- NFT subpoenas to Bitcoin wallet authorized by a Brazilian court in a $900M fraud case.
- BWA Brazil allegedly ran a Ponzi scheme, leaving a loss of $52.2M to investors.
- Authorities follow blockchain transactions as they try to trace missing crypto assets.
A judge in Brazil approved the use of non fungible tokens (NFTs) in delivering subpoenas to Bitcoin wallet holders involved in a major financial fraud case. The ruling permits NFTs to be sent to digital addresses linked to an alleged investment scam, BWA Brazil, which is thought to have around 11,200 BTC (worth around $900 million at market rates).
The legal proceedings are in response to an attempt by the court-appointed overseer of BWA Brazil’s liquidation to ensure that claims related to crypto assets that were acquired through investor funds remain legally actionable. The estate asked permission to create digital notifications of the form NFTs and send them to blockchain addresses associated with the disputed transactions.
Blockchain Technology Enables Legal Notifications
The court ruling highlighted the need to modernize legal processes so that there were no more roadblocks to defrauded investors. The judge allowed the estate administrator to use electronic means, including NFTs to send out notifications. This request was also backed by the Public Prosecutor’s Office.
This strategy is targeted at asset holders whose identities are hidden but whose transaction history is open on the Bitcoin ledger. The contested transactions occurred before the company’s collapse and may now be the subject to legal recovery efforts.
Founded in 2017 under the leadership of Paulo Roberto Ramos Bilibio, BWA Brazil presented itself as an investment platform focused on opportunities related to Bitcoin. The company promised investors a fixed 5% profit per month, a figure that is unsustainable considering Bitcoin’s inherent price changes. By early 2020, BWA Brazil put a stop to withdrawals, which caused investment losses of about R$300 million ($52.2 million). This is considered one of the country’s biggest suspected cryptocurrency Ponzi schemes by authorities. The company was granted a restructuring process by court in 2020, but was declared bankrupt as it could not pay compensation to clients who were affected.
Bilibio and his associate, Jessica da Silva Farias, are accused of diverting investor funds to purchase Bitcoin. Neither has been apprehended by authorities.
Tracing Digital Transactions in Legal Cases
While the blockchain transaction does not directly expose the personal identities, the technology permits tracking of the movement of digital funds. Every Bitcoin transfer is recorded permanently, making it possible to track the transaction trail. The estate administrator noted that some of the funds passed through conventional exchanges, while others were transferred via peer to peer which can obscure ownership details.
If domestic exchanges are involved, then Brazilian authorities may be able to trace these assets because these exchanges are compelled to report user activity to financial regulators. However, the direct transaction between individuals using cryptographic methods pose additional challenges, making the use of NFTs for legal notifications a practical adaptation.
The integration of blockchain tools into judicial procedures reflects ongoing efforts to adjust legal frameworks to decentralized financial systems. As courts face new challenges in handling digital asset disputes, solutions like blockchain-based subpoena delivery may become more commonplace in future legal cases involving cryptocurrency fraud and financial misconduct.
