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GLOBAL PRACTICE GUIDES Definitive global law guides offering comparative analysis from top-ranked lawyers International Fraud & Asset Tracing Switzerland Trends and Developments Saverio Lembo, Aurélie Conrad Hari, Pascal Hachem and Marianna Nerushay Bär & Karrer Ltd practiceguides.chambers.com 2021
SWITZERLAND Trends and Developments
Trends and Developments
Contributed by:
Matthias Gstoehl and Dominik Elmiger
LALIVE see p.5
Pitfalls of Securing Cryptocurrencies under way of civil attachment under the Swiss Debt
Swiss Law Enforcement and Bankruptcy Law (DEBA).
Introduction
Initially only traded by a niche community, cryp- According to Article 271 seq DEBA, a Swiss
tocurrencies such as Bitcoin, Ether, Ripple, and court grants a civil attachment if the applicant
Litecoin, to name a few, are growing in accept- can provide prima facie evidence that:
ance. Developments such as leading banks
planning to offer their clients access to crypto • it has an unsecured and due claim against the
investments, Tesla’s recent US billion-dollar debtor;
investment in Bitcoin and accepting it as pay- • there is a statutory ground for attachment;
ment for their cars, as well as Coinbase’s recent and
IPO, mean the relevance of cryptocurrencies will • the debtor has assets located in Switzerland.
also inevitably increase in asset-recovery pro-
ceedings. The first two prerequisites usually do not raise
any issues. From practical experience, however,
Determining the available means to secure cryp- a creditor frequently faces difficulties in providing
tocurrencies in Switzerland hinges on the legal the required prima facie evidence that the debtor
qualification of the same under Swiss law which, indeed holds attachable assets in Switzerland.
in the absence of any case law, remains contro- This is even more difficult with cryptocurren-
versial among legal practitioners in Switzerland. cies. On the one hand, a debtor is not obliged
While certain jurisdictions consider cryptocur- to disclose their assets to the creditor or court
rency as property, the situation is less clear in attachment proceedings. Also, a court dealing
under Swiss law, where a minority would like to with an attachment request will not undertake
qualify cryptocurrency as a chattel according to an investigation, but only rely on evidence pro-
the Swiss Civil Code. The majority view, how- vided by the applicant. An additional hurdle for
ever, qualifies cryptocurrencies as a new asset an applicant is that the courts will, in principle,
category (assets sui generis). The prevailing only admit documentary evidence in attachment
qualification is similar under Swiss criminal law. proceedings. For traditional commercial trans-
actions, a creditor is typically more likely to suc-
This article provides an overview of the most ceed by submitting correspondence referring
frequent practical pitfalls when attempting to to a debtor’s bank account in Switzerland. For
recover cryptocurrencies by way of attachment cryptocurrencies, the situation is inherently more
in civil and/or criminal proceedings, which are difficult and, in practice, most applicants may
among the most common recovery instruments. therefore already fail at the level of demonstrat-
ing that the debtor holds cryptocurrencies. First-
Attachment in civil proceedings ly, commercial transactions are not (yet) ordinar-
The majority view considers cryptocurrencies as ily settled by cryptocurrencies. Secondly, even
assets sui generis, and it is generally acknowl- if the creditor finds an alphanumeric address,
edged that cryptocurrencies can be secured by this will be of little help to identify the location of
2
Trends and Developments SWITZERLAND
Contributed by: Matthias Gstoehl and Dominik Elmiger, LALIVE
cryptocurrencies, which, as assets sui generis, collection office to force a debtor to release the
are not considered chattels and therefore cannot password are limited. Although a debtor refusing
be physically located. Indeed, by virtue of the to provide a password may become criminally
distributed ledger technology, cryptocurrencies liable for fraud against seizure under Article 163
are “located” on the blockchain and are there- of the Swiss Criminal Code, this may only be the
fore ubiquitous. case after unsuccessful debt collection proceed-
ings against the debtor, which can take years.
Swiss legal doctrine primarily focuses on the
private key when determining where cryptocur- Without actual access to the private key by the
rencies are located. In the case of cold storage, debt collection office and preservation of the
ie, storing the cryptocurrencies’ private keys in cryptocurrencies by moving them to another
an offline environment, eg, on a private storage public address under the control of the Swiss
device such as a USB stick (hardware wallet) or debt collection office, the attachment of the pri-
a piece of paper (paper wallet), cryptocurrencies vate key may be a moot point if the debtor can
are arguably located at the physical location of still dispose of the assets (eg, by keeping a spare
the private key. In that case, the private key is copy of the private key).
technically a movable object, but the cryptocur-
rency itself is not. If located in Switzerland, the A debtor may not always hold a private key to
private key may be attached according to the its cryptocurrencies, but may have them man-
Swiss DEBA and taken into custody by the com- aged by specialised third-party providers (vault
petent Swiss debt collection office, however, this providers). In such a case, a holder of cryptocur-
does not amount to an attachment of the cryp- rencies merely has a claim against the provider
tocurrencies themselves. for delivery of its virtual currency units. If such a
claim is known to a creditor, and they are able
In the case of hot storage, ie, online, the debtor to produce corresponding prima facie evidence,
is either using the services of a third-party pro- the virtual currency units can be attached like
vider (online wallet) or installing software on their any other claim against a debtor, either at the
computer (desktop wallet) to manage access to debtor’s Swiss domicile, or outside such domi-
their cryptocurrencies. Whereas in the case of a cile, at the Swiss seat of the vault provider.
desktop wallet, the private key is saved locally
on a hard disk, which can be attached if located Attachment in criminal proceedings
in Switzerland and taken into custody, in the In criminal proceedings, cryptocurrencies argu-
case of an online wallet, the private key is saved ably also qualify as assets sui generis. As such,
on the server of a third-party provider. Taking they cannot be confiscated as chattels, which
the private key into custody may only be pos- might be possible in the case of a private key in
sible in this case if the server is located in Swit- the form of a USB stick or a piece of paper. How-
zerland. Again, attaching the private key does ever, according to Swiss doctrine, cryptocurren-
not amount to an attachment of the cryptocur- cies may qualify as assets according to the defi-
rencies themselves. Attaching the private key is nition in Article 70 of the Swiss Criminal Code.
therefore only half of the equation. As such, under Article 263(1)(d) of the Swiss
Criminal Procedure Code, in conjunction with
In general, a wallet is also password-protected. Article 70 of the Swiss Criminal Code, they can
If a debtor does not provide the password vol- be (provisionally) confiscated if they have been
untarily, the means available to a Swiss debt acquired through the commission of an offence
3SWITZERLAND Trends and Developments
Contributed by: Matthias Gstoehl and Dominik Elmiger, LALIVE
or are intended to be used in the commission Such behaviour may qualify as money launder-
of an offence or as payment for an offence. By ing under Article 305bis of the Swiss Criminal
way of (provisional) confiscation, the criminal Code and the cryptocurrency holder may be
authority prevents the accused from disposing prosecuted.
of an asset.
In order to fulfil Article 305bis of the Criminal
The Swiss criminal authority will, however, face Code under Swiss law, the paper trail and thus
the same practical problems as the debt collec- the tracking of asset history must be interrupted,
tion office. Firstly, it must discern the existence which is arguably the case if an accused refuses
of the cryptocurrencies. In practice, a public to release a password. As a consequence, press-
prosecutor usually does so as a result of a house ing charges for money laundering may provide
search, or the analysis of further (documentary) an alternative avenue of prosecution, should an
evidence, eg, (email) correspondence, records accused resist confiscation of cryptocurrencies,
from WhatsApp, or phone conversations. How- or refuse to provide the password to the wallet.
ever, even if the criminal authority has estab- However, this has never been tested in court.
lished the existence of the cryptocurrencies,
the location of the private key will still remain The situation is slightly different from a criminal
unknown. As explained above, even confiscat- perspective, where an accused makes use of
ing a private key does not ensure access to the a specialised vault provider as outlined above
cryptocurrencies if the wallet is password-pro- under the heading, Attachment in civil pro-
tected. The accused will (again) be of little help ceedings. In such a case, the specialised vault
as they are not obliged to disclose any holdings provider may be under an obligation to disclose
in cryptocurrencies, the private key or its loca- information at the request of the criminal author-
tion, nor the password to the wallet. ity and perhaps even to transfer cryptocurren-
cies to them.
In practice, if the cryptocurrencies presumably
originate from a felony or aggravated tax crime,
the interesting question comes up as to whether
a recalcitrant cryptocurrency holder could then
be considered as frustrating the identification
of the origin or the tracing or the forfeiture of
these assets, which they know or should know
originate from a felony or aggravated tax crime.
4Trends and Developments SWITZERLAND
Contributed by: Matthias Gstoehl and Dominik Elmiger, LALIVE
LALIVE is an international law firm, renowned of obtaining interim measures of protection, and
for its expertise in international legal matters, in criminal and mutual legal assistance matters.
with offices in Geneva, Zurich and London. LALIVE has a strong banking litigation practice
Core areas of practice include asset recovery, and is unique in Switzerland in that it is conflict-
litigation, white-collar crime and compliance, free to act against banks and financial institu-
commercial and investment arbitration, art and tions. Recent work includes representing a Lat-
cultural property law, corporate and commercial in American state in a large-scale investigation
law, real estate and construction. The firm’s liti- and the tracing and recovery of illicit assets to-
gation team of ten partners and 32 counsel and talling over USD1 billion; a UHNWI in the recov-
associates has an established practice in com- ery of assets in relation to artwork transactions
plex, multi-jurisdictional, cross-border matters, exceeding USD1 billion in multiple jurisdictions;
including in the tracing and recovery of assets, and a telecommunications company in a mat-
misappropriated or otherwise. It also represents ter involving over USD500 million in claims of
clients before the Swiss courts for the purpose criminal mismanagement and fraud.
AUTHORS
Matthias Gstoehl is a partner at Dominik Elmiger is a partner at
LALIVE and specialises in LALIVE who specialises in
complex domestic and multi- domestic and international
jurisdictional proceedings and litigation, with a special focus on
investigations, including fraud commercial and banking
and white-collar crime, asset disputes, asset recovery,
recovery, insolvency, international mutual white-collar crime, recognition and
assistance, international sanctions, and enforcement of foreign judgments and awards,
ESG-related disputes. His practice focuses cross-border insolvency proceedings, and
strongly on banking and finance disputes. With mutual legal assistance in civil and criminal
first-hand experience in the sector, he handles matters. He regularly represents clients in
complex matters requiring specialist complex, often cross-border, banking disputes
knowledge in derivative instruments, hedge and commercial disputes before the Swiss
funds and financial products in general. He state courts. He offers strategic pre-litigation
also regularly acts in contentious corporate, advice in his areas of practice, in particular,
commercial and governance disputes across with regard to the protection and recovery of
various sectors (healthcare, natural resources, assets. He is a member of the Zurich Bar
sports and trusts). Matthias is an officer of the Association, the Swiss Bar Association, the
International Bar Association Anti-corruption International Bar Association, the International
Committee, the International Association of Association of Young Lawyers, as well as
Restructuring, Insolvency & Bankruptcy Dispute Resolution International.
Professionals (INSOL) and the expert group for
digitalisation of the Swiss Bar Association.
5SWITZERLAND Trends and Developments
Contributed by: Matthias Gstoehl and Dominik Elmiger, LALIVE
LALIVE
Stampfenbachplatz 4
8006 Zurich
Tel: +41 58 105 2100
Fax: +41 58 105 2160
Email: mgstoehl@lalive.law
delmiger@lalive.law
Web: www.lalive.law
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