"Property" - real estate, movables, funds and rights, including any consideration for such property and any property that has arisen or arose as consideration for such property profits;
Paying attention to the proximity between the definitions. Attention is also paid to the word "finances" that appears in both definitions. Ostensibly, the same object can be defined as an object and property in the same breath.
How, then, will the distinction be made?
In my opinion, the blurring of the boundaries in the definitions leads to the following obvious conclusion: if the same material can be an object and can be property, at the same time, then the test should be the test of the dominance of the evidentiary aspect as opposed to the property aspect of that object. The more dominant the evidentiary aspect, the more the material will be defined as evidence, while the more pronounced the proprietary aspect of the material is, the more the material will be defined as property.
Another conclusion is that there may be intermediate states, which are difficult to classify, and that we are dealing with a continuum or spectrum between two extremes.
For our purposes, and according to their definition, the recovery kernels grant de facto control over Bitcoin and therefore constitute a proprietary interest or at least a key or access to an actual proprietary right. Although the recovery kernels are not the property itself (Bitcoin) but rather the way to realize the proprietary right, but, as I will show below, the person who holds the recovery kernels "actually holds" the proprietary right to Bitcoin.
- In contrast to this view, the trial court's determination - that the material transferred should be viewed as purely evidentiary material - was based on five different reasons, as a derivative of the distinction between the recovery kernels and Bitcoin.
A Brief Reference to the Trial Court's Reasoning
- As stated, the trial court considered the reconstruction cores as evidence and not as property. The court listed 5 reasons on which it based this ruling, the following are the reasons:
- Bitcoin is a decentralized virtual currency and does not "move" from its place due to the transfer of a private key from one place to another.
- A copy of the restoration kernel was transferred to the U.S. and the original restoration kernel was in fact already returned to the applicant.
- The core of the recovery is (but) information that can lead to the seizure of property.
- The use of the information obtained in Israel does not constitute damage to the applicant's property.
- The "taking" of the property only takes place when the Bitcoin is transferred to an account owned by another.
- I do not believe that Bitcoin's position in view of its nature affects or affects the analysis of the definition of recovery kernels as evidence or property. In my opinion, the question of the (physical) location of Bitcoin, whether it moves or does not move from its place, is irrelevant, and does not raise or decrease it.
- The Honorable Trial Court attributed significance to the return of a copy of the reconstruction cores to the appellant after they were transferred to the United States. However, as mentioned above, the transfer of the recovery cores to the United States led to their use for seizure. By obtaining the reconstruction kernels and (simple) action in which the coins were seized by the US authorities, and then they were taken from their owners (he was the appellant), and this is irreversible. This unilateral move by the US authorities has completely eliminated the property significance of the recovery cores, with no way back. From that moment on, the original reconstruction nuclei became devoid of any property significance, as opposed to the evidentiary (historical) significance. Therefore, there is no significance in returning them as worthless (property) information back to the appellant.
- I accept that in some cases it is possible that the transfer of information may not automatically or completely revoke the previous owner's access, given that he keeps copies of the keys or recovery kernels in different places. However, as the trial court held in its decision, there is the ability of each of the holders of the address information to unilaterally transfer the coins to another address, provided that he is the first to do so. This (simple) ability, which cannot be prevented, gives others the power to expropriate the value of the coins. Because, with a change in code, the previous private key becomes economically worthless. In other words, despite the lack of exclusivity, the ability of the first person to expropriate the coins' belonging to the previous owner is in itself of proprietary significance. The "right" of the former, and more specifically the ability of the former, grants the information subject the power of immediate proprietary exercise, even if not necessarily exclusive at that stage. The issue of unilateral capability is known to both the provocateur and the authorities, and therefore the first to reach the reconstruction nuclei in such a state of affairs will act first and act to change the details for fear that this will be done by the competitors. As soon as the action is completed, the person performing the action becomes the new owner without competition.
The trial court harshed and presented a number of examples of the transfer of information from Israel to the US authorities, such as a map of a gold hoard under a tree in New York's Central Park. The trial court reasoned that in this case it was a transfer of evidence and not a transfer of an asset, even though the map may lead to the location of the treasure and the gold. And again, as I mentioned above, when we are dealing with cryptocurrencies, I am afraid that there is a considerable amount of overlap between the "address" and the coin itself. This is in contrast to the hoard and the map, which are two separate objects, and the map, as an independent and separate object, can only assist in locating the gold hoard.