The dominant narrative surrounding cryptocurrency fraud was one of hopelessness for many years. The decentralised nature of the blockchain was labelled a ‘Wild West’ where stolen assets disappeared into a digital void, moving through mixers and borders faster than legal systems could react to.

That narrative, however, has shifted, with the last 24 months seeing the English High Court aggressively plot a way through the murkiness of digital asset disputes. Through the introduction of Gateway 25 and innovative equitable remedies, the English courts have emerged as the premier jurisdiction for crypto fraud victims seeking to unmask perpetrators and recover assets (see our guide to civil recovery for more).

The Borderless Problem and the English Solution

The primary hurdle in crypto litigation is rarely proving theft, instead lying in the identification of the thief. Fraudsters rarely reside in the same jurisdiction as victims, and their spoils are often domiciled in offshore havens.

Historically, serving a disclosure order on a foreign entity was a procedural minefield. However, Gateway 25 (part of Practice Direction 6B of the Civil Procedure Rules), introduced in late 2022, was a game-changer for digital asset recovery. It allows claimants to serve court proceedings out of the jurisdiction with the specific purpose of obtaining information pertaining to the identity of a potential defendant or to the claimant's stolen property. English courts have therefore been able to compel global overseas crypto exchanges to disclose Know Your Customer (KYC) data and transaction logs, meaning fraudsters cannot find solace in, say, the Cayman Islands or the Seychelles.

This serves as a message from the English courts that they will stop at nothing to deliver justice and to reach fraudsters, regardless of where their servers are located.

Piercing the Veil: Disclosure Orders

Once jurisdiction is established via Gateway 25, the English courts utilise powerful disclosure mechanisms:

Norwich Pharmacal Orders (NPOs): These compel innocent third parties (like exchanges) related to cases to reveal the identities of wrongdoers.

Bankers Trust Orders: These are specifically designed to trace funds, compelling intermediaries to disclose banking or wallet records to track the flow of stolen assets.

The recent speed at which judges have granted these orders, often within days of a fraud being discovered, has proven vital, and highlighted the courts’ understanding of the landscape. Speed is key in the world of crypto, where assets can be sieved and shifted through multiple wallets within mere hours.

The Future: Free-Standing Information Orders

While the current system is effective, it can be excessively costly. Currently, victims often have to frame requests for information as interim remedies attached to prospective claims. This is a concern given crypto’s increasing presence in personal finance.

Recognising this friction, the Law Commission has proposed a statutory reform to introduce free-standing information orders, aiming to strip away the complex procedural scaffolding currently required to get an NPO.

If enacted, this would empower victims to apply for information disclosures without necessarily commencing full proceedings immediately. It acknowledges that in the early stages of a crypto fraud investigation, the victim does not need a trial, but merely a name. This reform would be reflective of a jurisdiction that is proactive in strengthening access to justice for digital asset holders.

The Flexibility of Equity

Importantly, the substantive law in the English system remains its greatest asset (see our view on the choice of English Law as governing law). It is built on ‘equity’, a system of justice based on fairness and flexibility.

English judges have been quick to class crypto assets as ‘property’ (most notably in AA v Persons Unknown) in allowing for proprietary injunctions. Equity famously acts in personam (against the person), meaning courts can issue Worldwide Freezing Orders (WFOs) against persons unknown. This flexibility allows courts to freeze assets in wallets even before owners of those wallets are identified. It locks the digital doors, preventing movement of stolen funds while disclosure orders (via Gateway 25) do the work of identifying thieves.

The English approach to the ‘Wild West’ of crypto fraud shows that common law, rather than extensive regulation, is the best way to protect asset-holders. For victims of cross-border crypto fraud, the English High Court offers the unique abilities to serve orders globally via Gateway 25 and pierce anonymity through disclosure orders, and the promise of streamlined information access through Law Commission proposals.

For more on this topic, see our analysis on the appointment of the UK Insolvency Service's first dedicated crypto specialist.

How D'Aloia Rewrote the Rules of Crypto Tracing
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The 2022 interim hearing in D’Aloia v Persons Unknown was the tremor that shook the crypto legal landscape, and the 2024 High Court trial judgment is the earthquake that has permanently reshaped its terrain. Victims of crypto fraud have long faced dual challenges in the anonymity of the blockchain and the rigidity of orthodox property law. In a judgment that is both a victory for legal theory and a warning on evidentiary standards, however, the High Court has provided a definitive, albeit complex, roadmap for asset recovery.

‍Crypto as Property

For centuries, English law recognised only two types of personal property: choses in possession- tangible items you can hold (like a gold bar); and choses in action- rights you can enforce against others (like shares).

Cryptocurrency did not fit either. It was seen both as intangible and as not giving rise to a claim against a person. In D'Aloia, though, the court definitively smashed this binary.

The judge confirmed that USDT (‘Tether’ linking cryptocurrency’s value to the dollar) is a distinct form of property, a ‘third thing’. It is neither a claim right, nor physical, but a ‘persistent thing’ that maintains a distinct identity while moving across the blockchain.This is a monumental finding that means that, legally, crypto, rather than vanishing when it enters a mixed wallet, persists, capable of being both identified and reclaimed.

Following vs. Tracing

While the court crafted victims a theoretical sword, it also strengthened the shield for exchanges. The judgment highlighted the distinction between ‘following’ and ‘tracing’. Following is chasing the same asset as it moves from hand to hand. Tracing is identifying a new asset that substitutes the original (such as a stolen Bitcoin swapped for Ether).

The court accepted that, as crypto is a‘persistent thing’, it can be followed even through a mixed fund (a digital wallet containing coins from multiple sources). However, to succeed, the victim must factually prove that their specific coin is the one that landed in the defendant's wallet.

This is where the claim in D'Aloia failed. The court found the expert blockchain analysis insufficient, ruling that, while the legal mechanism to recover the funds existed, the evidence did not conclusively prove the flow of funds into the exchange’s wallet. This sets an important high bar for evidence in these cases, highlighting that claimants must sharpen their swords if they wish to be successful.

Constructive Trusts and Exchange Liability

The most aggressive limb of recent crypto litigation is the attempt to hold exchanges liable as ‘constructive trustees’. If an exchange receives stolen funds, can they be compelled to pay it back, even when the fraudsters have already withdrawn the money?

The D'Aloia judgment clarified that a constructive trust does, in fact, arise the moment a victim is defrauded. The fraudsters hold the stolen crypto in trust for the victim immediately. However, for an exchange to be liable, two things must happen:

Receipt: the claimant must prove specific crypto reached the exchange’s wallet (the tracing hurdle mentioned above).

Unconscionability: the exchange must have acted in such a way that makes it ‘unconscionable’ to keep the funds or deny the claimant’s interest.

In dictum, the judge suggested that an exchange could be liable if it acts in a ‘commercially unacceptable’ manner, such as ignoring obvious money laundering ‘red flags’ or failing to block suspicious accounts despite internal warnings. While the exchange in this case escaped liability due to the tracing failure, the court has clearly left the door open for future claims where exchange compliance failures are egregious.

The judgment sets a high bar for blockchain analytics. ‘Probable’ flows of funds likely are not enough as courts demand granular, defensible tracing methodologies. There is no longer a need to prove if crypto is property, but merely to prove where it is. Firms and clients dealing with High Net Worth individuals must understand that litigation strategy must be front-loaded with forensic excellence. The law is an aide, but it demands precision.

The D'Aloia judgment signals the beginning of a new, forensic era. The High Court has built the legal infrastructure to recover stolen digital assets by recognising them as a unique class of property. However, the burden of proof has shifted from legal argumentation to technical demonstration. To win a constructive trust claim against an exchange, you need, beyond a good lawyer, a forensic blockchain expert who can withstand the scrutiny of the High Court.

Please contact the Commercial Litigation team at Barnes Law for legal advice on crypto fraud.

Authored by Barnes Law Managing Partner, Yulia Barnes.