Cryptocurrency utilizes technology that creates, verifies, and secures transactions using digital assets.1 These assets are rapidly increasing in popularity as a means to capitalize on market gains.2 The worldwide attention that cryptocurrency has been receiving over the last decade has come not only comes from legitimate investors and profits, but also from bad actors.
Cryptocurrency Fraud
Cryptocurrency crime is growing fast as the technology evolves. Between 2018 and 2020, $12.6 million reported losses were reported as attributable to events involving cryptocurrencies that have been characterized as fraud or scams. This number significantly increased in 2021, where the Canadian Anti-Fraud Centre received reports of cryptocurrency fraud losses totalling $75 million.3 Furthermore, the Federal Trade Commission states that between Q1 2021 and Q1 2022, 46,000 people lost more than $1 billion to crypto scams. Crypto scams reportedly account for 40% of all dollars reported lost to fraud on social media.4
Aiden Pleterski
The recent case of Aiden Pleterski ("Mr. Pleterski") is a recent banner case in cryptocurrency fraud. Mr. Pleterski, resident of Ontario and self proclaimed "Crypto King," had raised $41.5 million from investors, promising to invest in cryptocurrency and foreign markets. However, it is alleged that he only invested 1.6% of that money. With the remainder of the proceeds, Mr. Pleterski bought luxury cars, flights on private jets and lakefront mansions.
Mr. Pleterski's schemes began to unravel in April of 2022. Many of his investors subsequently commenced lawsuits and alleged that he that he misappropriated their money. Mr. Pleterski shortly declared bankruptcy thereafter, and a bankruptcy trustee (the "Trustee") was tasked with tracking down and recovering as much money for his creditors and other investors as possible.
Mr. Pleterski further hit the headlines in December 2022, when he was kidnapped from downtown Toronto, allegedly by "investors" who had lost money. He was released three days later but under threat to come up with money.
To further complicate the matter, it was recently discovered that Mr. Pleterski had found a new way to use digital assets (but not cryptocurrency this time) to store value. A report from the Trustee in bankruptcy revealed that that Mr. Pleterski transferred more than $500,000 worth of digital currency on video gaming platforms, by selling valuable in-game items called "Skins," which are forms of customization – somewhat similar to a decal or wrap on a vehicle in real life. These items can be earned or purchased on the gaming platform in exchange for real money or in-game currency.
The Trustee subsequently brought legal action seeking to freeze Mr. Pleterski's gaming account and requiring the gaming service provider (Valve Corporation) to provide account access to the Trustee.
Digital Assets, Cryptocurrency, and the Law
Some suggest that Mr. Pleterski was able to successfully operate his illegal scheme because of the lack of oversight and regulatory framework regarding cryptocurrency assets.5 With the fast-growing digital world, industry experts and regulators call for better measures to protect investors in order to safeguard against cryptocurrency fraud in the future.6
As it relates to the law, it is clear that the rapid development of technology, new forms of digital stores of value, and the increasing number of virtual transactions are permanently influencing and changing the profession. Among other things, litigators must be increasingly responsive and proactive in their efforts to identify assets and recover proceeds of crime. As technology evolves, so too must the law. The Pleterski case highlights a new and unexpected way for money to be hidden, and a novel kind of asset seizure – a gaming account – to accompany it.
If you have been a victim of fraud, contact Graeme Oddy, a lawyer in our commercial litigation department. Reach out by email graeme.oddy@devrylaw.ca or by phone 416-446-5810.
This blog was co-authored by summer law student Adriana Piccolo.
Footnotes
1. Canada, Financial Consumer Agency of Canada, Crypto Assets (Government of Canada: 2023) (canada.ca/en/financial-consumer-agency/services/payment/digital-currency.html).
2. Royal Canadian Mounted Police, Countering the rise of cryptocurrency fraud (Government of Canada: 2022) (rcmp-grc.gc.ca/en/gazette/countering-the-rise-cryptocurrency-fraud).
3. Supra note 1.
4. Tad Simons, "Why the crypto economy needs stricter anti-fraud protocols and other regulations", Thomson Reuters (11 October 2022), online: (thomsonreuters.com/en-us/posts/investigation-fraud-and-risk/crypto-anti-fraud-regulations/).
5. "The Scandal of Aiden Pleterski, Canada's Crypto King", Crypto Definance (17 May 2024), online: (cryptodefinance.com/scandal-aiden-pleterski-canada-crypto-king/).
6. Ibid.
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