Managing partner of the law firm ZP Legal Alexander Zheleznikov will try to return about 200,000 BTC stolen from the MtGox exchange. At the same time, he expects a reward of 50-75% of the refund amount.
Moscow law firm ZP Legal (Zheleznikov and partners») claims to have been able to identify Russian citizens who received bitcoins stolen as a result of the MtGox hack in 2014.
According to MtGox lenders, representatives of ZP Legal contacted them earlier this year and offered their help in recovering almost a quarter of the 850,000 bitcoins stolen in the 2014 exchange hack. (At the time of the theft, the coins were worth more than $480 million. To date, they are estimated at almost $9 billion).
ZP Legal estimates that between 170,000 and 200,000 of these coins, which are currently worth between $1.7 billion and $2 billion, can be recovered by prosecuting Russian citizens who misappropriated the stolen crypto assets.
In exchange for its assistance, ZP Legal will charge creditors between 50 and 75 percent of the amount reimbursed, as well as the usual hourly rate. As a result, if the entire amount is returned, the lawyers ‘ remuneration will amount to more than a billion dollars. ZP Legal States that payment will only be charged if they manage to recover the stolen bitcoins.
Alexander Zheleznikov said that some of the assets stolen from MtGox could have ended up on the BTC-e cryptocurrency exchange, which also subsequently ceased to exist.
In 2017, at the request of the United States, he was arrested
the alleged Manager of the BTC-e cryptocurrency exchange, Alexander Vinnik, is currently awaiting extradition to the US, Russia or France.
Zheleznikov believes that the criminal case against Vinnik, which is also being investigated by the Russian authorities, can be accelerated if MtGox creditors help law enforcement agencies establish a link between MtGox, BTC-e and its successor, the WEX cryptocurrency exchange, which has also ceased operations to date
, disappearing along with the remaining customer deposits.
“We plan to represent MtGox creditors and help them cooperate with Russian law enforcement agencies so that investigators can use the Vinnik case to establish a link between the stolen funds with MtGox and the BTC-e and WEX operations,” Zheleznikov said.
“If our assumptions about these connections are correct, the perpetrators will eventually come forward and offer to return some of the funds to reduce the punishment. If they don’t, then they will be sued for damages in the criminal case,” he added.
Zheleznikov said that his firm contacted lawyers representing MtGox creditors through the Russian Embassy in Tokyo, and then contacted the creditors themselves.
Andy Pug, founder and former coordinator of the largest group of creditors MtGox Legal (MGL), said that representatives of ZP Legal first contacted him on February 22, shortly after ZP Legal came into contact with Japanese lawyers working on the MtGox case.
“On February 15, 2019, ZP Legal lawyers met in Tokyo with MtGox creditors and separately with lawyers of the MtGox Legal group of creditors (MGL), MHM Japan. I was the MGL coordinator at the time,” said Pag, who left MtGox Legal at the end of March.
“There was a long break after that, but just recently they contacted me again and asked me to help them develop a process for verifying individuals who are really victims of MtGox and a process for contacting them.”
According to a discussion of creditors in a closed forum, ZP Legal said it returned about one million dollars to an unnamed client of the WEX exchange.
Zheleznikov declined to discuss the amount, but confirmed that his firm worked with two people whose money was frozen on WEX.
“The police at that time were conducting preliminary investigative actions, but we initiated our own investigation and soon some people contacted us and offered to compensate the losses of WEX users. We brought both sides together and soon the issue was resolved,” Zheleznikov said, but he declined to name any of the participants in the deal.
According to the document, ZP Legal informed MtGox creditors that due to “close cooperation with law enforcement agencies”, there are all prerequisites for the fact that “it will be possible to return 170 000 – 200 000 BTC”.
At the same time, ZP Legal admits that it does not have data on the identities of all the people involved in the theft – law enforcement agencies will have to find the perpetrators. Zheleznikov said that the amount is approximate, based on the number of creditors that ZP hopes to take on as clients.
Zheleznikov also stressed that his clients can expect to receive not the bitcoins themselves, but their Fiat value.
“I don’t promise to return bitcoins. Only those funds that we can return through the court,” – said Zheleznikov.
“If your MtGox balance at the time of the exchange’s closing was, say, 100 BTC, then to calculate your claim in the Russian court, you must convert it to hard currency based on the current exchange rate. For example, the current exchange rate is $10,000 per bitcoin, which means that your claim will be $1 million in rubles,” the document says.
A potential problem with this approach is that crypto assets currently do not have a legal status in Russia, as in many other jurisdictions, and there is no clear methodology for evaluating the value of cryptocurrencies. Zheleznikov admits that his firm will act in the absence of established practice.
“We are entering a “grey area” that no one has ever been in, but we will be able to convince the police to trust our estimates. We do not promise anything – we assume that we have certain legal skills, there are some existing laws that we will use,” Zheleznikov said.
He acknowledged that there may be “years of legal struggle, working with the police and forming a legal practice” ahead.
Despite the fact that Zheleznikov is little known in the Russian crypto space, he has a remarkable reputation as a lawyer in a number of high-profile Russian cases handled in recent years.