During the course of the investigation, some of the investigative activities in Israel were carried out by virtue of Israeli warrants and some by virtue of requests for legal assistance from the United States.
At the request of the Israel Police, the Tel Aviv Magistrate's Court issued a search warrant for the appellant's home as well as an intrusion warrant for the computer materials to be seized (as part of the Israeli investigation). The combined order allowed the seizure of a variety of materials, including "Bitcoin and Bitcoin wallets."
The appellant's computer was seized. Two days later, a request was filed to extend the search warrant in favor of transferring the search products to the United States as part of a legal aid proceeding.
A few days later, the (extended) penetration of the computer was carried out by the police and a large volume of material was produced, among other things, using the search word "Bitcoin". There is no dispute that the recovery kernels of a Bitcoin wallet have been seized, which can be used to retrieve the Bitcoin coins themselves.
A copy of what was seized was immediately transferred to the United States. Thanks to the material provided to the investigative bodies in the United States, the authorities there seized about 31 Bitcoins, with a large monetary value (about ILS 11 million) belonging to the appellant.
Later, two indictments were filed against the appellant and his accomplice in Israel and the United States, accusing them of conspiracy to commit money laundering.
The Arena of Dispute and the Decision of the Trial Court
- For the purpose of its decision, the trial court was required to consider various definitions related to the Bitcoin currency. The court explained that Bitcoin is a valuable digital asset, which is included in a group known as "virtual currencies" and is used, with the consent of the community of its users, as a means of payment for goods or services, for conversion into other currencies, and even for the purpose of investment. It is a decentralized currency that is not physical and is expressed only in a digital representation of an idea in the virtual space (the court referred to Civil Appeal 6389/17 Bits of Gold in a Tax Appeal against Bank Leumi Le-Israel in a Tax Appeal (2018)).
- It was also noted that the proprietary regulation of Bitcoin in the world is actually carried out through a code that allows locating the coins in the virtual space, associating them with a wallet, and thus accessing them and carrying out transactions and transactions with them.
As the trial court noted, in order to understand how the Bitcoin transfer is carried out, it is necessary to understand the concepts - a public key and a private key. A public key is a string of over 20 characters. The private key allows the control of the public key. In order to transfer the value of Bitcoin from Public Address A to Public Address B, it is necessary to use the private key of Address A from which the value will be transferred.