations, you don't have recovery and asset recovery cases and the majority of those, uh, situations.

Ishana: Thanks for setting the tone for this conversation, uh, Aiden. And that just leads me to sort of the next question. What are the different types of activities that would require the tracing of assets? What would be the process of seizure and what would be your involvement then as a seized asset manager?

Ishana: Just perhaps with a particular case example, Give us your experience of dealing with a seized asset. What were the steps involved and specifically, where does your role end in such a case instance? 

Aidan: At Asset Reality, we're very much trying to highlight the role and the importance of seized asset management.

Aidan: Again, as I, as I mentioned, my, my previous life, there was definitely a culture in the public and private sector of, you know, investigating the asset, find the boat, find the Bitcoin, find the property, get the court order, appoint somebody to sort that out. It was never really, Given, I think the importance that it deserves, it was usually an afterthought and you, you don't even, you, you really don't have an asset management sector to speak of.

Aidan: I mean, when we think the word asset management, I mean, literally, if you say that in the United States, you're talking about fidelity, you're talking about BlackRock, you're talking about global asset managers that manage trillions of dollars, things like pensions and sort of like sovereign wealth and things like that.

Aidan: Right. Right. Right. But in my world, we're talking about, you know, managing assets that, uh, a liquidator, a bankruptcy trustee. an administrator or a government agency. So when I talk about asset management and seized asset management specifically, I'm thinking about the really important role of, um, in an enforcement setting.

Aidan: Again, creditors will not get their money back. IPs will not get paid if we don't recover the value. So, to recover the value in an insolvency situation, you have to have a seized asset functionality. Now, at Asset Reality, we do that because we are actually the person appointed, usually to manage the asset.

Aidan: or provide the software and the solutions for insolvency practitioners to be specific in that field to manage the asset themselves. So let's say for example that someone seizes bitcoin tomorrow or a Bentley, that actual activity in that office of the insolvency practitioner. I mean, once they have their order, they're appointed over all of these assets.

Aidan: They then have to carry out a tracing situation where they're figuring out what have they got. They'll ask the insolvency No, the debtor or they'll have information from the official receiver, or maybe the person that instigated the insolvency proceedings, like a government agency, they'll usually have a good eye idea of what the assets are before they even take on the case, because there obviously has to be a minimum value just to get appointed.

Aidan: So let's say someone's getting appointed over a crypto portfolio of assets and a bunch of cars, for example. The role of the asset manager is really to make sure in things like complicated assets, pre seizure, even before the asset has been seized, having the experience of someone that, and I hate the word expert, But you can use this sort of terminology of expertise and experience, like knowledge through doing this is not the type of sector that you want to watch a YouTube video and say, I know how to do this.

Aidan: It's about people who have done it many, many, many times over. And if we're going to find over a crypto portfolio. It's about making sure do you have the technical solutions available to safely recover those assets to make sure they are recovered in a way that they can be managed effectively throughout the life cycle of the insolvency case and not crypto case in those car cases.

Aidan: You have to be able to report to creditors report internally. You may have statutory compliance reporting. You have to be able to say. This is what we recovered. This is what the value is. Here's a reconciliation that ensures we got all the things we said we were going to get and that everything has been caught within the actual estate.

Aidan: I've been involved in cases where assets that they should have recovered, but they didn't. And then creditors will later point out and obviously be quick to remind you. And you could even get kicked out or you could get personally sued. If you've seized the proceeds of a crypto exchange and you've missed some of the assets or you've recovered a USB stick or a little hardware device that controlled access to crypto, And you didn't have the experience to sweep that wallet properly, and you've left something behind that has then been stolen or moved or fraudulently put beyond your reach.

Aidan: Again, we've seen examples where insolvency practitioners sort of find themselves liable for not recovering the asset effectively. So I would say a lot of our role actually is involved at the early stage in this sort of pre seizure part, and it usually starts off with a help. We've been appointed on a case.

Aidan: How do we get all of these assets and then it moves into the, once they're safely sort of tucked in, how can we then manage these effectively? Because when people get appointed, they have no idea, is this going to be a quick appointment or is this going to be a three or four year appointment and very contentious?

Aidan: Is it going to be splashed all over the press? Is it going to be a quick out for everybody? So it's about having a flexible solution that you know, I can run through this. What happens when you identify new assets halfway through the case? How do you then add those assets into your portfolio and also making use of things like the blockchain technology?

Aidan: One of the best things about the blockchain is the fact that if I seize 20 super cars and 20 crypto assets. I can just read the blockchain and you as a an insolvency practitioner don't have to take my word for it. If I say there are 20 crypto assets worth X in these 20 accounts that Asset Reality has created for you and give you access to manage them, you can independently go onto the blockchain and verify them.

Aidan: Whereas if I'm holding 20 cars and I tell you these supercars are in great condition in a warehouse that we control, unless you send someone to look, Can you even trust the pictures I'm sending you? Can you can't read a blockchain to verify they are exactly where they're supposed to be? And also then using the technology to programmatically track the value.

Aidan: It's like logging into your bank account and seeing the exact balance. Digital assets makes a lot of that possible, whereas physical assets don't. So quite often, the role of the asset manager is just to be that inventory management person. And you can't really do it with a clipboard or spreadsheets anymore, especially with things like digital assets.

Aidan: So that's sort of where asset reality was born effectively, was this explosion of digital asset seizures. In addition to existing assets, there wasn't a solution available anywhere bar spreadsheets and old legacy systems that could allow you to see. All your crypto assets, not just the ones that big exchanges cover.

Aidan: All your crypto assets in one place, plus your physical assets, be able to run reports and share information with third parties, like creditors, like government agencies. So I think that we'll hopefully be talking about this in four or five years time, and there'll be lots of seized asset managers, and we'll have lots of healthy competition.

Aidan: But because our team was involved in some of the first crypto seizures in the world, And my co founder, Nick Furneaux, literally wrote the book, Investigating Crypto. We were one of the first to be involved in some of the high profile cases, and we've had the fortune then in our team of bringing in the people that did the first U.

Aidan: S. government, Nick, the Silk Road seizures. Those people have now joined us at Reality. people from the private sector. So we have a great team of practitioners now who've done some of the first crypto seizures all over the world and we've been able to bring all of that experience in house so that when we build an app or a platform that makes it easier for you as an insolvency practitioner or as a lawyer, you don't have to worry about all the technical details.

Aidan: Like if you ask me to value a diamond, you don't need to train and become a gemologist to seize a diamond and ask someone to value it for you. You just kind of need to know about the basic risks and bring in someone that has the experience. So we're hopefully doing that in the, in the asset management field, um, to make it a bit easier for practitioners to seize and manage and just get on with their own jobs and let somebody else worry about the seized asset.

Ishana: Thanks so much for that. One of the things that I want to sort of latch on, which you just said, is the experience that is required to become a seized asset manager. What should be a portfolio that a seized asset manager should carry? You've had the experience of being a public official yourself. And from the Indian context, when you're looking at a lot of cases of say, Are assets involved in money laundering issues or say serious fraud?

Ishana: Uh, the entire investigation model is public official oriented. We'll not see the private bodies who are hired to do such investigation or, uh, see such management. So where do we sort of draw the line and what should be the experience portfolio and where is the scope for, say, private organizations then to assist?

Ishana: in such, um, uh, seizures of assets and investigation? Well, it's 

Aidan: a great question. The public and private sector collaboration debate has raged on for decades. And there was often, I remember when I was in law enforcement, you know, people would have thought it was absurd to have private sector agencies, you know, running investigations for you.

Aidan: But then you look at some of the biggest cases in the world, and it simply wouldn't be possible if there wasn't public and private sector collaboration. If you have a contentious insolvency case, you have to appoint insolvency practitioners who know what they're doing, because government agencies, and I say this respectfully as someone who worked, as you say, in the public sector, We didn't have the exposure at the levels and volumes that they did.

Aidan: So, if you have, um, the official receiver in the United Kingdom, for example, where I'm currently sitting, I mean, you have a very, very good team of people, but they don't have the resources. They'll be the first to tell you. There's not a public sector entity in the UK right now that is awash with budget and loads of resources.

Aidan: And I know this is replicated. I'm a, I'm a United Nations contractor on the side, and I regularly get involved in development projects. And there's not many governments in the world that has what they want. Successive governments make cuts. And we've seen in the UK, the continual drive down in resources.

Aidan: They'll argue that the numbers are going up, but in different departments, I mean, the sector we talk about fraud, Fraud effects is the biggest crime type in the UK. To give this an example of why public and private sector collaboration is needed. Fraud effects is 40 percent of all reported crime in the UK.

Aidan: It's 40%. Less than 1 percent of policing is dedicated to that problem. There just simply isn't enough people. And there isn't enough money made available to government agencies. I would love to see government agencies, Sending off their staff for four and six and eight week training courses, sending them on to comments to get the skills that they need.

Aidan: But the fact is, private sector often just pays a lot more. So what tends to happen is, public sector entities get a couple of, you know, people coming through who really show an interest in these topics, getting into the nitty gritty and the real details and the, uh, the complexities around some of these cases and into the weeds of things.

Aidan: And what happens is. The private sector company comes along, offers them a big pay rise to go and do this with cutting edge tools and technology. And they leave. And there really sometimes isn't the backfill that needs to take place. So you've got official receivers all around the world who want to be able to get stuck into these cases, but simply don't have the capacity to move as aggressively as a private sector insolvency practitioner would.

Aidan: The official receiver will not be able to throw people on a plane to go to that offshore jurisdiction to carry out inquiries on the ground, to meet with people, to, you know, recover documents, to just do things, or they may not have the internal experience of, you know, piercing the corporate veil and, you know, ripping apart a trust structure or, you know, carrying out a complex blockchain analytic exercise.

Aidan: And if you look at these big global cases, the big success stories are public and private sector collaboration. That's just the reality. United Nations has been talking about this as a mandate since 2001. It's just not possible. And if we talk about digital investigations, let's look at the global leads and what they do.

Aidan: IRS Criminal Investigation, Secret Service, FBI have posted some of the biggest recoveries in history. And digital assets and every one of the heads of those agencies, just follow them on LinkedIn. We'll talk about it every single week. This wouldn't have been possible without our private sector partners.

Aidan: It's not that you're giving it away, but I think we need to get over the old stigma about public private sector collaboration. Now we shouldn't appoint private sector agents that are just going to overcharge and under deliver. That shouldn't happen in any sector. And I think a couple of bad cases in the past where insolvency practitioners, law firms have been appointed.

Aidan: I think a bit more self awareness on their part to not get appointed on cases that you're not experienced in because I've seen cases firsthand where Auditors, I'll not name firms for obvious reasons and very well known household name insolvency sort of restructuring companies have been appointed on cases where they have no expertise.

Aidan: And what happens then is that there could be a mismanagement of assets in the public domain where assets are lost. There's a huge contentious issue. And what happens then is the next public sector agency that comes along with the case just is bitten and they're afraid to appoint private sector partners.

Aidan: And then they just turtle up. And they keep the case themselves and they don't have the resources and the case just doesn't ever get the level of expertise that it would have needed otherwise. So I think that the narrative needs to be updated because you cannot do this job without some level of public and private sector collaboration.

Aidan: And people get blinkered a little bit in blockchain analytics as an example. And saying, I can't think of a single activity that takes place in a government agency that doesn't have a private sector input. You don't build your own laptops. You don't build your own digital forensics tools. You don't build your own blockchain analytic tools.

Aidan: You don't build your own video conferencing tools. The car that you use to go and speak to someone you didn't build it as a government agency. There's always Private sector and put in some capacity. So I think it is a bit of an outdated mindset that government still think that they can do everything in house.

Aidan: And unless that government is one of the biggest agencies in the world with one of the biggest operating budgets. Then I've seen examples of keeping things in house, but I would argue in a fraud case, in a crypto case, that level of internalization just doesn't need to, doesn't need to happen. 

Ishana: On that sort of specific note, what is the role and the scope of law and regulation in enabling efficient asset based measures?

Ishana: Should their role then just be legislative and regulatory, be left to say private bodies with assistance from the public sector just by virtue of legislation. And in general, how do you think you'd be able to sort of address specific instances, the issue of a lot of domestic enforcement concerns when it comes to assets in general?

Aidan: So if we think about and correct me if I'm wrong here, but thinking about sort of, um, an average insolvency case that normally makes its way through the public sector. Now, if we're saying, should all investigations remain with the public sector entity, or should they be passed out to private sector companies?

Aidan: I think it's always a case of, it has to be, be based on the facts of the case. If you have a insolvency or liquidation case, for example, And it's a an official receiver or the global equivalent official assignee or whatever it might be in the jurisdictions Appreciate you guys are a large organization globally There's absolutely no reason why if the agency has all of the experience it needs to keep those cases in house So we're not i'm not advocating everything has to be given away to the private sector But i'm also a realist and I can be objective And I think that if the best result for the outcome of that case You Is to partner or assign or appoint a private practitioner that I would ask, but what's the reasons why you wouldn't do that?

Aidan: And if the reason is Something just, you know, I don't like working with the private sector. Well, that's not a valid enough reason. But if it's a case of, we don't feel that any of the private sector entities in our region has the experience necessary, well then look outside your region. Your legislation allows you to appoint anybody suitably experienced.

Aidan: We've worked on the ground in different cases around the world. For the avoidance of doubt, we're not an insolvency practitioner, just to be absolutely clear. We're not a licensed or regulated entity to act in insolvency cases. We provide technology solutions and on the ground operational experience, but we work for the IPs.

Aidan: We work for the trustees and the government agencies. But if you have the expertise, you're And the experience and the tools necessary, and you've all the blockchain analytic tools, all the digital forensic tools, and you've all that experience, great. No, lucky, lucky you. You're a very, very unique agency because the agencies I've worked with, when I see people like the FBI and the SEC and FinCEN working with private sector partners, using private sector tracing tools.

Aidan: Well, that tells me if the biggest, most well funded agencies in the world adopt a methodology of public and private sector partnership, you'd need to have a really good reason in your agency why you're not doing that. Or you do risk the same criticism from accreditors. And let's not forget that the legislation, I don't believe anyway, yourself or your listeners would know better than me.

Aidan: I don't think the legislation. gives any extra bandwidth to an official assignee or receiver as in if I'm a creditor, if you've made the decision to keep this in house and haven't appointed a private trustee, you can't use that as a reason if you don't get my assets back. I mean, it's about what is the, what is the best result for that particular case?

Aidan: What is most likely to lead to a return to creditors carrying out that statutory duty? So I think that. Certainly from my experience in the UK, the legislation is very, very clear. You know, upon the making of a bankruptcy order, you know, the assets vest. The trustee, if it's an official receiver rooted case that automatically fits, sits with the official receiver, the official receiver has the ability to appoint private sector insolvency practitioners.

Aidan: If they feel that they do not have the expertise in house or separately, creditors can take an action, propose their own insolvency practitioner, in which case that case will not be a case that's worked on by the official receiver. And that's almost a direct fast track appointing your own insolvency practitioner.

Aidan: Because it's led by what the majority creditor wants, but I'm obviously I'm confident that that's not necessarily the model in every country around the world. So I do think having the inherent flexibility that the majority creditors, you know, have to be allowed to appoint the experts that they want. Or similarly, that the government agency doesn't have a dogmatic piece of legislation that says you have to do it this way.

Aidan: Because again, unless the legislation was prepared in 2024, I would hazard a guess it is not going to be fit for purpose in dealing with new and emerging asset classes like digital assets, where jurisdiction is an enormous issue. And a misunderstood issue where things like how can you establish the venue or who should be dealing with a case when you've got a borderless asset class like crypto assets.

Aidan: There's so many challenges in the crypto sector that have still not been tested. That's where you need that inherent flexibility to be able to look at different models and appoint different people for different cases. As this. the sector finds its feet. I mean, we're less than 10 years in to any sort of real litigation in crypto cases.

Aidan: There's probably going to be another 10 or 20 years to set those precedents and those sort of stated cases that will become the future benchmark that we'll all be referring back to. So it's such early days that I think having any sort of dogmatic approach to dealing with your assets will only lead to lead the problems.

Ishana: In the context of present day, we're looking at a lot of investment on, say, insolvency administrators being truly international, right, truly cross border. And there is a lot of sort of focus on your cross border insolvency norms and enterprise group norms. In fact, the UK is now pioneering, say, adopting the new model law on enterprise group insolvency because that seems to be.

Ishana: Uh, the way forward when it comes to value maximized resolution of corporates. In that same space, what are the efficiencies and inefficiencies of seizing assets that are in multiple jurisdictions for a part of the same insolvency proceeding and where the complexities come about or where would you think Intervention is needed or support is needed for legislation and regulation.

Aidan: So I think that there, there is no such thing as a crypto case. I hate the term crypto case because it's a It should be a case involving crypto, but just for conciseness, a case involving crypto. I have never come across one of those cases that isn't cross border. There is no such thing as a domestic digital asset case.

Aidan: It just, it's a, as an oxymoron, even conceptually. If I live in the UK, and it's a UK insolvency case, and it's all UK creditors, and it involves digital assets, there's still going to be an element cross border by the fact that the asset category I've created doesn't exist. And I think we just haven't got there yet, conceptually.

Aidan: People will talk about, well, it happens all the time. You've got international disputes and, you know, where's the data center? Well, there is no data center in blockchain. Even in, you know, internet and technology related cases. There's still a grounding. I mean, if you've got a scam case, there's still, well, the data is in a Google data center in a tank somewhere, you know, um, in the ocean.

Aidan: Where's that data center? There's always something you can point to. And I think that many courts haven't experienced yet a crypto case. And I would sort of shamelessly promote a sort of not for profit organization, the CIFAR, Crypto Fraud and Asset Recovery Group, that we were one of the very early founding members of, because there were so many.

Aidan: There were so many cases involving digital assets that were hitting UK courts that having an initiative where people could go to and say, like, what did you do? And people who've actually worked in a lot of these cases, this sort of CIFAR network is a great resource, a lot of free events, a lot of sort of free webinars and things for people just to see and hear of stuff that is happening because so many decisions are based on what happened in a previous or similar case.

Aidan: That sort of extraterritoriality, what you have mentioned about enterprise groups, those things I imagine have probably been debated for years before we've seen the implementation. And I think where we still exist with crypto, it's still so new and so early and things keep changing so often. That it's almost like constant shifting sounds.

Aidan: Nothing is settled to be able to say, ah, we're going to talk about this thing and then implement something. And it takes four or five years to implement the thing we agreed one year ago. Even that conceptually isn't really possible in crypto because what we thought we knew four or five years ago is being replaced every two or three years.

Aidan: So I still think we're in too much of an early nascent stage to even make those firm sort of wider routine decisions. I'll give you an example, the financial action task force, you know, FATF, the global body that sort of sets what the world's response to money laundering is, they're the reason why insolvency practitioners have take on processes with clients and OFAC sanctions and screenings.

Aidan: All of these things are because the global watchdog set standards and even FATF hasn't really put out a lot on things like defy. Because anytime a large government body or intergovernmental agency tries to do things with so many moving parts, things naturally take a couple of years from the inception of a document and a discussion point to the publication of guidance.

Aidan: It always takes a few years. And things like DeFi, the reason they're having to park it is because it's almost like DeFi doesn't know what it is yet. The sector hasn't agreed. Internally, the sector hasn't agreed. So I think it'll be a very long time from a crypto perspective to have that sort of clarity, which means that we have to impose our own common sense.

Aidan: And if we know it is an entirely borderless entity, if you're an IP taking on a case involving crypto, You need to treat it as a case that has multiple offshore bank accounts, properties, and creditors. And immediately your mindset should be, this is a geographically dispersed, large international case.

Aidan: The effort that you will expend on these cases, what is the asset class and what is the level of creditors claims for the perceived and potential complexity in this case? Because I've seen so many tragic cases where creditors or victims of fraud who couldn't get sort of police support because the case wasn't big enough have appointed insolvency practitioners or law firms to pursue claims.

Aidan: thinking that I've lost some money. It's moved to this exchange. This exchange is based in country A. If I just serve notice, I'll get my money back. And that's disingenuous of those insolvency practitioners and lawyers that get appointed. If you do not say to a victim or a creditor, potential creditor, you do know that this is just the beginning of pulling the string.

Aidan: We don't know where the assets are. We know the first place they move to. And there's a good chance that when we go to country A and ask country A where did the assets go, we might be presented with one really positive answer that your assets are still here. Send me your corridor to freeze them and we can get them back to you.

Aidan: That's a million to one. I've been involved in 7, 000 cases involving crypto assets over the last three or four years. I can count on two hands how many times that's happened. The vast majority of cases is that it's been moved, and moved again, and moved again, broke up into a thousand pieces, and moved some more.

Aidan: And if that was a Bernie Madoff style Ponzi scheme, Every single one of those movements to a third party is another application. It's more legal fees. So these cases where someone has lost a hundred thousand pounds, I would honestly confidently say to anybody that has been involved in a crypto scam, for example, unless you have a budget of probably 250, 000.

Aidan: So as your loss is less than 250, 000, that for me is the average, just getting to the beginning of the bottom of the case. We've seen some wonderful cases where 50, 000 or 75, 000, 100, 000 or less has led to a resolution situation. The vast majority require litigation funding. So again, I think, back to your question, I think that's what is, that's one of the reasons because we haven't got international standards in these cases because it's just too early.

Aidan: means that we need to consider them as complex international cases. So through that lens, the asset tracing is going to be complex, resource intensive, and resolutions are going to involve multiple stakeholders in multiple jurisdictions and also complex. And I think the sector could do a better job at managing people's expectations.

Ishana: So just picking up on that Aidan, what would be a few points that international standards should consider when it comes to creating global guides? And maybe you put it in the same spirit, weigh in on the guidelines that has put out on, say, digital assets. 

Aidan: One of the, one of the things that we're quite lucky to be involved in me in a personal capacity and asset reality as a company.

Aidan: We're involved in a number of cross governmental working groups and sort of public and private sector collaboration and one such organization that deserves a special mention is the Digital Asset Task Force. So the Digital Asset Task Force sits as part of the global coalition and the fight against financial crime.

Aidan: And it's alongside things like within the world economic forum, it has partnerships with the Interpols, the fat Fs of the world. So there it's very comforting and people should know that this is being discussed at the highest levels of government. People are practically trying to align on guidance and working papers and ways forward so that that guidance can then be shared.

Aidan: And again, it goes back to, as I mentioned, it's such a fast moving industry. It's kind of like trying to plant a flag in the ocean, and there's so many external factors that affect the position of that flag. You've got things like, you know, Russian invasion of Ukraine changes things. The current Israel and sort of Palestine conflict changes things.

Aidan: It changes governmental priorities in terms of how the blockchain is being used in terrorist financing cases, or how the blockchain technology is being used and digital assets are being used to evade sanctions. And what that means is then trying to get consistent guidance in the treatment of these assets, things like mixers that are involved to hide the source of crypto assets.

Aidan: It's almost like the complex just got even more complex and then put on a trampoline and set on fire and then you're still trying to figure it out and sort it out. So it is just a bit of a hot mess to be quite honest with you. And I think that there has been, as you mentioned, sort of unidroid and, um, a lot of this comes off the back of the FADF guidance, UNODC has published guidance, United Nations Convention Against Corruption, and UNCAC.

Aidan: Everyone is keeping publish, publishing guidance that all kind of has the same message, but there has been criticism about a lack of sort of specificity, and high People can talk about what you should do and talk about what you should aim to do with this sort of overall guidance, but quite often the guidance is lacking in a, yes, but how do I implement that?

Aidan: How does that affect me as an insolvency practitioner or me as a police officer or me as a prosecutor or judge, for example? So I think with groups like CFAR, groups like DATF, You've got public and private sector organizations feeding in to government agencies. 

Aidan: I had the unique sort of pleasure of being involved in the UK sort of parliamentary committee hearings. So governments are open. They are asking people to come forward and say, if you have experience in this field, talk to us about the challenges you're seeing. What does future legislation need to look like? Uh, the UK, I would recommend your listeners. The UK has put out some very good guidance on treatment of crypto assets and they put out sort of crypto asset fact sheets.

Aidan: If you just search UK home office, crypto fact sheets, And they've put in things like technical considerations, what you should think about if legislating and preparing guidance and what you should think about practically. But I do think that taking it back to basics as well is something that people are missing out on.

Aidan: I would expect that things like the regulatory entities that govern insolvency in each jurisdiction. So if I think back, I think in the UK it's the ICAEW or something along those lines that prepare the checklists. I would really like to see the checklists and insolvency cases being updated around the world.

Aidan: I remember for my own days of working in an insolvency setting, going through the checklist when I'm first appointed and I'm working for the insolvency practitioner. I remember as an assistant manager ticking through the checklist going, what are the pensions? Have we served notice on the pension providers?

Aidan: Now we check what assets they have. I mean, something as simple as, is there digital assets in this case? How are we thinking about serving notices mean if the guidance in my country talks about how you serve notice has to be in a classified ad section, or it has to be in a local newspaper? Well, how is that going to relate if I'm dealing with an overseas crypto exchange?

Aidan: Do I serve it in the local newspaper? But what if the open source information tells me that even though they have a footprint there because of their website, all the other guidance actually makes me think they're based in the UAE, but I know the directors are actually from the UK and it just becomes this, how do I apply that to like 1970s or 1980s and solvency legislation?

Aidan: So I think the guidance Rather than overcomplicate it, we're seeing a growing trend to common sense, thankfully. So an example of this could be, if you're trying to achieve serving notice, if the guidance talks about newspapers, classified ads, because the spirit of that is that the person is likely to see it, or you can point to, well, we served it in your last known address.

Aidan: What else can we do? Well, if you know they live on a blockchain and they run their business on a blockchain and you can show they can access that wallet frequently, well couldn't I drop a message into that blockchain linked wallet? If I can show a judge they access this wallet a week ago, well, blockchain technology allows me to put a message into that wallet.

Aidan: Why don't I put a message in? Hey, I need you to look at this notice that I've just served as an insolvency practitioner. So we've successfully done that in insolvency cases. It's called serving papers by an NFT. So again, there wasn't legislation about serving notice about NFTs, but what we're expecting to see is, Organizations like Insol, organizations like sort of trade body saying to people, here's a couple of cases internationally where people have served notice via NFT under 1980s insolvency legislation.

Aidan: You can do that. You don't need to change your legislation, but you should update your guidance. And we've seen other cases where countries wanting to regulate crypto or not regulate crypto are getting all caught up in what legislation do they need. But if enforcement legislation says I can seize property used in criminal offenses and property is defined as 1970s legislation as tangible and intangible because I can see I can seize stock and shares and then we later use that legislation to seize websites in the 90s and 2000s.

Aidan: Well, we can use the same legislation to seize crypto assets because it's just an intangible asset. So I think as well, rather than trying to boil the ocean, good guidance should look at what is the purpose of the legislation trying to achieve in the first place and apply some practical steps. But if I was preparing guidance tomorrow, I would always try and root it in practical case studies or existing cases where we've got evidence of someone having done this before.

Aidan: Okay. There's been examples of really prescriptive legislation and guidance that has been ripped up and outdated within a year. Again, I'll not name the country, but an EU country set about what it thought was world leading in prescriptive legislation about virtual assets. Lots of press releases, lots of announcement, lots of big conferences talked about the amazing job that they had done.

Aidan: And within a year, the technology had changed and they had to re legislate again. And then that takes a couple of years. So, again, hitting a moving target, planting a flag in the ocean is the analogy I always keep coming back to. It's very early days in this sector. Some countries are still trying to ban crypto.

Aidan: Some haven't made up their mind. India famously was going to ban crypto and change their decision. Indonesia wasn't going to ban it. Them was going to ban it. Now it's a religious decision as to whether you hold it or not. Saudi Arabia, you can't use it as a payment system, but you can hold it very different than what the positions were a couple of years ago.

Aidan: So again, I just think we're too early to be prescriptive, but common sense guidance that points to positive outcomes in other cases is exactly where we should be aiming. 

Ishana: Thanks for the information and also a lot of food for thought in terms of what the next steps could look like later. But I wanted to sort of end our conversation by giving some more information about how to become a seized asset manager and how to effectively embark on a career as a seized asset manager, if you wish, because a lot of our listeners, our young listeners, And it is a very sort of unexplored area of potential career.

Ishana: Or do they sort of wait for 20 years, become an IP and then somehow find you to get a job? 

Aidan: Absolutely not. This, this sector is much more fun. Yeah, they go go to asset rally.com and apply for the open jobs. No, I, I'm teasing, actually, I'm not. If they have the relevant skillset, please. Yeah, I think that, I think that this sector has always existed since the dawn of time.

Aidan: There's always been the person that recovers the asset. The old like biblical tax inspector would repossess someone's home and a person would manage the property, a person would manage the crops, a person would manage the assets. So I think the sector is as old as time, but it hasn't been defined. And I think we're trying to define it.

Aidan: By sort of calling it seized asset management. It is its own asset class. I mean, uh, I've lived and breathed in it for a long time now, but in the past it's been, I mean, my previous role was working in an auction company and it sounds, people would often be like, you worked in an auction company to seize assets.

Aidan: But when you think about it, if there's no clearly defined seized assets sector, and I'm a government agency seizing assets. Well, actually an auction house is a perfect partner for a government agency because they have recovery capabilities, they have inventory management, they have valuation experts, they have an avenue to sell and realize the asset.

Aidan: So back to the beginning of this call, we talked about tracing assets, recovering assets, managing them, selling them. So this is why you see most insolvency practitioners who has ever sold a boat, a plane, a car, a Bentley, whatever it might be, a Bitcoin. They appoint auction companies when the biggest insolvency cases in the world will end up with the assets in a Christie's or a Sotheby's or a Bonham's.

Aidan: I worked in the company Wilson's Auctions in the UK. I mean, these assets always make their way back to the seal. You have to realize the value, you know, you've got to put the recovery and asset recovery for the creditors to get paid and the insolvency practitioner to get paid. What we're trying to do at Asset Reality is create that software that doesn't exist in the middle right now because most of the companies I've named They might have their own internal bespoke solutions, but there's no sort of sales force or hub spot for the sector in general.

Aidan: And there are certainly no tools that can help seize crypto assets. That's the bit that's really difficult right now, how you actually seize. There's lots of established custodians crypto. There is lots of solutions for liquidating crypto through the exchanges. But the bit that is really being difficult for people is the actual seizure.

Aidan: Because the guidance is go get a crypto wallet and seize it yourself. And if you're the risk officer or the risk partner in an insolvency firm, you will not be happy with that. You will not be happy with someone in your office having millions of dollars of crypto on a USB stick. So for us, I think that the sector will continue to grow.

Aidan: I think that you will see more companies identifying themselves as a seized asset company. But I do think we should see, hopefully, I did my insolvency exams through BPP in the UK. I would love to see more courses around actually teaching people, you know, how to seize assets. Like, what is that? To see that sector have its own criteria.

Aidan: And it, it might seem absurd, but I mean, 10 years ago, there was no such thing as a blockchain investigator. There was no such thing as blockchain analytics 10 years ago. And now we have a multi billion dollar industry and as part of a trillion dollar sector. So I fully expect that in the same way, digital forensics wasn't a thing 30 years ago.

Aidan: And now it's an entire university degrees, masters, all of these things. So one of the things we're doing at us at reality is actually launching training courses. For people to come into this sector, whether you want to work directly for insolvency practitioners, whether you want to have a bespoke office in India as part of servicing insolvency practitioners, we're trying to bring the first of its kind in terms of academic qualifications sort of supported by universities to be a seized asset manager so they can sort of follow our LinkedIn page and sort of watch this space for for future announcements in that sector.

Aidan: But my takeaway point is The sector has always existed. People have always carried it. The functions, I just don't think it's been badged or branded that if you walked up to someone and said, I'm an insolvency practitioner, they know what you mean. I'm a lawyer. They know what you mean. If you say I'm a seized asset manager, most people would greet that with what's that?

Aidan: And I would hope to be talking to you again in four or five years time and people will say, Oh yeah, I know exactly what that is. That's my wish for the podcast. On 

Ishana: that very positive note, I want to thank our listeners for staying with us even. Also, thank you very much for spending this time with us. Uh, I also want to sort of direct our listeners to your own podcast, which is Seize and Desist.

Ishana: I want to enable more conversation as you have sort of asked us to do in this particular area. So thank you very much for joining this episode of Insult Arts and we will link the C Synthesis podcast in the show notes. So good afternoon and evening from me to all our listeners and till next time. Thank you very much.

Lisa: If you have enjoyed this podcast, make sure to subscribe on your favorite podcast provider so you don't miss an episode. Contact us on LinkedIn and Twitter at Insole International using the hashtag insole talks. The information provided is intended for a general audience and reflects the personal views of the participants.

Lisa: This podcast is distributed under a Creative Commons attribution, non-commercial, no derivatives, 4.0 international life. Thank you for listening.

‍

‍

Want to learn more?

GET STARTED
Update cookies preferences