Hefetza Claim 65435-03-26 State of Israel v. Artyom Nadurenko

Hefza’s claim 65435-03-26

Decision

Our Sugya

1. Is the Israel Police authorized to initiate and maintain voluntary cooperation with a financial institution that operates outside the country's borders in order to obtain information from it about assets and funds that are suspected of being involved in criminal activity that it is investigating, which is connected to Israel? Is it permissible for the police, in this framework of voluntary cooperation, to ask the foreign financial institution to freeze the assets and money of the interrogee? What is the source of such authority, and how can it be exercised in relation to cryptocurrencies stored in a digital wallet that operates in a computerized Internet space?

These are the questions on which I was required to decide in the present proceeding.

2. The focus of this proceeding is an application for leave to appeal under Section 38A(b) of the Criminal Procedure Ordinance (Arrest and Search) [New Version], 5729-1969 (hereinafter: Judgment), against the decision of the Central District Court of Lod (Judge Arad-Ayalon), which was given on March 18, 2026 inanother appeal 54295-12-25, [Nevo], in which the appeal filed by the respondent against the decision of the Rishon LeZion Magistrate's Court (Judge G.  Maimon) was accepted.) which was given on November 27, 2025 inReturn of Possession 54825-09-25 [Nevo].  The subject of these two decisions is the police action in the framework of a criminal investigation, which led to the freezing of a cryptocurrency wallet that the respondent claims belonged to him.  The value of the wallet exceeds 10,000,000 USD.

Background of the application and previous proceedings

3. The National Cyber Unit of the Lahav 433 Police is conducting an investigation together with the Central District's Online Crime Department, accompanied by the District Attorney's Office, regarding a large-scale fraud in Israel and around the world, known as the "Russian Sting." According to the suspicion, the fraud is carried out through investments in cryptocurrencies (hereinafter: the coins or cryptocurrencies), and its victims, almost all of them, are citizens of Russian origin and immigrants from the former Soviet Union. This investigation is being conducted against a number of suspects in Israel and abroad, to whom many offenses are attributed, mainly fraud, fraud and money laundering (hereinafter, respectively: the investigation and the fraud affair).
4. The Ottoman Settlement [Old Version] 1916The investigation of the money transfer axis in the framework of the fraud affair revealed that the cryptocurrencies were transferred to a number of digital wallets and drained, inter alia, into the wallet that is the subject of the application before me, which the respondent claims belongs to him (hereinafter: the wallet or digital wallet). This wallet is managed by a private company called Tether, which is located and incorporated outside the borders of Israel (hereinafter, interchangeably: the company and Tether).  On May 19, 2025, the Cyber Unit of the Israel Police (hereinafter: the Applicant) contacted the company with a request to freeze the wallet.  This request was made as part of the investigation and for the purpose of promoting it, with the basis of it, as stated, prima facie evidence that emerged from the investigation.  The company froze the wallet - the digital account in which the cryptocurrencies are held.

12-34-56-78 Chekhov v.  State of Israel, P.D.  51 (2)

5. Between me and me, an ex parte application was filed with the Rishon LeZion Magistrate's Court, "for an order for the seizure and freezing of accounts and belongings" (according to the account number registered with Tether). It is not clear that the Applicant had a reasonable basis to assume that the coins held in the wallet were connected to the criminal fraud affair.
6. On May 20, 2025, the Magistrate's Court granted the request, after finding that "there is a reasonable basis to assume that the same object was committed, and/or is about to be committed... or constitutes property worth the scope of the offense for the purpose of this investigation and/or future forfeiture in accordance with the law." Accordingly, the court signed the order in its form of the form (hereinafter: the freeze order or the order), and in doing so, ordered as follows: "I hereby order every banking corporation [...] or any other financial corporation to provide the investigative unit of the Israel Police with the detailed documents/objects" (hereinafter: the Directive Provision).  In addition, the order contains instructions addressed to the recipient of the order, which instruct him, inter alia, to seize "any other object found in any safe in his use and/or ownership, including: joint owner, authorized signatory, power of attorney, beneficiary, controlling shareholder, guardian, and transfer it to the Israel Police." The Applicant sent the order to Tether, acting in accordance with Tether's request, which was in accordance with the policy set by this company with regard to the investigation of offenses, such as the investigation of the fraud case, which requires a proper legal proceeding to support the request.  It should be noted that this policy has been published on the company's website.
7. Copied from NevoAs of the date of the freeze, the wallet contained about 7,000,000 USDT digital tokens, which are pegged to the US dollar currency and are issued by Tether. Subsequently, two additional deposits were made in the digital wallet, so that a total of about 10,729,347 USDT was frozen inside.
8. The respondent filed a motion to cancel the freeze order by virtue of the provisions of section 34 of the Civil Procedure Code. At the same time, the Applicant filed an application under section 35 of the Judgment Order, which deals with the extension of the validity of the order for an additional 180 days, as of November 16, 2025.
9. The Magistrate's Court rejected the Respondent's request to cancel the freeze order and granted the Applicant's request to extend the validity of the order for an additional 180 days (hereinafter: the Decision). In the framework of the decision, the court held, inter alia, that the freeze order was a valid order issued in light of a reasonable suspicion of committing fraudulent offenses, as emerged from the investigative materials that were brought to its review.  In view of the existence of such a reasonable suspicion, and since it was determined that the Applicant's application to Tether was made on the voluntary level, within the framework of a policy of cooperation that the Company has instituted in its relations with state and international enforcement authorities, it was determined that there is no basis to accept the Respondent's arguments regarding the illegality of the order and the Applicant's lack of legal authority.  In addition, it was held that the respondent did not present unequivocal proof as to his ownership of the wallet; Therefore, there is no need to discuss the question of the scope and applicability of the freeze order.
10. The respondent appealed this decision to the District Court. Before ruling on the appeal, the District Court held two hearings.  After the last hearing, and in light of the District Court's comments therein, the Applicant announced that she intends to apply to the Magistrate's Court and request the issuance of a new seizure order that will explicitly clarify the intention of the original order.  Accordingly, the Applicant requested that the District Court suspend its decision on the appeal.  Subsequently, the Applicant applied to the Magistrate's Court for "an order for the seizure, freezing and realization of cryptographic assets" (hereinafter: the New Freezing Order).  In the framework of the said order, instead of the instruction that appeared in the form built into the previous order, the following provision appears: "I hereby instruct the Israel Police to take action to freeze the cryptographic assets [...] their perception and realization, in any platform, infrastructure, object, including computer material, in which the assets are embodied." The new freeze order also states that a police officer has the authority to "cancel the freeze, in whole or in part, and to give additional instructions, by means of a written notice [...] and without the need for an additional judicial decision." This request was rejected by the Magistrate's Court for the following reasons: the District Court's decision regarding the Applicant's notice of her desire to apply to the Magistrate's Court for the issuance of the new freeze order has not yet been given.
11. Subsequently, the Applicant applied to the District Court to make it clear that the appeal pending before it does not prevent the Magistrate's Court from rendering a decision in relation to the new freezing order.
12. On March 18, 2026, without ruling on this application of the Applicant, the District Court issued a decision in which the Respondent's appeal was granted. In this decision, the District Court ordered the cancellation of the stay order due to lack of authority (hereinafter: the decision that is the subject of the application in this case or the decision that is the subject of the application).  In this framework, it was held that there is no dispute that the freezing order, as worded in the structured form, exceeded the territorial authority of the Israel Police and even of the court that issued it under its control, since it includes an extraterritorial coercive provision that is directed at Tether, a body that is not subject to the authority of the courts in Israel; and that this is sufficient to order the order to be null and void due to lack of authority.  In any event, the District Court further ruled that with respect to the search and seizure of assets, the territorial approach remained intact in the existing law, so that the enforcement authority of the Israel Police is limited to the territory of the State of Israel.  Therefore, the seizure of property in a foreign country, in which Tether is registered or operates, can only be done by virtue of the Inter-State Legal Aid Law, 5758-1998.  It was further held that although in the investigative matter in question the Applicant required swift action, this is of no use - since an investigative necessity cannot establish legal authority out of thin air.
13. In the decision that is the subject of the application in this case, the District Court further ruled that the Applicant's preliminary application to Tether was not made by virtue of a statutory authority, as it contradicts the requirement of explicit authorization in the statute, which applies when it comes to an infringement of individual rights. In the meantime, the District Court rejected the Applicant's claim that she acted within the framework of a voluntary track, which is possible for her by virtue of the provisions of Section 3 ofthe Police Ordinance [New Version], 5731-1971 (hereinafter: the Police Ordinance).  The court distinguished between the case at hand and the voluntary outline that was discussed and approved as such in the High Court of Justice case 7846/19 Adalah Legal Center for Arab Minority Rights in Israel v.  State Attorney's Office Cyber Unit [Nevo] (April 1, 2021) (hereinafter: the Adalah case or the Adalah High Court of Justice).  This is when it was determined that in our case, "this is a deliberate act of exercising coercive governmental authority against a foreign entity, in a foreign country and with respect to a foreign account, with the aim of seizing a person's property" (see: paragraph 37 of the decision that is the subject of this application).  The District Court held, inter alia, that since the seizure of the digital wallet violates a person's right to property, freedom of occupation and good name; Since Tether is essentially close to a bank that owes a fiduciary duty to its customers; and also in view of the Applicant's two-stage mode of action, when her first application to the company, which was envisaged to be an action based on the company's voluntary discretion, was a "trigger" for the coercive enforcement action - which is done as a complementary step to the issuance of the order - we are dealing with, in fact, a coercive action that violates the right of the individual.  This determination led the District Court to the conclusion that the Applicant's application to Tether could not have been made without explicit authorization in the statute, which speaks of "Rachel, your little daughter".
14. In addition to the aforesaid, the District Court noted in the decision that is the subject of the application that the evidence presented to it indicated the existence of a reasonable suspicion of the existence of the offenses being investigated by the Applicant. As I have already stated, the existence of such a reasonable suspicion is not in dispute.  Additional arguments raised by the respondent were not answered since it was determined that the freezing order was issued without authority and was null and void.
15. Hence the application for leave to appeal before me.

The parties' arguments

16. The application for leave to appeal before me (hereinafter: the application in question) was accompanied by a request to stay the execution of the District Court's decision. I granted this last request on March 26, 2026, for obvious reasons (preventing the smuggling of cryptocurrencies).
17. According to the Applicant, as presented in the Writings and in the hearing held before me on April 20, 2026, the application in question raises a fundamental legal question regarding the existence or absence of the authority of the Israel Police to contact a foreign company that manages cryptographic assets, with a request for the voluntary freezing of such an asset, in the event of a reasonable suspicion linking the asset to the commission of an offense, and to instruct the Israel Police to seize this asset if and when it is transferred to it. Further to this argument, the Applicant notes the broad implications underlying the application.  According to her, the District Court's precedent-setting decision puts at real risk the ability of the Israel Police (and other law enforcement authorities) to deal with online crime that is carried out in the Internet space, which includes offenses of money laundering and the financing of terrorist acts in cryptocurrencies - in a way that is liable to establish a "digital city of refuge" for criminals and terrorist elements.
18. In the meantime, it was argued that the District Court erred in applying strict territorial rules to cyberspace, in a manner that ignores the unique nature of the Internet and the fact that foreign companies that manage digital assets choose, as part of their declared policy, to voluntarily cooperate with law enforcement authorities around the world. According to the Applicant, the normative source for her application to Tether is anchored in the general powers of the police to prevent and act to detect offenses, which were granted to it in section 3 of the Police Ordinance.  This is similar to the action discussed in the Adalah case, since in our case we are dealing with voluntary cooperation that does not amount to coercion and which contains, if at all, only a limited violation of the rights of the owner of the property.
19. The Applicant complains about the District Court's determination that the freezing order was issued without authority.  Although the Applicant does not dispute that the freeze order was not drafted optimally, she argues that the court's ruling ignores the fact that Tether, the Israel Police, and the Magistrate's Court itself did not view it as a coercive order.  This is mainly because the need to issue the order stemmed from the company's policy as part of the voluntary cooperation with the Israel Police, which was agreed upon by it, and also because the freezing of the wallet was done by the company voluntarily, following the applicant's request, even before the order was issued.  In any event, the Applicant argues that the District Court should have allowed her to amend the order and replace it with the new, properly worded freezing order.  In this context, the Applicant further clarifies that the new freeze order does not in itself authorize the Israel Police to act, but rather that it is necessary for the purpose of presenting it to Tetherand especially for the actions that will come later - if and when Tether transfers the tokens in the wallet to the State of Israel.
20. On the other hand, the respondent is of the opinion that there is no reason to accept the application in this case. In this context, it was argued that the proceeding in question focused on a concrete order that was issued unlawfully without having the authority to issue it as it was issued.  The decision that is the subject of this application - which is correct in itself, according to the respondent - cannot have implications for other cases in which the police will conduct themselves lawfully.  For this reason, this is not a decision with broad implications.
21. With regard to the freezing order itself, the respondent is of the opinion that the order is illegal for the reasons on which the District Court relied in the decision that is the subject of this application. In this context, it was argued that an Israeli court is not authorized to order Tether to freeze the Respondent's wallet.  Therefore, once the freezing order was issued unlawfully, there is only one solution to the situation that has arisen: the cancellation of the order.  The Respondent further clarified that in his view, the Israel Police's request to Tether through the order does not constitute an invitation to voluntary cooperation.
22. After hearing the arguments of the parties, I asked to submit various documents to my review. After the State submitted the necessary material, counsel for the Respondent informed me, on May 6, 2026, that he had nothing to add to the materials he had already submitted for review.
23. At this point, the time is ripe to decide on this application.

Discussion and Decision

24. Leave to appeal "in a third incarnation" is granted only in cases that raise a legal question with significant broad implications, which has not yet been decided and which deviates from the individual interests of the parties. This criterion also applies to requests to appeal "in a third incarnation" within the scope of section 38a(b) of the PDP (see: Miscellaneous Criminal Applications 5769/12 Mizrahi v.  State of Israel, para.  16 [Nevo] (August 20, 2012); Miscellaneous Criminal Applications 2189/14 Feldman v.  State of Israel, para.  5 [Nevo] (April 24, 2014); Miscellaneous Criminal Applications 5564/14 Tenenbaum v.  State of Israel [Nevo] (September 18, 2014)).
25. I am of the opinion that the case at hand is one of these exceptional cases. This raises an important question of principle: Is the Israel Police authorized to initiate voluntary cooperation with an entity outside of Israel that manages crypto assets in order for this entity to voluntarily freeze crypto assets suspected of being infected with criminal activity concerning Israel, such as fraud, money laundering, acts of terrorism and organized crime, and to transfer such assets voluntarily to the Israel Police?

An accompanying question, which also arises in this case, is: Is the Magistrate's Court operating in Israel authorized to issue an order before it that constitutes a judicial reference for the Israel Police to act as aforesaid, whenever such an order is necessary to ensure cooperation between the police and the foreign entity that manages cryptographic assets suspected of being infected with criminal activity, and the seizure of the assets in the digital wallet, to the extent that this wallet is transferred to the Israel Police by the foreign entity?