How I was made a criminal
As of February 10, 2022, all my accounts and property have been seized, and I and I were left without means of subsistence. This is done sneakily, cynically, and illegally by the Organized Crime Unit of Latvian Police: no notification and no way to find out what is happening. This is the story of what happened.
To begin with, the answers to just two of the most critical questions:
Have I done everything I can to legalize my income in accordance with the country's current laws? YES.
Did I break any laws or platform rules when I sold my art as an NFT? NO.
Legalization of income
I thought about how selling my art as an NFT could be my primary source of income right after the first successful sale. In the legislation of Latvia (and as far as I know in other countries as well) there are no provisions on this matter. So I assumed that it falls under the rules of selling digital works. I called the VID (Latvian State Revenue Service) and asked in detail what I should do. I was told that I should first register as a self-employed person with the profession of an artist. And I have to convert my income into fiat and pay tax on the income in fiat because cryptocurrency is not money in Latvia.
Interaction with the bank
I have been a client of SEB bank for many years. Before withdrawing large amounts of money, I called them and asked about the procedure for such transfers. I was told that I would have to go through additional verification. That was fine with me. My first transfer was 30,000 EUR. The money did not arrive in my account, and I received a letter from the bank asking for details about the source of the funds. It took several days of correspondence with the bank. I provided all the information I could at the time: my artist history, my social networks, accounts on different platforms, data on payments and transactions, and a statement from Coinbase. My account was unblocked, and the money was deposited into it. Later there was another such blockage when I withdrew money not after sales but from my hardware wallet. I successfully passed the second check as well. I was sure from the beginning that everything would be okay because all my activities were transparent, and it was easy to trace my history as an artist. I transferred 8.7 million euros to my account in total. This is a significant part of my income for 2021. All conversions and transfers were made through Coinbase.
A visit to the state security service
At the beginning of October, I received a call from my previous job informing me that the State Security Service was interested in me. In particular, there were questions about the NFT. I called the State Security Service at the official number on their website, and suggested that they talk directly to me. I got a callback and was invited to their office on October 20, 2021. The visit was very productive and lasted two hours. It was immediately explained to me that this was not an interrogation but that the State Security Service has the right to ask anyone in the country what they are doing. They exercise this right concerning me. There were questions about how and when I became an artist, how I ran my social media and marketing, and what I would do with the money I earned. I told my whole story in great detail. The tone was amiable. At the end of the conversation, my interlocutor wished me good luck and said he liked my story and was very interested. He also promised to help to set up charitable foundations in Latvia to which cryptocurrency could be donated. As for me, I was happy that I was able to talk to a representative of the authorities of one of the higher departments and that I was able to convey my thoughts because it is not so easy to deal with people unfamiliar with the NFT world.
The year 2022 is upon us. I was actively working on my next project for Art Blocks and, simultaneously, trying to return to my music classes. On February 14, when I was about to buy some music production software, suddenly my card didn't work. I called the bank, and at first, they told me that some paperwork had come from the US, and they were dealing with it. I figured it was a tax report from Art Blocks that they would send over. But later, the bank called back and said that the Latvian police blocked the account. They refused to give any details, saying I should get a notice in the mail and that's how I would find out. Since I was not in Latvia, I called my girlfriend, who lives at the address where I was declared, and asked if there was any notice from the police. There was nothing. I figured the post office didn't have time to deliver it. But it wasn't there the next day or the day after. I needed an official representative to take care of this issue. I hired a lawyer. He asked me to get the case number from the bank. It wasn't easy. The bank refused to give that information, and I had to convince them. I found the case number: 11815000222 and that my accounts have been arrested since February 10. After calling the police, we also learned the name of the investigator: Ieva Gorska. That was the end of it. For three months, we could achieve nothing. Not a single paper, not a single dialogue. I could not find out my status, the reason for my arrest, what I was accused of, and whether I was indicted. From the first days, I began to receive the punishment: uncertainty and obscurity.
Uncertainty and obscurity
This is a classic technique of the secret services and the police. Ignorance of one's destiny and what is going on is exhausting for even the most psychologically strong people. To apply it in this case, Ieva Gorska deliberately broke the law. On May 9, 2022, in response to one of our complaints about unlawful actions, the prosecutor (not the police!) sent copies of the decision to arrest my accounts and property. They were dated February 9, 2022, and it was stated that I should get copies of these decisions and have the opportunity to appeal legally within ten days. These papers were just hidden from me so that I can't file a protest.
How did those three months go? Every day I woke up thinking that maybe today I would finally find out what was going on and went to sleep perplexed and frustrated. I gave up all collaborative projects and stopped creating altogether. I stopped studying because my productivity had dropped to zero. I spent my days idly, unable to start doing anything at all. With each piece of news, the situation worsened. The lawyer received letters from the police saying that he had no right to know anything and that nothing would be sent to him. This was beyond the sensible world I was used to living in as a citizen of a European Union country. It was as if the laws had stopped working. In the meantime, all the subscriptions to the services I was using stopped: cloud services and various applications. I had to transfer all payments to my girlfriend. I couldn't pay the bills I was getting. And the worst part was that it was unclear how long it could last and why it was happening. Everyone I talked to about it was shocked and couldn't even guess what it could be. But most of all, my lawyer was stunned because, for the first time in his practice, he was told that he had no right to request an arrest decision or any paper.
The first glimpses
On May 9, 2022, in response to another complaint about the investigator's misconduct, my lawyer received copies of the prosecutor's decision to seize the accounts and property. Prosecutor got tired of receiving these complaints and sent them himself. It turned out that the decision to arrest was issued on February 10, a week after the opening of the criminal case.The decision to arrest stated that I was receiving money from Coinbase, and therefore it is impossible to trace the source of funds. Also, the funds are considered criminally obtained if they are explicitly or implicitly received due to criminal acts. It does not matter where the crime took place. Also, the police do not need to determine which crime was committed. And this all suggests that my money is criminally derived. And therefore, it is necessary to seize all my money, as well as all subsequent receipts, into my account(!). Roughly speaking: arrest everything and forever. It is also stated that the bank, the prosecutor, and I should get this decision. And I can appeal it within ten days. I got this decision three months later. This ten days term are long gone.
And now, our task was to get the opportunity to appeal this decision, which at first glance looked absurd and did not stand up to any criticism from the legal side. It was beginning to make sense why it had been hidden for so long. We filed further complaints, and when we had the opportunity, we filed a protest against these illegal arrest decisions.
On June 7, 2022, my attorney received notice from Ieva Gorska, the investigator of my case. She suddenly stopped thinking of him as a "nobody" and sent him a document, which says that under the current law, within 45 days, I am instructed to prove the legality of the funds received. That I have to confirm the origin of all funds in my accounts from January 1, 2021, and identify all the individuals and legal entities with whom the transactions were conducted. That was something. I was allowed to justify myself.
Incompetence, shame and despair
On June 30, 2022, the court ruled on our objection. And it's pretty humiliating for the person who wrote the arrest decision. Ieva Gorska didn't bother to report what specific amount she wanted to arrest and why she wanted to arrest all the other money that will come into the account in the future. She just arrested everything and forever. The decision to arrest was reversed by court, and that decision was not subject to protest. My funds were free. It was a small victory - now I could pay 2.2 million euros of income tax and close my obligations to the state.
But only I thought so. Further events unfolded like a blockbuster. I notified the bank of the court decision, uploaded electronically signed court documents to my account, and asked them to unblock my accounts. It was June 30, Thursday evening. The next day the bank called me and told me that my accounts would not be unblocked because the bank had to get information about the court decision from "official channels." To the question of why an electronically signed document, which is legitimate in our country, is not, in their opinion, official, they did not answer me. The lawyer called the police to tell them to forward the judgment to the bank. But there, he was told that Ieva Gorska was no longer employed. The evening came, followed by the weekend. And then the fun part began. On Monday morning, the lawyer receives a new arrest order directly from the head of the Organized Crime Unit Pēteris Bauska . The police "urgently" (quote) issued a recent arrest on my accounts, asking the prosecutor to sign the papers on Sunday. The case has a new investigator: Kristīne Nicmane. And in the latest decision, it is written that the investigation revealed signs that indicate the legalization of the criminally gained funds using a complex scheme of transactions. It also shows specific amounts to be seized: 4 727 463.86 EUR in one account and 2 425 535.43 EUR in the second account. So it turned out that this is 12 and a half thousand more than my capital. I found this out by logging into my account at the bank. These amounts were frozen 10 minutes after we received the decision. This time the bank was lightning fast.
All the information collected on this site has been sent to the district court to protest the last property seizure decision. The same package has been sent to the Organized Crime Unit in response to an inquiry about the legality of the origin of my funds.
On July 18, 2022, the court represented by Judge Karīna Kazārova denied our objection to the new urgent decision to seize the accounts dated July 3, 2022. The refusal was based on the fact that the investigation materials had not yet been opened, and therefore the arrest was legitimate because these funds could be subject to confiscation. It also became known that the criminal case was initiated based on the conclusion of the Financial Intelligence Unit on 2 February 2022. And also that at this stage of the criminal proceedings, it is not the guilt of the person or the property subject to seizure that is decided, but whether there are legal grounds for seizing the property.
The New Investigator
There is a new investigator in the case: Nina Samorodova, and now she is the one who responds to all inquiries. It is worth noting that, unlike Ieva Gorska, she does it almost instantly. It would seem that this can only be good. But she immediately responded that all the information I had carefully collected, sorted and adapted over a month and a half, reflecting all my financial activities, was insufficient to stop the criminal case. She sent this response the same day the court refused to overturn the decision to arrest my funds. That means that she got the case materials from the court and our papers, and it took her no more than a day to get acquainted. I can only envy such speed of analytical thinking. But the logical conclusion is that the investigation does not care about my transactions and it's about something else.
The lawyer sent a statement to the investigator asking that they specify:
- What specific information do they need for them to verify the legality of my funds
- Why the information we gathered is not appropriate?
- What the investigation considers to be money laundering.
And also to invite me with a lawyer to explain the case from my side and attach documents from the State Revenue Service that my activities were legal and from the Financial and Capital Markets Commission that Coinbase can officially operate in the country.
August 10, 2022, a response was received. Nina Samorodova informed us that there is still no convincing evidence that the seized money was obtained legally. And also, it is up to me to prove that the funds were not obtained by illegal means (which I am trying my best to do) and that it is not the investigator's duty to give any explanations. But they call my lawyer and me for interrogation on August 16 at 10:00, and there, we will be informed of the additional information required to satisfy the investigator regarding the lawful origin of my funds.
On August 16, I was under interrogation. I spent three hours on camera talking about generative art, NFT, my career as an artist, and how I sold my art. The investigator Nina Samorodova and the prosecutor Uldis Cinkmanis were present at the meeting. The atmosphere was relaxed, and I had the impression that I was a victim of the previous investigator's negligence and long bureaucratic processes. Everyone was determined to solve the issue as soon as possible. On August 24, I have to come in with a computer and show how I create the art, sell it, and everything I have described verbally. I have a feeling that after that, it will be over. I hope it's not false.
It took a little over two hours to prove that I am Shvembldr, a generative artist and that my actions of selling art in the form of NFT are legal. I sat with my laptop in front of the camera and tried to show everything the police could have doubted. I showed that I owned all the social media accounts with the nickname Shvembldr and the domain shvembldr.com. I showed my GitHub with all the repositories of my art. I showed my first works and the last ones, as well as what I'm preparing now for the exhibition. I even did a little demonstration and drew a couple of gradient squares. Demonstrated all my cryptocurrency wallets and transactions and accounts on all platforms. Got nostalgic showing my first NFT on Hic et Nunc. I told them how they could check who bought my NFTs and what processes occur during sales on different platforms. The interrogation was attended not only by the investigator but also by an expert from the police.
A New Strike: The State Revenue Service
On September 9, 2022, I received a notice from the State Revenue Service of the Republic of Latvia. It said that I do not voluntarily pay my taxes and the accumulated debt. And that is why it was decided to enforce the collection of overdue tax payments using a total order on the taxpayer's property (movable and immovable property, including property held by third parties). Based on my 2021 tax return, I owe the state €2231591.71. They are divided into three payments:
- 25.07.2022 - 743863.90 €
- 23.08.2022 - 743863.90 €
- 23.09.2022 - 743863.91 €
As of July 25, 2022, I am assessed a penalty amount of 0.05% of the amount owed for each day past due. At first, this amount was about 372 Euros. From August 25, it is about 744 Euros, and from September 23, it will be more than 1115 Euros per day. On September 9, 2022, I owed an additional 23,000 Euros.
The absurdity of what was going on was beyond all possible limits. The police believe that I have made money by illegal means, but then it has to be confiscated, and I do not have to pay taxes. The State Revenue Service considers that it was earned money, and I have to pay taxes and will collect it from me. There is no protocol of interaction between these two structures. The day was filled with endless calls and writing statements but no clarity. This is an absolute nightmare for me! I withdrew money to a bank in Latvia with one sole purpose: to pay taxes and do good to my country. In response, my accounts were seized, and they declared me a criminal and now a debtor. My mental state is close to critical. I am about to be announced as a debtor worldwide, and I won't be able to have accounts in any financial institutions. I won't be able to work and earn until I pay back the debt. And then they will give my case to a bailiff who will run after me and try to take away my belongings… My computer where I create the art?
The conclusion for today
At this point, all efforts are focused on getting the State Revenue Service to reverse the judgment of foreclosure because of my tax debt and suspend the payment of taxes until a decision is made in the criminal case. I believe I have done everything to prove my innocence and the absurdity of the charges. I am 99% sure that what happened to me resulted from the error, incompetence, and slow bureaucratic procedures. I am full of hope for a speedy resolution of this case in my favor.