On November 30, 2020, the Ashdod Magistrate Court in Israel sentenced two defendants convicted of forgery, impersonation, and fraud in connection with fraudulent receipt of cryptocurrencies. (CrimC (Ash) 45739-08-18 State of Israel v. Matan Bunder & Matan Bunder (decision by Judge Liat Shamir Hirsh, Nov. 30, 2020).)
The defendants admitted in accordance with a plea bargain to have conspired to fraudulently obtain Bitcoin and Etherium (cryptocurrencies) from the complainants.
As part of the conspiracy, the second defendant created fictitious accounts on Facebook, using the identity details of the complainants without their knowledge or permission. The first defendant used the fictitious accounts to enter cryptocurrency trading communities, contact the complainants, and negotiate the details of cryptocurrency purchase transactions with them. He then obtained from the complainants their selfies and photocopies of their identity cards under false pretenses and provided them to the second defendant.
The second defendant then forged documents presumed to be bank documents confirming the transfer of payment for specific transactions to bank accounts provided by the complainants. Relying on the misrepresentation, the complainants transferred the cryptocurrencies to digital wallets held by the defendants. After redeeming the money in the digital wallets and dividing it among themselves, the second defendant deleted the fictitious accounts he had created on Facebook.
According to the Penal Code (Amendment 113) 5772-1992, in sentencing a defendant a court must ascertain the existence of an appropriate relation between the severity of the offense under the circumstances, the degree of the defendant’s guilt, and the type and degree of punishment. In determining the “appropriate penalty range” on the basis of this rule, the court will take into account the social value harmed by the commission of the offense, the extent of the harm, the commonly used punishment policy, and the relevant circumstances.
Judge Hirsh determined that it was undisputed that the offenses perpetrated by the defendants in the current case constituted an infringement on the complainants’ protected rights to property, privacy, and freedom of choice. By their actions, Hirsh held, the defendants also violated protected rights to free and reliable trade and caused harm to the public’s trust in transactions involving cryptocurrency.
In Hirsh’s opinion, considering that the offenses were jointly committed by the defendants in a systematic manner that involved forging documents and impersonation, and considering the size of the finances involved, the degree of violation of the protected values cannot be found at the low threshold for the appropriate penalty range. In her view, to determine the degree of harm to these protected values,
[t]he question must be asked – whether the anonymity of the transaction in cryptocurrencies and the lack of supervision of these currencies, together with the parties’ understanding of the high risk involved in the transaction, may affect the degree of harm to the protected social value, without disputing the very need to protect those whose money has been fraudulently taken. (Para. 37.)
Hirsh determined that the interest in providing an adequate protection for cryptocurrency users took priority over the degree of risk taken by the complainants in engaging in trade in cryptocurrency. The need to protect proper trading has especially intensified, she noted, in light of the social distancing “imposed on the citizens of the world” at the present time. This has increased the use of digital means in commerce and resulted in business operations that are frequently conducted without a meeting between the parties, and often without the parties knowing who stands on the other side of the screen. Hirsh explained:
The balance between these considerations will determine the degree of harm to the protected value, on the one hand, with regard to the recognition of technological changes appropriate to our time and the need for stability and protection of the public, and the nature of the trade and the risks involved on the other hand. (Para. 42.)
Examining the relevant facts of the case, Hirsh concluded that the defendants’ actions constituted a violation of protected values in the intermediate threshold of the appropriate penalty range.
In determining the appropriate penalty within that range, Hirsh considered the defendants’ personal circumstances, their young age and lack of previous criminal record, the chances for their rehabilitation, the fact they had returned the amount fraudulently obtained, and the need to deter others from engaging in similar activities. On the basis of these considerations, she imposed on the defendants varying community service terms, along with fines.