Mankiw Research: Will the U-related case be confiscated if "not claimed within the stipulated time"? A comprehensive guide to the legal logic behind the police announcement.

In the compliance battle of Web3, "silence" is extremely costly.

Authors: Lawyer Li Haojun, Lawyer Liu Honglin , Mankiw Blockchain Legal Services

introduction

Recently, a local public security bureau issued a "Notice Regarding the Disposal of Involved Virtual Currency/Funds." The notice is concise: police seized a batch of funds (virtual currency) during a case investigation; however, ownership is unclear, hence this public notice. The key point is the last sentence: "If no one claims the funds by the end of the notice period, they will be treated as unclaimed property and turned over to the national treasury according to law."

In traditional finance, a frozen bank account can be forcibly seized with a court ruling. But in the Web3 world, things are much more complex. The right to dispose of assets no longer depends solely on "judicial authority," but rather on who holds the "private key."

Not all cryptocurrencies can be dealt with.

Before we can discuss whether the public security authorities can take this asset, we need to first determine which wallet it is stored in in order to assess the feasibility of disposing of the virtual currency.

As mentioned earlier, the judicial disposal of virtual currencies differs from the disposal of traditional assets, facing a chasm that physical laws cannot overcome—technological control. Based on the possession of private keys, we categorize assets into three states, with the difficulty of judicial disposal increasing from "Easy" to "Impossible".

(i) Assets are in the hot wallet of a centralized exchange (CEX).

If your USDT and BTC are stored in centralized exchanges such as Binance, OKX, or HTX, and the private keys are actually held by the exchanges, you only possess a "claim" to withdraw your funds from the exchanges. In this case, the public security authorities do not need to obtain your private keys at all. The investigating authorities only need to issue a "Notice of Assistance in Freezing/Deducting" to the exchange (or its domestic affiliates/cooperating channels) in accordance with the relevant provisions of the Criminal Procedure Law.

In practice, this is a major area for handling "ownerless assets." If the police issue a notice and you fail to claim the assets for various reasons (such as being detained, unaware of the situation, or being afraid to come forward), or if the account has been dormant for a long time and is involved in a case, the police can, based on the logic of "ownerless property" or "illegal proceeds," instruct the exchange to liquidate or transfer the assets.

At this point, silence equals surrender . In a centralized system, if you don't assert your rights, the law assumes you've waived them, and direct seizure and confiscation are both legal and fully enforceable.

(ii) The assets are in a non-custodial cold wallet, and the public security authorities have obtained the private key.

When suspects are arrested, their notebooks seed phrase are confiscated, or they may voluntarily hand over their hardware wallets and passwords in an attempt to plead guilty. In reality, these have already been transferred to the authorities (usually quickly moved to a secure address controlled by the police). At this point, the virtual currency is physically equivalent to seized cash or gold bars.

The core controversy here is no longer "whether it can be disposed of," but "when to dispose of it." Currently, the biggest legal pitfall in practice lies in "preemptive disposal." Many local authorities, citing "large price fluctuations and difficulties in safekeeping of virtual currencies," sell the coins through third-party companies and convert them into fiat currency for temporary storage before court judgments (especially during the investigation stage).

If you are later proven innocent, or can only receive a partial refund, but your BTC was sold at $20,000 and has now risen to $100,000, it is usually difficult to apply for state compensation for this huge price difference loss.

(iii) The assets are in a non-custodial cold wallet, and the private key is only in the suspect's mind.

The suspect uses decentralized wallets such as MetaMask and Ledger, and refuses to disclose their private keys (zero confession), or seed phrase are complexly encrypted. The suspect monopolizes the assets. Therefore, the judicial system's ability to process these assets is virtually zero (this is the core logic of Web3. No matter how authoritative a court judgment is, or how many official seals are affixed, without the private key, the assets on the blockchain are simply a string of untouchable data characters).

In this scenario, the notion that "unclaimed assets will be confiscated" is a false premise. Even if the police issue a thousand public notices declaring that "unclaimed assets will belong to the state," the transfer cannot be technically executed. This asset will not become "state property," but rather a "dead account" on the blockchain, permanently dormant.

So, is there a legal basis for the police to deal with virtual currencies?

Based on the above classifications, for situations one and two, because the police are "capable" of handling them, they tend to act "quickly." However, strictly speaking, according to the Criminal Procedure Law and related judicial interpretations, confiscation of property is a form of criminal punishment and should be determined by the court through a judgment.

When public security organs directly classify assets as ownerless and hand them over through "public announcement of claim" during the investigation stage, they are essentially depriving citizens of their property rights without trial. Unless it is proven that the asset is in danger of "damage, loss, or spoilage" (such as perishable fresh food), virtual currency, as electronic data, does not pose a risk of physical decay and should not be subject to preliminary disposal arbitrarily.

Regarding scenario three, investigators might argue that the suspect's refusal to hand over the private key constitutes abandonment of the asset, or presumes it to be "ownerless." However, under civil law, "abandonment" requires an explicit expression of intent. "Silence" does not equate to "abandonment." Unless the suspect explicitly states "I don't want it anymore," the asset remains "property pending confirmation of ownership." The inability to retrieve it due to technical reasons does not imply a change in its legal status.

Are unclaimed cryptocurrencies destined to just lie in your wallet and become cold, lifeless numbers?

Actually, that's not the case. According to Article 233 of the "Regulations on Procedures for Handling Criminal Cases by Public Security Organs (2020 Revision)":

"If seized or detained property, documents, mail, emails, or telegrams are found to be unrelated to the case, the seizure or detention shall be lifted within three days and returned to the original owner or the original postal or telecommunications department or network service provider. If the original owner is unknown, a public notice shall be issued to inform the original owner to claim the property. If no one claims the property within six months after the notice or public notice, it shall be treated as unclaimed property, registered, and turned over to the national treasury."

This led to the aforementioned announcement issued by a local public security bureau regarding the handling of virtual currency/funds involved in the case.

Okay, let's go through this again. How did your coins become ownerless?

• Step 1: Investigation reveals that funds/assets are suspected of flowing into black and gray industries (such as online gambling and fraud).
• The second step is to freeze/seize assets, but due to the anonymity of blockchain or the layered penetration of accounts, it is impossible to directly identify the specific legal holder.
• Step 3: Issue a public announcement. This fulfills the "obligation to inform".
• Step 4: Silence = Giving Up. If you do not appear within the specified period, the legal process assumes that no legitimate owner has a claim to the asset.
• Step 5: Classify it as "ownerless property". Since it is ownerless, it naturally belongs to the state.

So, should we choose to "play dead" or "confirm ownership"?

Upon seeing the announcement, many people's first reaction was: "If this batch of virtual currency is mine, will I be arrested if I go to claim it?" This mentality is the root cause of the confiscation of legitimate assets.

(a) Who can "claim" it?

If your funds are from legitimate sources (own funds, salary, legal loans), and you are conducting transactions for normal investment purposes, you are a "bona fide third party" under the law. For this type of person, "overdue payment" is the biggest miscarriage of justice. You must, within the announcement period, have a lawyer submit a "Letter of Objection to Ownership" and a "Request for Return" to the handling authority.

(ii) What materials are needed to claim the item?

First, prove that the exchange account is yours (KYC information) and that you control the on-chain address (private key signing/demonstration transfer).

Second, bank statements showing your purchase of virtual currency, order records from trading platforms, and chat logs prove that you were not acting as a shill, but rather engaging in legitimate transactions.

Third, prove that you fulfilled your reasonable due diligence obligations during the transaction (such as checking the other party's transaction history and real-name authentication) and that you had no criminal intent.

(III) Who should "take it easy"?

If you know for certain that you are engaging in "money laundering" or that the transaction price is obviously abnormal (buying U devices at inflated prices), then going there rashly does indeed carry criminal risks. In this case, you need a lawyer to intervene and conduct a criminal risk assessment, making a rational choice between "protecting your money" and "protecting your life."

Conclusion: The law does not protect those who "lie flat" (take a passive, passive approach).

The phrase "overdue remittance to the national treasury" reflects the efficiency of administrative law enforcement and imposes a severe restriction on the statute of limitations for rights holders to assert their rights. In the compliance game of Web3, "silence" is extremely costly.

If your name or account appears on this list, don't take any chances. The moment the announcement period ends will be the moment your assets are legally "socially dead."

Don't give up your rights out of fear. Professional legal intervention is not only about recovering assets, but also about leaving evidence in the legal process that "I asserted my rights," which is the only line of defense against the determination of "ownerless property."

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