Yesterday, a group of Ottawa residents won a private class action lawsuit to freeze at least 146 cryptocurrency wallets and bank assets tied to the main organizers of Canada’s “Freedom Convoy” in a bid to stanch funding for the ongoing demonstrations.
Known as a Mareva injunction, the lawsuit was filed by Ottawa residents Zexi Li, Geoffrey Devaney, and the Happy Goat Coffee business against key convoy organizers including Chris Barber, Benjamin Dichter, Tamara Lich, and Nicholas St. Louis. The hearing was held in private without public notice or access, lawyer Paul Champ who represents the residents bringing the suit, told The Star, a Toronto-headquartered Canadian newspaper. Li earlier this month won an injunction which barred protesters from honking their horns in downtown Ottawa.
The suit is unprecedented for the country, as it’s the “first time in Canada that a Mareva injunction [has] ever been used to freeze cryptocurrency,” says Matthew Burgoyne, a crypto- and blockchain-focused partner at Calgary-based McLeod Law. He added that the injunction was a powerful legal “remedy which can have significant consequences for a defendant.” The defendants weren’t given advance notice of the suit, says Champ.
Champ, who hired a private investigator and cryptocurrency expert, found that the organizers’ crypto movements outpaced the government’s attempts to track them, according to The Star.
Under the injunction, the named defendants, and those affiliated with them, are restricted from moving fiat and cryptocurrency assets in the bank accounts and cryptocurrency wallets specifically named in the suit. The respondents must now respond to the court and “submit to an examination under oath” regarding their assets and what the assets have been used for. The Mareva injunction is only used when there’s a “high risk” that the defendant will “dispose, encumber or…remove its assets from the jurisdiction during the course of litigation,” says Burgoyne. It effectively freezes their assets until judgment is passed.
If the defendants breach the order, they could be fined, given jail time, or subject to asset seizure. Should individuals help any of the named defendants in breaching the order, they could also face penalties or be imprisoned, says the suit.
The injunction comes amid Canadian authorities’ sweeping crackdown on the Freedom Convoy protests, which began in late January and have cost the country hundreds of millions in trade, policing costs, and city services each day the demonstrations have occurred. On Monday, Canadian Prime Minister Justin Trudeau invoked the Emergencies Act for the first time in the country’s history, giving law enforcement authorities greater power to clamp down on demonstrators.
Late last evening, Ottawa police arrested several key protest organizers, including Lich and Barber, on charges of mischief. By Friday morning, armed police officers backed by armored tactical vehicles descended on downtown Ottawa in a major push to clear protesters and trucks from the city.
Although the Mareva injunction is new, Canadian authorities have targeted the convoy protesters’ funds in other ways.
Earlier this week, Canada’s Royal Canadian Mounted Police (RCMP) ordered all FINTRAC-regulated firms to stop transactions with 34 cryptocurrency wallets, which received 20 Bitcoin (BTC), or nearly $900,000, for the protesters. The majority of cryptocurrency exchanges which operate in the country are regulated by the Financial Transactions and Reports Analysis Centre of Canada (FINTRAC). Canada’s TD Bank also froze two personal accounts that received over $1 million for the protesters, and crowdfunding platform GoFundMe shut down a donation campaign for the truckers after discussions with authorities.
Jesse Powell, cofounder and CEO of Kraken—one of the world’s top 10 cryptocurrency exchanges—and a staunch supporter of the Freedom Convoy, warned protesters yesterday that his platform will be “forced to comply” with Canadian authorities. “Don’t keep your funds with any centralized [or] regulated custodian. Get your coins [and] cash out and only trade P2P [peer to peer]. We cannot protect you,” Powell tweeted.
Powell previously donated to a Bitcoin fundraiser for the protesters organized by a group called HonkHonkHodl. “Mandates are immoral. End the madness,” he wrote on the fundraising page. The BTC fundraising campaign, which Powell contributed to, ended earlier this week after reaching its goal of amassing 21 Bitcoin (BTC), or around $929,134, the campaign organizers announced on Twitter. One of HonkHonkHodl’s founders, who goes by the name NobodyCaribou on Twitter (and who’s named in the suit as Nicholas St. Louis), says the group distributed 14.6 BTC to 90 truckers earlier this week via an “epic P2P Bitcoin wallet airdrop.”
Yet the authorities’ actions may only have a minimal effect on the protesters’ crypto funds, particularly if they are using “unhosted” wallets disconnected from the internet or a cryptocurrency exchange. This method of transferring crypto peer-to-peer means that the assets are stored in “noncustodial” wallets, which, Burgoyne says, “keeps [the assets] insulated from…a government or bank.”
The protest organizers can easily transfer crypto to new wallets, where assets can be cashed out in Canadian dollars via an exchange. Burgoyne doesn’t believe that the government will start tracking historical wallet transactions, but even if it did, owners could use crypto “mixers” like Tornado Cash to “wash” their funds, hiding their digital trails on the blockchain.
Burgoyne argues that using such “self-hosted” wallets means that it will be “very difficult, if not impossible” for Canadian authorities to actually freeze protesters’ crypto assets.
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