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Court of Appeal:
Restitution Order Must Be Based on Current Value
Sixth District Rejects Contention That Requiring Transfer of Cybercurrency in Face-Amount of That Stolen
Creates a Windfall to Victims Because in Intervening Years, Since 2018, the Value Has
By a MetNews Staff Writer
The Sixth District Court of Appeal has rejected the contention of a convicted thief of Bitcoin and other cryptocurrencies from 13 victims in 2018 that a judge erred in ordering restitution by his transferring digital money of the same kind and amounts as he pilfered even though the value then was about $1.56 million and the current worth is roughly $15.9 million.
Kalvin Kimbo Ung, who pled no contest in 2021 to one count of identity theft, one count of attempted grand theft, and 10 counts of felony grand theft and was sentenced to 10 years in prison, asserts that the order, made pursuant to Penal Code §1202.4, creates a windfall for the victims.
Presiding Justice Mary J. Greenwood authored the opinion, filed Tuesday, affirming the restitution order, made by Santa Clara Superior Court Judge Elizabeth C. Peterson.
Wording of Statute
Subd. (f) of the statute provides, with exceptions that do not apply:
“[I]n every case in which a victim has suffered economic loss as a result of the defendant’s conduct, the court shall require that the defendant make restitution to the victim or victims in an amount established by court order, based on the amount of loss claimed by the victim or victims or any other showing to the court….The court shall order full restitution.”
Greenwood wrote:
“Ung’s claims rely on the premises that the dollar values of the stolen cryptocurrencies increased substantially after he stole them, and fluctuations in the cryptocurrency markets make it difficult to determine future dollar values. That much may be true, but we see no merit in Ung’s contention that the order provides the victims with an undue windfall by requiring restitution in-kind. The plain language of section 1202.4, subdivision (f) states restitution is required where the economic loss suffered by victims is a result of the defendant’s conduct. By stealing and taking control of the victims’ cryptocurrency, Ung deprived them of the ability to sell it for a profit after its value increased; whatever profits they lost were a direct consequence of Ung’s conduct. And based on the historical values of the cryptocurrencies as Ung himself documented, the likelihood that victims lost potential profits is more than hypothetical.”
No Authority Cited
She added:
“Ung cites no authority that would require the trial court to order payment in dollars instead of cryptocurrency. As the Attorney General notes, California courts have previously allowed restitution in the form of returning stolen property, and courts may further require that defendants pay additional amounts to compensate victims for losses in the value of the returned property.”
The presiding justice commented that even if payment in conventional currency had been ordered, the amount would have to have been set at approximately $15.9 million. She pointed to a portion of §1202.4 that specifies:
“The value of stolen or damaged property shall be the replacement cost of like property….”
Greenwood declared:
“Here, the replacement cost of the cryptocurrencies would include the increase in dollars required to buy them in the markets at the time of replacement.”
She noted:
“Given market fluctuations, the replacement cost in dollars would depend on exactly when the replacement was made, but the trial court circumvented this problem by ordering Ung to return the cryptocurrencies instead. We see no abuse of discretion in the court’s solution to this problem.”
‘SIM Swapping’
The thefts were accomplished by “SIM swapping,” and Ung’s conviction was portrayed in news stories in 2021 as the first one, or one if the first, for such activity. “SIM” is an abbreviation for “Subscriber Identification Module.”
Cell phones have such a component. As Greenwood explained it:
“[T]he thief tricks the victim’s phone carrier into switching the victim’s phone number to a SIM card in the thief’s phone, thereby hijacking the victim’s phone number. The thief then prompts the website hosting the victim’s financial account to send a temporary security code to the hijacked phone number, whereupon the thief accesses the account and transfers the assets out of it.”
Cybercurrencies that were appropriated other than Bitcoin were Bitcoin Cash, Ethereum, Cardano, Monero, and Stellar.
The case is People v. Ung, 2023 S.O.S. 766.
Copyright 2023, Metropolitan News Company