Expert Witness Journal Issue 63 October 2025 - Flipbook - Page 93
Crypto Fraud, Custody
and the Courts
by Conor O’leary - coleary@mhc.ie
A recent UK High Court decision in Jones v Persons Unknown underscores the complex
questions crypto fraud cases raise around ownership, custody and third-party rights. The
Court declined to overturn a previous fraud judgment, despite a non-party exchange claiming
its customers’ Bitcoin had been wrongly taken to satisfy it. Our Dispute Resolution team
examines the background to the case and explores how courts approach custody arrangements,
mixed funds and third-party claims in fraud disputes.
Huobi transferred the Bitcoin from an unconnected
wallet and then deducted the equivalent amount
from an account held by Kyrrex in the Targeted
Wallet.
What you need to know
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An investor previously in 2022 succeeded in
its claim for fraud against two unknown
fraudsters and Huobi Global Ltd, a
cryptocurrency exchange.
Huobi owned the wallet that stored the
stolen Bitcoin.
The Court made an order for the return of the
Bitcoin against Huobi.
Huobi transferred the Bitcoin from an
unconnected wallet and then deducted the
Bitcoin from the account belonging to Kyrrex
Ltd, another cryptocurrency exchange.
Kyrrex sought to have the judgment
annulled on the basis that it was directly
a昀昀ected by it through the loss of the Bitcoin
from its account.
The Court refused the application and stated
that Kyrrex’s claim lay against Huobi which
held its Bitcoin, under its terms of business.
Application to annul the judgment
Two years later, Kyrrex, sought to have the judgement
set aside on the basis that although it was not a party
to the proceedings, it was directly a昀昀ected by the
ultimate judgment.
Kyrrex argued that it had been directly a昀昀ected
by the judgment through the loss of the Bitcoin in
its account in the Targeted Wallet. Kyrrex claimed
that the expert evidence produced by Mr Jones in
the proceedings which traced the stolen Bitcoin to
the Targeted Wallet was incorrect. Expert evidence
obtained by Kyrrex showed that Huobi transferred
Bitcoin from an unconnected wallet which did not
contain Mr Jones’ stolen Bitcoin but mixed funds
belonging to Kyrrex and its customers.
Background
What is crucial to note is that under Huobi’s terms
and conditions, the Targeted Wallet was de昀椀ned as
a custodial wallet. As a result, the cryptocurrencies
contained in the wallet, as a matter of law, belonged
to its customers. However, in practice, Huobi treated
the Targeted Wallet as a source of funds from which
it could add and deduct cryptocurrencies at will,
provided that it kept an account record of what
cryptocurrencies it owed to each account holder.
Mr Jones, a Bitcoin investor was persuaded by two
unknown fraudsters to transfer 90 Bitcoin to a fake
investor platform. Expert evidence produced by
Mr Jones identi昀椀ed an exchange wallet, referred
to throughout the case as the ‘Targeted Wallet’,
owned by Huobi, into which Mr Jones’ Bitcoin was
transferred and stored. Mr Jones brought a claim
against the fraudsters and Huobi on the basis that it
owned and controlled the Targeted Wallet.
The decision
Neither the fraudsters nor Huobi participated
in the proceedings. The Court granted freezing
injunctions against the fraudsters. The Court also
made an order against Huobi for the return of the
90 stolen Bitcoin and a further 8 Bitcoin to cover
interest and costs on the basis that the exchange had
duties towards Mr Jones.
EXPERT WITNESS JOURNAL
The Court refused the Kyrrex’ application to set
aside the judgment on the basis that Kyrrex failed
to show that it had been directly a昀昀ected by the
judgment. The Court held that while the judgment
was based on the assumption that Mr Jones’ Bitcoin
was stored in the Targeted Wallet, the order for the
return of the Bitcoin did not specify the wallet from
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