The fractured political relationship between New Zealand and the Cook Islands has been dealt another major blow.
Confidential documents leaked to 1News reveal the Cook Islands government was looking at new plans to seize tainted cryptocurrency worldwide.
Experts say it amounted to state-sponsored hacking, and the move has set alarm bells ringing with the New Zealand Government.
Last year in Rarotonga, a cryptocurrency bill, drafted by US company Drumcliffe, was tabled in the realm country's parliament but rejected after Crown Law deemed it deeply flawed, unconstitutional and essentially validated criminal activities.
Now, a similar bill, the Cook Islands Cryptocurrency (Ransomware Suppression) Bill 2025, has been drafted and is currently under review.
James Little, the principal of Drumcliffe, was in Rarotonga meeting with government figures, including prime minister Mark Brown.
Drumcliffe, which has links to deep-sea mining exploration in the Cook Islands, declined to comment on the draft legislation. But experts who've examined it say some changes have been made but it was riddled with red flags.
The legislation tabled in Parliament has far-reaching and potentially serious international ramifications. (Source: 1News)
Essentially, it allowed agents to hack into accounts they suspected could hold tainted cryptocurrency and seize it — the bill was being sold as a way the Cook Islands could compensate victims and stop cyber criminals from profiting.
Associate professor of Canterbury University's Pacific Regional Security Hub, Jose Sousa-Santos, said the Cook Islands would place itself at risk if the draft bill were passed.
"From a security perspective, I think the Cook Islands does not have the infrastructure or the capability to engage in these kinds of activities and, if any criminal entities want to target Cook Islands back after any attempts at recouping money, that would make the Cook Islands an international target for traditional organised crime," he said.
The recovery methods of the supposed cryptocurrency were also causing concern. Jeff Nijsse, a cryptocurrency specialist with RMIT University, said there was nothing to stop recovery agents from going about "what I would call state-sanctioned hacking".
He said the bill explicitly permitted private agents to engage in "finding and fully exploiting system vulnerabilities or system misconfigurations", "bypassing authorisation and authentication mechanisms," and "installing a backdoor for future access".
And they could do a warrantless search based only on their "reasonable grounds".
He said it was not clear to him how the Cook Islands would benefit.
Sousa-Santos said New Zealand was meant to be consulted in regards to foreign policy for its realm country, the Cook Islands, as any fallout would land on Aotearoa.
Foreign Affairs Minister Winston Peters' office agrees. Just days ago, 1News revealed he had suspended around $30 million in aid after the Cook Islands signed controversial agreements with China without consulting New Zealand.
In a statement today, a spokesperson said the draft bill was one in a series of actions that have created challenges in the NZ-Cook Islands relationship in recent times.
Those actions also included plans for a separate Cook Islands passport and the misuse of the Cooks shipping registry, as well as a lack of consultation over the China agreements.
The spokesperson said New Zealand had previously expressed serious concerns to the Cook Islands government about the proposed legislation that would allow for the seizure of cryptocurrency outside of its jurisdiction.
In particular, "its potential to be used to contravene New Zealand law, undermine New Zealand's security and breach the rights of New Zealanders … we would expect the Cook Islands to consult us about any such plans in keeping with our free association agreement".
Drumcliffe declined to comment on the draft bill.
In a statement to 1News, the Cook Islands government said the draft legislation hadn't been tabled and was "going through internal processes to ensure it aligns with legal standards, national priorities and international obligations".
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