2024.07.16

2022 (A) 1460

Keishu Vol. 78, No. 3

(Criminal Case)Judgment concerning a case in which the court found that the act of sending the transaction information related to the act of transfer of NEM (cryptoasset) after signing it with an illegally obtained private key for NEM is equal to providing "false information" as referred to in Article 246-2 of the Penal Code

Case charged for violation of the Act on Punishment of Organized Crimes and Control of Proceeds of Crime

Judgment of the Third Petty Bench, dismissed

Tokyo High Court, Judgment of October 25, 2022

A person participating in the NEM (cryptoasset) network cannot conduct a NEM transaction unless they sign the information necessary for conducting the NEM transaction (transaction information) with a private key linked to the NEM address they manage, and therefore, it can be said that the sending of the transaction information to the NEM network after signing it with a private key is required in order to confirm that the transaction is a NEM transaction by a person who legitimately holds the private key. Under such circumstances of the case, it should be said that the act of sending the transaction information related to the act of transfer of NEM to the NEM network after signing it with the illegally obtained private key is equal to providing "false information" to the effect that the transaction is being conducted by a person who legitimately holds the private key, to the NIS nodes (servers) that make up the NEM network.

(There are concurring opinions.)

Article 2, paragraph (2), item (i) of the Act on Punishment of Organized Crimes and Control of Proceeds of Crime; Article 11 of the Act on Punishment of Organized Crimes and Control of Proceeds of Crime (prior to the amendment by Act No. 97 of 2022); Article 246-2 of the Penal Code

The final appeal is dismissed.

Among the reasons for final appeal stated by the defense counsel, KURACHI Tomohiro, ITO Takeru, and MATSUDA Issei, the argument of violation of a judicial precedent is irrelevant in this case because the cited judicial precedent addressed a different type of facts, and the rest, including the argument of violation of the Constitution, are in effect arguments of mere violation of laws and regulations and erroneous finding of facts. None of these reasons constitutes any of the reasons for a final appeal as referred to in Article 405 of the Code of Criminal Procedure.

In consideration of the defense counsel's arguments, the Court makes a determination by its own authority.

1. According to the findings in the judgment in first instance upheld by the judgment in prior instance as well as the case records, it is found that the NEM (cryptoasset or cryptocurrency) received by the accused was part of the NEM (hereinafter referred to as the "NEM in question") that an unidentified person transferred from the NEM address managed by Company A (a stock company) to the NEM address managed by the unidentified person and others, using Company A's private key for NEM that had been illegally obtained (the act of transferring the NEM in question is hereinafter referred to as the "Act of Transfer"). In transactions of NEM, when information necessary for conducting a transaction, such as the transaction date, transaction volume, and sending and receiving addresses, (hereinafter referred to as "transaction information") is sent to the NEM network after being signed with a private key that is linked to the sender's NEM address, any one of the NIS nodes (servers) that make up the NEM network will use a public key linked to the sender's NEM address to verify whether the information was signed with the private key, and will mechanically confirm the consistency of the transaction information and approve the transaction. The transaction approved in this manner is then combined with other approved transactions to form a block, and blocks thus formed are accumulated in sequence and incorporated into a blockchain, and the entire NEM network shares the information in the blockchain, from the first block to the most recent block. This makes it virtually difficult to rewrite the information and the transaction is finalized.

2. The defense counsel argue as follows. The act performed by the unidentified person to send the transaction information related to the Act of Transfer to the NEM network using the illegally obtained private key cannot be regarded as providing "false information" as referred to in Article 246-2 of the Penal Code, and the Act of Transfer does not constitute the crime of computer fraud, and therefore the NEM in question does not fall within the scope of "property obtained through a criminal act" referred to in Article 2, paragraph (2), item (i) of the Act on Punishment of Organized Crimes and Control of Proceeds of Crime (hereinafter referred to as the "Organized Crime Punishment Act"), and the accused is not guilty of the crime of violation of Article 11 of the Organized Crime Punishment Act prior to the amendment by Act No. 97 of 2022 (hereinafter referred to as the "crime of receiving criminal proceeds").

3. However, a person participating in the NEM network cannot conduct a NEM transaction unless they sign the relevant information with the private key linked to the NEM address they manage, because, without such signing, a transaction will not be approved by the NIS nodes or incorporated into the blockchain. Therefore, it can be said that the sending of the transaction information to the NEM network after signing it with a private key is required in order to confirm that the transaction is a NEM transaction by a person who legitimately holds the private key. Under such circumstances, it should be said that the act of the unidentified person to send the transaction information related to the Act of Transfer to the NEM network after signing it with Company A's private key for NEM that had been illegally obtained is equal to providing "false information" to the effect that the transaction is being conducted by Company A, which legitimately holds the private key, to the NIS nodes that make up the NEM network. The judgment in first instance ruled that the Act of Transfer constitutes the crime of computer fraud and the NEM in question falls within the scope of "property obtained through a criminal act" as referred to in Article 2, paragraph (2), item (i) of the Organized Crime Punishment Act, and found the accused who received part of the NEM in question to be guilty of the crime of receiving criminal proceeds. The determination by the court of prior instance that upheld the judgment in first instance is justifiable.

Accordingly, in accordance with Articles 414 and 396 of the Code of Criminal Procedure, the Court unanimously decides as set forth in the main text of the judgment. There are concurring opinions by Justice IMASAKI Yukihiko and Justice HAYASHI Michiharu.

The concurring opinion by Justice IMASAKI Yukihiko is as follows.

I agree with the court opinion, but I would like to give some comments on my understanding in relation to the reasons for final appeal, including the argument that since the NEM system does not authenticate user information, the act performed by the unidentified person to send the transaction information related to the Act of Transfer to the NEM network after signing it with the illegally obtained Company A's private key for NEM is not equal to providing "false information."

Under the Payment Services Act, cryptoassets such as NEM are defined as property value which can be used in relation to unspecified persons as payment instruments and can also be purchased from, sold to, and exchanged with unspecified persons, and which can be transferred by using an electronic data processing system. At the time of the incident of this case, a number of cryptoassets were being issued using technologies, such as blockchain and public key cryptography, and it can be said that their use as assets, etc. had been rapidly expanding and they had been widely used as the subject of transactions, and markets had been formed for them, based on the premise that they could be exclusively controlled by using private keys.

In light of the roles that cryptoassets such as NEM play in society and the economy and their importance, etc., the Payment Service Act, etc. provide for regulations on cryptoasset exchange service providers who participate in cryptoasset networks for the purpose of protecting users who conduct transactions via cryptoasset exchange service providers. After the incident of this case, the Financial Instruments and Exchange Act was amended by Act No. 28 of 2019 to regulate unfair trading of cryptoassets and provide more direct protection of the rights of those participating in cryptoasset networks. There may be little objection to the fact that if a person who is not the legitimate holder of a private key transfers cryptoassets such as NEM from an address linked to that private key to another address after the signing with the private key that has been illegally obtained, the legitimate holder of the private key can make a civil claim against the person who transferred the cryptoassets, at least on the grounds of unjust enrichment or tort.

In the field of criminal law as well, an act that violates the right for NEM held by a legitimate holder of a private key can be subject to punishment as long as the act satisfies the constituent requirements of a crime.

The reason that NEM is used as the subject of transactions by a large number of unspecified network participants is that society has confidence in the NEM system's ability to ensure static and dynamic security in transactions. The applicability of "false information" cannot be determined without considering the actual use of NEM, and the roles, importance, etc. of cryptoassets such as NEM in society and the economy, and it cannot be logically deduced from the mechanism or operation of the system on a stand-alone basis. In this case, the unidentified person, who is not a legitimate holder of a private key, sent the transaction information related to the Act of Transfer of NEM from the NEM address managed by Company A, which is linked to the company's private key, to the NEM address managed by the unidentified person and others, after signing the transaction information with the company's private key that had been illegally obtained. It is true that the NEM system does not have a mechanism to determine whether the person who signed the transaction information is a legitimate holder of a private key. However, society's confidence in the NEM system mentioned above is secured by the fact that the legitimate holder of a private key can exclusively control NEM through the management of the private key. If a person other than the legitimate holder of a private key obtains the private key by an illegal method and uses it for the signing, this will harm the exclusive control of the legitimate holder of the private key over NEM and damage society's confidence in the NEM system. From this perspective, the act of sending the transaction information related to the Act of Transfer to the NEM network after signing it with the illegally obtained private key can be described as the act of providing the transaction information, in which the sender of the information is disguised as the legitimate holder of the private key, to the NIS nodes that make up the NEM network. Such act is nothing other than an act of providing "false information" to a computer.

Justice HAYASHI Michiharu is in agreement with the concurring opinion by Justice IMASAKI Yukihiko.

The public prosecutors in charge attended the trial.

Justice HAYASHI Michiharu

Justice UGA Katsuya

Justice WATANABE Eriko

Justice IMASAKI Yukihiko