Brazil's judiciary authorizes the use of non-fungible tokens (NFTs) to serve subpoenas in crypto fraud case

Brazil's judiciary has authorized the use of non-fungible tokens (NFTs) to serve subpoenas to unidentified individuals in a high-profile crypto fraud case.

Brazil's judiciary has authorized the use of non-fungible tokens (NFTs) to serve subpoenas to unidentified individuals in a high-profile crypto fraud case.

The decision is part of the bankruptcy case of BWA Brazil, a digital currency investment company that is being sued for fraud involving 11,200 bitcoins, currently valued at approximately $900 million.

The ruling comes in response to a request to pause the statute of limitations on claims linked to crypto assets that were allegedly purchased using creditor funds. A court-appointed trustee overseeing BWA Brazil's bankrupt estate requested permission to serve digital subpoenas using NFTs.

The tokens, which will contain legal documents from Brazil's Public Prosecutor's Office, will be delivered to Bitcoin wallet addresses that are connected to the contested transactions.

Court decision accepts the use of NFT subpoenas

In the ruling, the court highlighted the importance of protecting the creditors, stating:

“Those who suffered multi-million dollar losses cannot be further harmed by legislative delays in keeping up with technological innovation. Therefore, I authorize the court-appointed trustee to take all necessary actions to carry out notification of this interruptive protest [which pauses lawsuit deadlines] via electronic communication using NFTs.”

The measure will only be used to target people whose identities are not known but whose Bitcoin blockchain activities can be monitored.

According to the bankruptcy estate, the 11,200 BTC were purchased using funds from BWA Brazil's clients before the company went out of business. This means that the clients could be sued to recover the funds.

Four crypto exchanges, including Bit Blue, Mercado Bitcoin, Brasiliex, and Bitcambio, have been instructed to notify the wallet owners involved in the case by forwarding copies of the court's ruling and the initial legal petition.

BWA Brazil: What's happened so far

BWA Brazil, which was founded in 2017 by Paulo Roberto Ramos Bilibio, presented itself as an investment firm offering exposure to Bitcoin. It managed to attract customers with promises of fixed monthly returns of 5% on deposits, which economists say are not possible considering Bitcoin's volatility.

The company collapsed in early 2020 after freezing withdrawals and filing for a Chapter 15 bankruptcy petition, leaving investors with an estimated R$300 million (approximately $52.2 million) in losses. Authorities later identified BWA as one of Brazil's largest alleged crypto pyramid schemes.

The company was ordered to undergo judicial collection in July 2020, a process that helps companies pay back their creditors. However, less than a year later, the court changed its mind and declared the firm bankrupt because there was no evidence that it had tried to pay back customers.

Bilibio and his business associate, Jessica da Silva Farias, are currently facing charges for allegedly using customer funds to buy bitcoin before the company's collapse. However, both remain at large, and there have been no reports of arrests or sightings.

In other news, Brazil's top financial authority has imposed new restrictions on crypto investments for pension funds.

Local news publications report that the National Monetary Council (CMN) has barred closed pension funds, known as Entidades Fechadas de Previdência Complementar (EFPCs), from investing in Bitcoin or other digital assets. The EFPCs manage retirement savings for unionized and corporate employees, traditionally investing in bonds and equities.

“The resolution also prohibits investments in virtual assets, considering their specific investment characteristics and associated risk,” a Ministry of Finance notice explained.

However, Brazilian citizens seem unperturbed by the regulatory attention on crypto.

A survey conducted by Datafolha and Paradigma Education, commissioned by Hashdex and Coinbase, and published by local news outlet Portal do Bitcoin, has revealed that among more than 2,000 participants, virtual currencies ranked as the fifth most popular investment option.

The survey, which was conducted in December 2023, found that 16% of the participants held digital assets, placing it behind traditional choices such as money stored at home (24%) and investment funds (19%), but outperforming assets like foreign currency, bonds, gold, and stocks. Savings accounts were the most preferred investment tool, with 31% opting for this method.

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