The Supreme Court accepted the appeal of the Public Prosecutor's Office and ruled that the Israel Police is authorized to act against foreign companies that manage digital wallets in order to freeze crypto assets suspected of being related to criminal offenses, within the framework of voluntary cooperation and in accordance with its powers under law. The proceedings dealt with a large-scale crypto fraud case known as the "Russian Sting," in which cryptocurrency investment fraud was allegedly committed against citizens in Israel and abroad, mainly expatriates from the CIS countries.
It is suspected that the fraudulent funds were transferred between various digital wallets and drained into a crypto wallet where coins worth over $10 million were held.
As part of the proceedings, the State Attorney's Office, through Attorney Sarit Misgav on behalf of the Criminal Department and Attorney Ayelet Levy from the International Department of the State Attorney's Office, argued that the District Court's decision, which overturned the order to freeze the digital wallet, could materially harm the ability of enforcement authorities to deal with money laundering, online fraud, and terrorist financing offenses committed using cryptocurrencies, as well as thwart actions required to prevent the smuggling of funds. It was further argued that accepting the District Court's position could create a "digital haven" for criminals and terrorist elements.
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The Supreme Court accepted the position of the Attorney General's Office and determined that the police action was taken within their authority, and that the police are entitled to contact foreign companies for voluntary assistance in freezing digital assets suspected of being related to criminal offenses, pursuant to Section 3 of the Police Ordinance. It was further determined that the police's contact with Tether was made as part of voluntary cooperation and without coercion.
