This Is How Confiscated Bitcoin, Ethereum, And Monero Sold By The Taxman
Selling the confiscated EUR 6.4m (USD 7.63) in crypto for the Lithuanian tax authority was a lengthy and complicated process that lasted at least two months and required long preparation and detailed coordination between the seller, supplier, trading partners, and intermediary banks so as to avoid issues and delays during the sale, according to the CEO of the Lithuanian investment and exchange service that performed the sale.
As previously reported, on November 18, the Lithuanian State Tax Inspectorate (STI), sold EUR 6.42m worth of bitcoin (BTC), ethereum (ETH), and monero (XMR), which had been confiscated in February 2020. This was the first time the authority sold confiscated cryptoassets. They have done this with the help of the supplier Kaiser Exchange International, aka Kaiserex.
And though the details on the confiscation itself are unavailable, Kaiserex CEO Linas Rajackas told Cryptonews.com that "from my cryptocurrency experience and some market knowledge I would guess it is related to illegal drugs. Considering the fact that STI had a significant amount of monero, over XMR 11,000, which is a preferred currency in the dark web, because of it's anonymity," he said, adding that he doesn't know "the exact source of confiscation and did not ask about it."
In total, the company sold BTC 336.85357, ETH 360.37325, and XMR 11,992.81.
The sale process began with the start of the public contest for the cryptocurrency sale at the beginning of September. According to Kaiserex, the company was one of four suppliers that had met the requirements of the public procurement tender, and they offered the lowest price. The CEO said that they "had to pass extensive due-diligence checks personally and as a company, provide a contract, which showed significant amounts of cryptocurrency trading volume, have qualified personnel, be in the market for a certain amount of years, etc."
After the company won, they signed the contract with the STI on November 10. The STI was "very responsive to our advice that it is a very favorable time to sell, since all the prices were at record highs and we sold it [confiscated crypto] 8 days later."
"It was done through one of the largest OTC [over-the-counter] desks in the crypto market. It consisted of less than 20 trades timed at the right moments. Trading duration was about 12 hours," the CEO said, without naming the OTC desk.
According to the company, the STI's fast reaction to the advice to sell enabled the sale of the cryptocurrency "at record prices and extract the maximum amount of euros."
And while the sale lasted less than a day, with the money landing in the STI's hands in less than two days, the actual preparation for the sale took more than a month. This consisted of at least two major parts:
- Given that the confiscated crypto is most likely related to crime, said the CEO, the company had to make sure that no trading partners would freeze the trading process when Kaiserex sent them crypto from these potentially blacklisted wallets, because their KYT (Know Your Transactions) systems would likely put a red flag on it.
- Making sure that all intermediary banks are expecting these transactions and have all the documentation beforehand.
"I can not disclose specific details, but it was a complicated and lengthy process. Any kind of slack or miscommunication could have caused delays and problems when doing the sale."
The main challenge during this entire process, per the CEO's words, was "coordinating all the aspects together," including partners buying the crypto, STI selling the crypto, and the intermediary banks sending the money without delays. "To generalize, the most complicated part to do was talking with compliance departments, providing documents and explaining what we plan to do," he said.
However, it turns out that a month of preparation is actually not a lot of time for the entire process at all, which is a lesson Kaiserex learned, said Rajackas. He told Cryptonews.com that "it's never too early to start preparing for deals like this." They started sale preparation even before they entered the public contest in September and "thought that we have a ton of time to do it. Looking back now I see how much it helped us to be early and well prepared. We didn't have too much time at all."
The company plans to continue working with the Lithuanian institutions on similar cryptocurrency deals as their current contract with STI is valid for the next year.
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