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Executive Summary

As criminal investigations increasingly involve Virtual Digital Assets (VDAs), law enforcement agencies face the critical challenge of securely seizing and managing these funds. The technical complexity, coupled with the need for an unimpeachable chain of custody, requires specialized solutions that go beyond traditional evidence handling.

Premier law enforcement agencies in India, including the Central Bureau of Investigation (CBI) and State Special Investigation Teams (SITs), rely on Liminal Custody to define and secure such assets.

Faced with managing digital assets from high-profile, multi-million fraud cases, these agencies required a secure, compliant, and agile solution. Liminal was appointed to provide a non-custodial “Sovereign Wallet-as-a-Service”, enabling the agencies to leverage advanced security technology while retaining full sovereign control over the seized assets.

1. The Challenge: Securing Seized Digital Assets in High-Stakes Investigations

World over, law enforcement agencies find themselves at the forefront of complex investigations involving large-scale cryptocurrency fraud. These operations require the seizure and secure management of substantial digital assets, presenting a unique set of operational hurdles:

• Urgent Need for Specialized Expertise: The agencies require immediate assistance to handle the technical intricacies of seizing and transferring digital assets held by perpetrators of multi-million frauds.
• Maintaining an Unbroken Chain of Custody: For evidence to be viable in court, the chain of custody for seized digital assets must be flawless. This necessitates a secure and compliant wallet solution capable of safeguarding assets from the moment of seizure until final disposition.
• Operational Complexity for Officers: Law enforcement officers, who are not necessarily cryptocurrency experts, need to be onboarded onto a platform that can manage the complexities of illicit digital assets while adhering to strict internal protocols.
• Requirement for Segregated and Secure Storage: To ensure the integrity of evidence, seized assets need to be held in segregated, highly secure wallets, preventing any co-mingling of funds or unauthorized access.

The situation demands more than just a software product; it requires a hands-on partner capable of providing both the technology and the expert guidance to navigate these challenges under the pressure of a live operation.

2. The Solution: A Sovereign, Non-Custodial Partnership

Liminal was appointed by the CBI and other agencies, to provide secure, non-custodial storage and management for the seized digital assets. This engagement established a new model for public-private collaboration, centered on empowering the agency rather than outsourcing control.

2.1. A Non-Custodial, “Sovereign Wallet-as-a-Service” Model

The cornerstone of the partnership is the non-custodial model. Liminal provides the secure wallet infrastructure and operational expertise, but the law enforcement agencies retain ultimate legal custody and sovereign control over the assets. This approach is critical as it ensures the chain of custody remains entirely within the agency’s authority, eliminating third-party counterparty risk and complex legal questions that arise from traditional custodial arrangements. Liminal’s role is to provide the underlying “wallet infrastructure” and “secure storage solutions,” acting as a technology enabler for the state.

2.2. Technology Deployed: MPC and Multi-Sig Wallets

To meet the high-security requirements, Liminal deployed specialized wallets built on a foundation of Multi-Party Computation (MPC) and Multi-Signature (Multi-Sig) technologies.

• Multi-Party Computation (MPC): This technology enhances security by splitting a private key into multiple encrypted shards, which are distributed among different parties or devices. To authorize a transaction, a cryptographic protocol is run where each party uses its shard, but the full key is never reconstructed in any single location. This eliminates any single point of failure, making it ideal for securing wallets that need to be accessible for operational purposes.
• Multi-Signature (Multi-Sig): This technology enforces procedural controls by requiring signatures from two or more independent private keys to approve a transaction. For law enforcement, this ensures that no single officer or compromised device can unilaterally move funds.

These wallets are not generic; they are precisely configured to adhere strictly to the law enforcement agency’s own Standard Operating Procedures (SOPs).

2.3. Hands-On Collaboration and Support

Recognizing the operational pressures and the specialized nature of the task, Liminal assembled a dedicated team to collaborate directly with the agency officers. This multi-dimensional effort involved:

• Upskilling the personnel on core concepts of VDA custody
• Enabling them to create self-custodial wallets with secure recovery practices
• Providing key insights on conducting searches for VDA operations
• Facilitating the complex transfer of illicit assets
• Creating segregated wallets for different cases and assets
• Supporting officers in complex asset movements including VDA conversions

This high-touch, collaborative approach was highlighted by law enforcement officials as being instrumental to the success of their operations.

3. Key Platform Capabilities for Law Enforcement

The Liminal platform provides institutional-grade features, crucial for the secure and compliant management of digital assets within a law enforcement framework.

• Robust Wallet Infrastructure: The platform offers a hybrid infrastructure of hot, warm, and cold wallets, allowing agencies to balance the need for operational accessibility with the high security of offline storage. All this is protected by enterprise-grade MPC and Multi-Sig technology.
• Liminal Firewall for Governance and Compliance: A powerful policy engine allows agencies to enforce their internal rules automatically, using:
  • Address Whitelisting: Requiring pre-approval of all destination addresses to prevent unauthorized transfers.
  • Spending and Transaction Limits: Setting hard caps on transaction amounts over specific time periods.
  • Role-Based Access Control (RBAC): Assigning specific roles (e.g., Owner, Admin, Member) and creating approval workflows to ensure that critical actions require authorization from multiple individuals.
• Automation Engine for Operational Efficiency: To reduce manual workload and minimize human error, the platform includes powerful automation tools:
  • Smart Consolidation: Automatically sweeps funds from multiple deposit addresses into a central secure wallet, streamlining the management of seized assets from various sources.
  • Smart Refill: Automates the process of maintaining balances in operational wallets for approved purposes, such as paying network fees.
• Comprehensive Auditing and Reporting: The platform generates immutable, on-demand audit logs and reports for all system activities, including user actions, policy changes, and transaction approvals. This provides a complete, verifiable record essential for maintaining the evidentiary chain of custody.
• A Foundation of Trust and Security: Liminal’s platform is built on a security-first approach, validated by top-tier industry certifications, including SOC 2 Type II, ISO 27001 & 27701, and the CryptoCurrency Security Standard (CCSS) Level 3.

4. Outcomes and Strategic Implications

The partnership between Liminal and law enforcement has yielded significant positive outcomes and established a powerful precedent.

• Operational Success: Success of high-pressure operations, ensuring the safety and integrity of seized assets throughout the process.
• A Proven Model for Public-Private Partnership: Established Liminal as a vital ally for law enforcement and serves as a blueprint for other government agencies globally. It demonstrates how agencies can leverage cutting-edge private-sector technology without compromising sovereign control.
• Strengthening the Digital Asset Ecosystem: Liminal is contributing to a safer and more regulated digital asset landscape, reinforcing its commitment to upholding the highest standards of security and compliance.

This case study demonstrates that a collaborative, non-custodial approach provides law enforcement with a powerful, secure, and legally robust framework for managing the challenges of digital asset seizure in the modern age.