“Russian fraud”: The Supreme Court allowed the Israeli police to request the seizure of crypto wallets

The decision was made as part of the investigation into the “Russian fraud” case, which is being conducted by the cyber unit of LAHAV 433, the cybercrime department of the Central District and the prosecutor’s office of the Central District.

According to investigators, victims in Israel and abroad – mostly Russian-speaking – were victims of investment fraud involving cryptocurrencies.

The investigation revealed that the stolen funds moved between various digital wallets and eventually ended up in one account containing over $10 million worth of USDT tokens. The Israeli police asked Tether, the issuer of the token, to freeze the wallet, and it complied with the request.

The magistrate’s court subsequently issued a freezing order, but the district court overturned it, finding that the police were not entitled to carry out law enforcement actions outside Israel.

The state appealed this decision to the Supreme Court, which pointed out that the deprivation of the ability to interact with foreign companies could harm the fight against money laundering, online fraud and terrorist financing, as well as turn the crypto space into a “digital haven” for criminals.

Judge Alex Stein supported the state’s position and qualified the incident as voluntary cooperation, and not a coercive act of authority. The decision states that the powers of the police are based on Article 3 of the Police Ordinance, which allows them to act in order to prevent and detect crimes.

Stein also emphasized that digital currency issuers are interested in maintaining an impeccable financial reputation, and therefore they have an incentive to cooperate with law enforcement agencies.

During the proceedings, the owner of the crypto wallet argued that the funds belonged to his legitimate business, and their freezing caused him significant damage.