Research On Legal Remedies And Litigation Strategies In Digital Asset Theft Cases
Case 1: D’Aloia v Persons Unknown (England, 2024)
Facts:
The claimant, Mr D’Aloia, alleged he was induced by a purported trading platform to transfer about £2.5 million in stablecoin (USDT) and other crypto assets to wallets controlled by fraudsters. He then initiated proceedings in the English High Court against “Persons Unknown” and also named a number of crypto exchanges (e.g., one of the big global ones) as potentially complicit or at least able to assist. The assets were quickly moved through the chain of wallets, mixed, and some ended up on an exchange.
Legal Issues & Remedies:
Whether the crypto‑assets (USDT etc) qualified as “property” under English law and therefore were capable of being traced, followed, recovered, or subjected to constructive trust/unjust enrichment. The Court held yes: cryptocurrencies constitute property.
Need for injunctive relief: the claimant sought proprietary injunctions (to prevent further dissipation) and tracing of the assets.
Evidence and tracing: the challenge of linking the funds from the fraud‑wallets into the defendants’ wallets or exchange accounts. The claimant also sought disclosure orders against the exchanges.
Outcome / Strategy:
The court ultimately found the claimant could not sufficiently prove that the stolen USDT reached the named exchange wallet under the required standard of evidence, so the claim failed against that defendant. However, the judgment is significant for recognising cryptoassets as property and confirming the availability of injunctive and proprietary relief (such as freezing orders) in this context.
Significance:
Establishes that cryptoassets can be treated analogously to traditional property under English law, hence subject to familiar legal remedies (tracing, constructive trust, proprietary injunctions).
Highlights the importance of speedy action, strong forensic evidence of chain of transfers, and cooperation with exchanges.
Illustrates the litigation strategy: combining claims against unknown persons (“Persons Unknown”) with named entities like exchanges, and seeking alternative service and freezing orders.
Case 2: Osbourne v Persons Unknown (England, 2023)
Facts:
Ms Osbourne’s wallet (a MetaMask instance) was hacked and two NFTs (“Boss Beauties #680” and “#691”) were stolen. The stolen NFTs were traced to other wallets linked to NFT marketplaces (OpenSea, LooksRare). The defendants were anonymous.
Legal Issues & Remedies:
Whether NFTs are property under English law (and thus capable of being owned, stolen, subject to injunctions etc). The court said yes.
Service of process: The identity of the wrongdoers was unknown, so conventional service of documents was impractical. The court permitted service of proceedings via an NFT airdrop into the wallet of the defendant (the wallet which held the stolen assets) — a novel method of “substituted service”.
Jurisdiction and location of assets: The question of where the crypto assets were “located” for jurisdictional purposes was addressed.
Outcome / Strategy:
The court allowed the claimant to serve documents via NFT airdrop, and granted the proprietary injunction preventing further transfer of the stolen NFTs, and ordered the marketplace to freeze listings.
Significance:
A blueprint for dealing with anonymous crypto‑asset theft where conventional service and identification of defendants are difficult.
Demonstrates creative use of blockchain‑native tools (airdropped NFTs) to effect court‑ordered service.
Strengthens the position of victims of NFT/crypto theft by confirming availability of proprietary injunctions and tracing remedies.
Case 3: Litigation strategies in Singapore – generic case “CLM v CLN” & “Janesh s/o Rajkumar v Unknown Person (‘CHEFPIERRE’)”
Facts:
In Singapore, a claimant alleged that his Bitcoin and Ethereum were stolen via hacking/phishing and transferred to certain wallet addresses. The lender then purportedly foreclosed an NFT used as collateral, and the NFT was listed for sale on a marketplace.
Legal Issues & Remedies:
The court granted a worldwide freezing injunction (Mareva injunction) over the value of the stolen cryptocurrency assets.
The court also granted a proprietary injunction over the specific NFT used as collateral, ordering the marketplace to freeze the listing/sale.
Thus the strategy: first, secure freezing/remedial orders before assets are dispersed, then trace and recover.
Outcome / Strategy:
The freezing order prevented the defendant from further dissipating the assets. The marketplace complied by freezing the listing of the NFT and thereby preserving the claimant’s rights.
Significance:
Shows applicability of traditional equitable remedies (freezing injunctions, proprietary injunctions) in the crypto context.
Underscores need for rapid action in digital‑asset theft cases: because assets move fast and across borders.
Useful model for cross‑border recovery and asset‑freezing litigation in the digital‑asset sphere.
Case 4: Generic U.S. recovery and forfeiture context – U.S. Department of Justice guidance, FTX/BlockFi etc
Facts:
In large fraud/failure cases involving digital asset exchanges (e.g., FTX, Celsius, BlockFi, Genesis), vast sums of crypto‑assets were misappropriated or lost. The DOJ has noted that in some instances victims of digital‑asset fraud may only recover the value of their assets at the time of theft (not later appreciation).
Legal Issues & Remedies:
Criminal forfeiture: The government can seek forfeiture of digital assets derived from criminal activity (wire fraud, money‑laundering, etc).
Civil recovery: Victims may pursue civil claims for restitution or damages, but face valuation issues (crypto price volatility), jurisdictional issues, tracing issues.
Evidence and chain of custody: Difficulty in proving ownership, tracing movement of assets across wallets, exchanges, mixers.
Outcome / Strategy:
Recovery efforts are underway; however, the guidance notes that victims may be disadvantaged by statutory rules (e.g., valuation at time of offence). Litigators emphasise coordination with blockchain forensics, exchanges, and obtaining freezing orders.
Significance:
Demonstrates gap between criminal forfeiture regime and private civil recovery in crypto‑theft context.
Highlights the importance of valuation timing, and the challenge that even when criminal proceeds are forfeited, that may not translate into full victim compensation.
Suggests that litigation strategies must incorporate valuation experts, prompt trace/freeze action, and creative use of injunctions.
Case 5: Fetch.AI Ltd v Persons Unknown (England, 2021)
Facts:
Fraudsters secured login access to a Binance account held by Fetch.AI Ltd, an English‑registered company, and made trades to drain its funds of some US$2.6 million. The claim was brought against “Persons Unknown”.
Legal Issues & Remedies:
Application for interim remedies: proprietary injunction, disclosure orders (to identify unknown defendants and trace assets).
The classification of cryptocurrency as property so that it could be the subject of relief.
Outcome / Strategy:
The court allowed the claimant to pursue its remedies. The case exemplified the litigation strategy of combining freezing/disclosure/proprietary injunctions early.
Significance:
Provided early precedent in the UK that cryptoassets are property and fit for these types of equitable remedies.
Reinforces that victims must act quickly and seek interim injunctive relief.
Emphasises the use of tracing/forensics to identify wallet addresses and intervene before dissipation through mixers/exchanges.
Case 6: Service of Process via Blockchain – LCX AG v John Doe Nos. 1‑25 (New York, USA, 2022)
Facts:
Crypto exchange LCX was hacked to the tune of US$8 million. The identity of the hackers was unknown. The plaintiff sought to serve process on the unknown defendants whose wallet addresses were identified as controlling the stolen assets.
Legal Issues & Remedies:
Service of process: how do you serve lawsuits on anonymous crypto‑wallet controllers? The court permitted service of the claim via “special‑purpose service token” airdropped to the wallet which held the stolen assets. The token contained a link to court filings.
Asset tracing and injunctions: immediate freezing of the assets traced.
Outcome / Strategy:
The court’s approval of blockchain‑based service highlighted innovation in procedural strategy to reach anonymous defendants.
Significance:
Opens the door for plaintiffs in crypto‑asset theft cases to use creative service methods when the defendant is anonymous or located offshore.
Recognises that traditional service may be inadequate; courts are adapting to technological realities.
Important milestone for litigation strategy: use of the blockchain itself as a conduit for legal process.
Key Litigation Strategies and Remedies Identified Across the Cases
Here is a summary of the legal‑remedy and litigation‑strategy trends that emerge:
Classification of digital assets as “property”:
Before many remedies (tracing, constructive trust, proprietary injunctions) are available, courts have confirmed that cryptocurrencies or NFTs qualify as property. This is foundational.
Tracing & Forensics:
Critical to success is tracing the stolen assets through wallet addresses, exchanges, mixers, often involving blockchain forensics and obtaining disclosures from exchanges or custodians.
Injunctive Relief (Freezing / Mareva / Proprietary Injunctions):
Acting quickly to freeze assets, stop further transfers, require disclosure of counterparties, and preserve assets for recovery is a common and vital strategy.
Disclosure Orders and Relief Against “Unknown Persons”:
Many plaintiffs must sue “Persons Unknown” because the perpetrators are anonymous. Courts are willing to grant relief (injunctions, disclosure) even before identification of the defendant.
Alternative Methods of Service of Process:
Traditional service may be impractical when defendants are anonymous or outside jurisdiction. Courts are increasingly permitting service via blockchain (NFT airdrop), email to wallet‑linked addresses, social‑media channels, etc.
Valuation, Location, Jurisdiction:
Digital assets raise unique issues: Where is the asset “located”? Which law applies? How to value it (because of volatility)? Courts have begun to develop reasoning (e.g., location based on where control is exercised).
Coordination with Criminal Proceedings / Forfeiture:
Often there is overlap between criminal prosecution (fraud, money‑laundering) and civil recovery. Civil plaintiffs benefit from asset‑forfeiture regimes but must note limitations (e.g., value locked in time of offence).
Platform/Exchange Liability and Cooperation:
Exchanges are often key nodes – either victims, intermediaries, or recipients of stolen assets. Plaintiffs may pursue claims or injunctions against exchanges, or rely on exchange cooperation (freezing wallets, disclosures).
Speed is essential:
Because digital assets move rapidly, get converted, mixed, transferred across borders. Delay often makes recovery impossible. Immediate action is essential.
Documentation and Contractual Risk Controls:
Good practice involves client-side contracts, terms of service, custodial agreements, crypto‑asset risk disclosures, insurance, incident‑response planning (though these are more preventive than remedial).
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