03333 231 580
Contact us
However, 2026 got off to a confusing start with two significant decisions of the High Court, one in the criminal jurisdiction and another in the civil. This despite the coming into effect of the Property (Digital Assets etc…) Act 2025 in December of last year.
These cases, very ably summarised below by our London intern Savannah Sottack, show that this jurisdiction is still capable of throwing up surprises.
The decision of Yeun v Li held that as a result of a 20 year old decision of the Supreme Court (pre-dating the original development of Bitcoin by “Satoshi Nakamoto”) that the tort of conversion (the civil law equivalent of theft) cannot apply to intangible property effectively restricts the causes of action that can be used to recover stolen crypto-currency. The Supreme Court’s binding judgment could not have anticipated the emergence of crypto-currency or block chain technology generally, yet remains absolutely binding on lower courts (unless the Supreme Court reverses itself in future).
In particular it largely leaves victims having to cram their claims within the scope of causes of action founded on dishonesty or equitable tracing. In my view the law needs to develop a more flexible law of digital conversion and bailment which can cover the exponentially expanding digital realm. If digital assets are a third kind of property, as statutory law provides, then those mishandling such property belonging to others must be held to account on equal terms to other forms of property and this should include the platforms hosting and transacting these assets. This seems to be shared by the Law Commission when it stated “We therefore conclude that the most appropriate way for the law to evolve is to develop specific and discrete principles of tortious liability by analogy with, or which draw on some elements of, the tort of conversion to deal with wrongful interferences with third category things and the realities of their markets.”
In R v Lakeman we see the inconsistency between the civil and criminal realms – where the statutory definition of property in the Theft Act 1968 (which had the foresight of including “other intangible property”) covers digital assets – whereas the common law tort of conversion does not precisely because the property in intangible. So much for the common law’s vaunted flexibility.
In another development in the classic fraud tracing case of Smithers & Anor v Persons Unknown the court held that the UTXO method of chain analysis was more reliable than the LIFO method, but perhaps of greater interest was its willingness to order an exchange to divulge personal details of the wallet holders known to them.
Case studies on digital assets and crypto-currencies
Yuen v Li [2026] EWHC 532 (KB), KBD
Summary
This judgment assess the causes of action available in civil law to cryptocurrency theft cases. It remains that the only viable claims in these cases are in unjust enrichment and proprietary restitution constructive trusts. The claimant sought to push these limits by seeking to bring a claim for conversion and trespass to goods, relying on the Property (Digital Assets etc…) Act 2025 which officially created a ‘third category’ of property – property which is neither “in possession or in action”. Relying on case precedents from common law jurisdictions like the US and Canada, the claimant argued that the acceptance of crypto as ‘property’ means it is now in the English courts domain to expand the limits set in the leading authority on conversion, OBG v Allan [2007] UKHL 21, to consider conversion and trespass to goods for this new category of property. This was rejected by Mr. Justice Cotter who deferred this issue to the decision makers in Parliament or an appellant court, striking out the claim for conversion.
Background
On the 2 August 2023, the claimant had between £180 -160 million in value of Bitcoin removed from its single address on the blockchain to 71 different addresses without his consent or knowledge. The claimant alleges this was done by his ex-wife and her sister (the first and second defendant respectively). Notably, the way in which the crypto currency was allegedly removed did not involve any taking of physical property. Instead, the defendants are said to have secretly accessed the claimants’ ‘seed phrase’ (a randomly generated set of 24 words) to recreate the ‘cold wallet’ on a separate device which held his bitcoin. By doing this, the defendants were able to send the bitcoin to this new cold wallet without having to access the “Trezor”, the physical device the bitcoin was held on.
The First defendant has asked the court to strike out the claimant’s conversion and trespass to goods claims, arguing that these torts are only applicable to property which is ‘tangible’. The first defendant also asked the court for a security for costs order against the claimant which was ultimately denied.
Conversion
Conversion requires there to be an intentional interference with the goods of another person in a way that is inconsistent with the rights of that person (the proprietary or possessory owner of the goods). ‘Goods’, under the Torts (Interference with Goods) Act 1977, was defined as “all chattels personal other than things in action and money” . This has been understood in OBG v Allan to apply to tangible property only. Intangible property, such as internet domain names or, in the case of OBG v Allan, contractual rights, and in this case crypto currency, could not be a ‘good’ capable of being converted.
Cotter J noted that there is a clear “trajectory towards recognising digital assets as capable of attracting personal property rights” but balanced that deciding if these rights “could or should” be protected by the law of conversion is separate consideration, one which he ultimately decided is up to Parliament. Stating, “the decision of the Supreme Court in OBG -v- Allan is a clear block to the extension of the law of conversion for this purpose”.
The court relied on the Law Commission Report 2023 on Digital Assets that considered this exact scenario and identifying a lacuna in the law where legal proprietary interest holders in a digital asset may not have the tort of conversional available to them. In these instances, the Law Commission suggests that the court can “develop specific and discrete principles of tortious liability by analogy” but only in situations where a claim based on “unjust enrichment or proprietary restitution cannot be made out.” The court accepted the claimant unjust enrichment and proprietary restitution claims, allowing even the claimant in this order to amend their particulars for the latter. These causes of actions being available meant Cotter J was resistant to allow the tortious actions to proceed and summarised that “[i]n any event as this claim is currently pleaded on the facts I do not see it providing fertile grounds for analysis of the extent to which the Court needs to fill a lacuna in current rights/remedies.”
Trespass to Goods
Similar to conversion, the tort of trespass to goods requires there to be a physical element. The claimant asserted in the interim hearing that it was possible the First Defendant had touched the wallet or altered the data on the blockchain whereas the defendant maintains they only accessed and copied the data to move the bitcoin. The important point here is the extent to which the defendant(s) interfered with the wallet and data; case law suggests that if there has been alteration could amount to trespass, even in the digital realm, but only accessing does not.
Cotter J did not immediately strike out the claimants’ trespass to goods claim, instead he allowed them more time to amend their particulars to make a more persuasive argument, failure to do so within the set time limit would result in the cause automatically being struck out.
Why does this matter?
This order maintains that the tortious causes of action for cryptocurrency interference is limited to claims in unjust enrichment and proprietary restitution despite crypto currency now being officially recognised as property under the Property (Digital Assets etc…) Act 2025 (DAA 2025). Further, there still remains an acknowledge lacuna in the law with digital assets like crypto currency being granted property rights under the Act yet not having the full extent of remedies available for property related torts.
The appeal of being able to bring claims for conversion and trespass to goods is that they are: strict liability claims, meaning they do not need to establish intent, and that damages are based on the value of the goods at the date of the conversion/trespass which for crypto currency that is highly volatile, greatly affects the recovery available to the claimant. Unjust enrichment and proprietary restitution claims require high hurdles to be met, including evidence to show that the defendant received a benefit at the direct expense of the claimant unjustly without defence.
The property must also be traced or followed into the defendants’ assets which is especially difficult with crypto currency.
Cotter J did not rule out the possibility that conversion and trespass to goods could be available for intangible property but stressed that this was not within his remit to decide. It is likely a higher court, or Parliament will need to consider the implications of creating intangible property at law without clarifying what remedies they are afforded.
R v Lakeman [2026] EWCA Crim 4
This Court of Appeal case, now being sent to the Supreme Court for appeal, considered if ‘gold piece tokens’ from the virtual game ‘Old School Runescape’ could be considered property under the Theft Act 1968.
s.1 of the Theft Act defines property as including “…money and all other property, real or personal, including things in action and other intangible property”.
Mr. Lakeman is alleged to have hacked into 68 players’ accounts and stripped them of gold pieces valued at £543,123, then selling them off-line, in return for cryptocurrency (Bitcoin). In this appeal, Lord Justice Popplewell ruled that the virtual gold pieces ‘are real functional things distinct from the code which creates them’ and that ‘they are capable of being subject to dishonest dealing which deprives their possessor of their use and value. It would be surprising and unsatisfactory if such dishonest dealing did not amount to the offence of theft.’
If assets like digital gold coins can amount to property capable of being subjected to the Theft Act, it seems inconsistent then that crypto currency are not capable of attracting similar tortious liability.
Smithers & Anor v Persons Unknown Category 1 & Ors [2026] EWHC 207 (Comm)
Summary
A crypto currency fraud case where the claimants have succeeded in obtaining a worldwide freezing order (‘WFO’) against eight defendants (the 4 – 8 being only information order defendants). The return day hearing, held on the 23 January 2026, dismissed the Seventh Defendants’, Binance, objection to the continuation of the WFO. The order is continued.
Binance’s objections
Waksman J considered the tracing methodology used by the tracing company instructed by the claimants to find the missing cryptocurrency. The court found that despite the use of the ‘Last in First Out’ (‘LIFO’) methodology resulting in a few false positive matches, this is not enough to alter or extinguish the WFO. Whilst the ‘Unspent Transaction Output’ (‘UTXO’) method was admittedly more reliable, especially for tracking bitcoin (the most common crypto currency removed) it would have taken longer. Because iSanctuary, the claimants’ tracing company, did not disclose the flaws with the LIFO methodology to the claimant’s legal team, this was found to be an “entirely innocent non-disclosure”.
Aside from the above-mentioned issue with non-disclosure of the flawed tracing methodology by the claimants, the defendants’ grounds for objecting to the WFO were that:
- the original hearing should not have been listed without notice;
- the court does not have subject-matter jurisdiction; and that
- innocent third parties have, and may still, be subjected to this order
Firstly, Waksman J maintained that it is the “usual approach” to not put the defendants on notice in emergency injunctions. A distinction was drawn between banks and cryptocurrency exchanges, with the latter not being regulated to allow them special notice before injunctions.
Secondly, the defendants did not make any compelling argument to the court that they lacked the jurisdiction to deal with cryptocurrency-related injunctions of this kind.
Thirdly, the court agreed, in the interest of justice, to allow disclosure of the basic identities of those who are holding crypto-assets to the relevant law enforcement agencies which, in the courts view, will also help progress the claim as “once the exchanges know that the enforcement agencies are involved, they are apparently more receptive to providing information which they otherwise may not be”.
Why does this matter?
Upholding the WFO demonstrates the courts willingness to protect the individual over crypto currency exchanges, which are still largely unregulated in the UK by not following the notice procedure usually granted to banks. Additionally, in maintaining the WFO even with the accidental leak of private addresses who were identified by the flawed tracing mechanism, the court has taken the view that this was an unfortunate ‘casualty’ in the process of identifying the unknown rogues.
For more information about any of the issues covered in this update around digital assets, or if you are a shareholder facing this claim, then please get in touch with one of our commercial litigation solicitors.
