Custody of court-seized Bitcoins: ‘OP_COURT’

This post was first published on Medium.

We have implemented a smart contract designed for custody and management of seized bitcoins from an individual under suspicion of engaging in illegal activities. The contract has potential to make it more efficient, transparent, and auditable to manage confiscated bitcoins on chain throughout a legal proceeding.

It is important to note that this is more of a conceptual exploration for illustrative purposes than a ready-to-deploy solution, especially considering the varying legal nuances and jurisdictional complexities of actual court cases.

General process of asset seizure in legal contexts

Asset seizure is a common practice in legal systems worldwide, particularly in criminal cases.

1. Reasons for seizure

• Criminal investigations: Assets are often seized in the course of criminal investigations, especially in cases involving illegal activities like drug trafficking, fraud, or money laundering.
• Evidence or proceeds of crime: The seized assets can either be evidence in the case or are believed to be proceeds from the criminal activity.

2. Legal authority and process

• Warrants and court orders: Typically, law enforcement agencies must obtain a warrant or court order to seize assets, ensuring the process adheres to legal standards.
• Immediate seizure in certain circumstances: In some situations, assets can be seized immediately without a warrant, such as during an arrest or when the assets are in plain view and linked to a crime.

3. Custody and management of seized assets

• Secure storage: Once seized, assets are cataloged and stored securely.
• Management: In cases involving large sums of money or valuable property, proper management is crucial to maintain the asset’s value.

4. Legal proceedings

• Connection to criminal activity: The legal process involves establishing the connection between the seized assets and criminal activity.
• Opportunity for contesting seizure: Defendants typically have the right to contest the seizure in court.

5. Outcome-based disposition

• Return to owner: If the owner is acquitted, or the assets are found not to be connected to criminal activity, they are usually returned.
• Forfeiture: If the assets are proven to be proceeds of crime, they may be forfeited to the state or used to compensate victims.

6. Post-trial scenarios

• Appeals and further claims: Post-trial, there might be appeals or additional claims regarding the seized assets, potentially altering their final disposition.

We focus on point 3 here.

Court Seizure Custodial Smart Contract

Our smart contract aims to manage and automate certain aspects of this process using the blockchain. Specifically, it is used to manage the process of holding and potentially releasing seized funds in a legal scenario. It incorporates roles such as a judge and a jury, with functionalities that allow for the resolution of a case, dismissal if a verdict isn’t reached by a set deadline, and the provision for an appeal, where an appellate judge can be assigned.

class CourtCase extends SmartContract {
    static readonly JURY_THRESHOLD=6
    
    @prop()
    jury: FixedArray12>
    
    @prop(true)
    judge: PubKey
    
    @prop()
    defendant: Addr
    
    @prop()
    dismissalDeadline: bigint
    
    …
    @method()
    public resolve(
        sigsJury: FixedArraytypeof CourtCase.JURY_THRESHOLD>,
        sigJudge: Sig,
    ) {
        // Check jury signatures.
        assert(this.checkMultiSig(sigsJury, this.jury), ‘jury invalid multisig’)
        // Check judge signature.
        assert(this.checkSig(sigJudge, this.judge), ‘judge invalid sig’)
        // Release funds to defendant.
        let outputs=Utils.buildAddressOutput(
            this.defendant,
            this.ctx.utxo.value
        )
        outputs +=this.buildChangeOutput()
        assert(hash256(outputs)==this.ctx.hashOutputs, ‘hashOutputs mismatch’)
    }
    
    @method()
    public dismiss(
        sigJudge: Sig,
    ) {
        // Check judge signature.
        assert(this.checkSig(sigJudge, this.judge), ‘judge invalid sig’)
        // Check deadline.
        assert(this.timeLock(this.dismissalDeadline), ‘dismissal deadline
        not reached’)
        // Release funds to defendant.
        let outputs=Utils.buildAddressOutput(
            this.defendant,
            this.ctx.utxo.value
        )
        outputs +=this.buildChangeOutput()
        assert(hash256(outputs)==this.ctx.hashOutputs, ‘hashOutputs mismatch’)
    }
    
    @method()
    public appeal(
        sigJudge: Sig,
        appellateJudge: PubKey
    ) {
        // Check judge signature.
        assert(this.checkSig(sigJudge, this.judge), ‘judge invalid sig’)
        
        // Set appellate judge as the new judge.
        this.judge=appellateJudge
        
        // Propagate contract.
        let outputs=this.buildStateOutput(this.ctx.utxo.value)
        outputs +=this.buildChangeOutput()
        assert(hash256(outputs)==this.ctx.hashOutputs, ‘hashOutputs mismatch’)
    }
}

Key features of the contract:

• Jury and Judge Roles: The contract includes properties for a 12-member jury (jury) and a judge (judge). The jury’s decision is based on a threshold of 6 members.
• Defendant: Address for the defendant (defendant) is defined, indicating the potential destination for the seized funds.
• Dismissal deadline: A deadline (dismissalDeadline) is set, after which the case can be dismissed if not resolved.

Public Methods:

• resolve: This method requires a quorum of jury’s signatures and the judge’s signature to return funds to the defendant when he is innocent.
• dismiss: The judge can dismiss the case after the dismissal deadline, releasing funds to the defendant.
• appeal: The case can be appealed by assigning a new appellate judge, keeping the funds within the contract’s control recursively until further resolution.

The full code of the smart contract is available on GitHub.

Acknowledgements

This contract is inspired by this example in BitML.

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