Crypto exchanges, cryptic court rules and the mystery of the unknown defendant…

Posted: 29/10/2025

For crypto exchanges, compliance with court orders over crypto wallets can be a delicate balancing act. Non-compliance could result in serious consequences, including contempt of court. However, delivery of the wrong crypto asset could also result in liability. And what is the remedy for the innocent party if the wrong crypto asset is delivered - can the order be set aside?

Civil Procedure Rule 40.9 states that if you have been 'directly affected by a judgment or order', you can apply to have the order set aside or varied, despite not being a party to it. However, the rule is spookily silent (or 'relatively lacking in prescription') on what is meant by 'directly affected'.

The recent crypto case of Jones v Persons Unknown & Ors [2025] EWHC 1823 (Comm) has now provided some clarity. Unfortunately for the applicant, crypto exchange, Kyrrex, a person is not 'directly affected' by a judgment if their assets have been mistakenly taken to comply with that judgment. In other words, if a judgment orders a step to be taken but the step is mistakenly taken against the wrong party, that party is not 'directly affected' by the judgment or order. Instead, it has been indirectly affected by the mistake. While the court had every sympathy with 'innocent losers' Kyrrex, it ruled that it had no standing to set aside the order.

This judgment highlights the far-reaching consequences of errors in the tracing and identification of crypto assets. From a practical perspective, it shows the importance of acting promptly and how delays in investigation or legal action can prejudice your position. It is also a salutary reminder to ensure that any tracing investigation is carried out by someone with the necessary expertise.

Background

Mr Jones, a Bitcoin investor, fell victim to a large-scale crypto investment scam in 2019. He was conned into agreeing to let fraudsters invest his Bitcoin. Instead of investing, however, they spirited away just under 90 Bitcoin (with a value of about £1.5 million) across the blockchain. Following expert tracing evidence, Mr Jones successfully obtained worldwide freezing and proprietary orders against persons unknown (the fraudsters) and an order against the crypto exchange Huobi Global Limited, to where the Bitcoin had been traced into Huobi wallets.

Mr Jones then secured summary judgment against the unknown fraudsters and Huobi (which had taken no active part in the proceedings). In 2022, following judgment and final orders, Huobi was ordered to deliver up the Bitcoin. It complied but in the course of compliance, deducted funds from wallets linked to Kyrrex, a separate company not linked to the fraud.

While Kyrrex complained at the time about the deduction, it was not until November 2024 that it applied to set aside the order.

The law

In addition to the analysis of the term 'directly affected', the court also concluded that Kyrrex's two year delay in bringing the application meant it was brought far too late. In the intervening period, Huobi had ceased to be listed on the Seychelles Register of International Business Companies and now was operating under the name HTX. This change, combined with the passage of time, would have made it almost impossible for Mr Jones to trace his Bitcoin through other exchanges. Accordingly, the delay adversely prejudiced Mr Jones and the court ruled this was also a reason not to set aside the order.

The lessons

While Mr Jones successfully obtained the remedy he sought (the delivery up of the stolen Bitcoin), a problem was created in obtaining that remedy. According to Kyrrex, the unjustified and mistaken deduction from its wallet had left it liable to claims from its own customers.

The possibility and practicality of tracing Bitcoin and other cryptocurrencies is a complex technical and legal question. While the English courts now clearly accept that cryptocurrency is property and the Property (Digital Assets etc.) Bill intends to confirm the same), it can remain challenging to trace or follow. This is particularly the case where, as here, the cryptocurrency is traced to a 'mixed' wallet. A further difficulty here was that the account was recorded 'off-chain', meaning there was no clear blockchain analysis evidencing the arrangements between the exchange and its customers.

This judgment underscores the need for technically competent and robust expert evidence. While Kyrrex was not successful in this application, the court appears to have accepted that the initial expert evidence was inaccurate. This is likely to lead to greater challenges to expert tracing evidence in the future from both the courts and defendant exchanges.

Questions of applicable law and jurisdiction in tracing crypto assets also create complexity. While the position in English law is not yet clear, the emerging consensus (following a Law Commission consultation) suggests that digital assets are likely to be recommended to be deemed to be 'located' in law wherever the controller of the asset's private key is located.

While the Law Commission's consultation remains ongoing, should this approach be adopted, in a case such as this where a crypto asset is 'controlled' by fraudsters, strategic legal planning will be required to ensure that any additional jurisdictional hurdles are met.

Final thoughts

This case highlights the nuances and challenges in responding to court orders for third-party crypto platforms. While compliance with court orders is plainly desirable and necessary, the risks of inadvertent errors by decentralised systems are significant. As the courts continue to adapt to the challenges of new classes of assets - and new ways to defraud people of them - litigation strategy in crypto disputes must be driven not just by knowledge of the law but the technology itself.

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