Background
Gary Jones lost 89.6 Bitcoin through a fraudulent online investment platform. Relying on tracing evidence that purported to connect his Bitcoin to a wallet controlled by the cryptocurrency exchange Huobi Global Ltd, he obtained summary judgment requiring Huobi and the unidentified defendants to transfer 89.6 Bitcoin to him. The order also required payment of his £148,000 costs through a further transfer of Bitcoin from the same wallet.
Huobi transferred approximately 98.2 Bitcoin to Jones and appears to have debited that amount from the account of Kyrrex Ltd, which was not a party to the proceedings but had Bitcoin credited within the relevant wallet. Later evidence established—and Jones accepted—that his stolen Bitcoin had been wrongly identified as having reached that wallet. Kyrrex applied under CPR 40.9 to set aside the order, but the High Court held that it was not “directly affected” and that its delay and the uncertain merits would in any event justify refusing relief.
The Court’s Holding
The Court of Appeal unanimously allowed Kyrrex’s appeal. Kyrrex was directly affected by the summary judgment because the order identified a specific wallet in which Kyrrex had a substantial interest and led to 98.2 Bitcoin being taken from its account. The effect was not merely indirect: Kyrrex had been significantly prejudiced by an order obtained without its participation.
The court also held that the case for setting aside the relevant portions of the order was overwhelming. The summary judgment rested on the false premise that Jones’s stolen Bitcoin had entered the wallet, and Kyrrex’s delay—although longer than desirable—did not outweigh the injustice of leaving that unsupported judgment intact. The court therefore set aside the relevant provisions under CPR 40.9, but declined at that stage to order Jones to transfer the Bitcoin directly to Kyrrex or back to the wallet because ownership and any remaining claims had not been determined. The parties were invited to agree appropriate security pending resolution of those issues.
Key Takeaways
- A non-party is “directly affected” under CPR 40.9 when an order targets an account in which it has a substantial interest and causes assets to be removed from that account.
- A victim’s entitlement to recover stolen cryptocurrency must be supported by reliable tracing evidence; sympathy for the victim cannot justify recovery from an innocent third party’s assets.
- Setting aside an erroneous transfer order does not automatically establish the non-party’s ownership or require immediate repayment where competing proprietary and personal claims remain unresolved.
Why It Matters
The decision underscores the procedural and evidential safeguards required in cryptocurrency-recovery litigation, particularly where relief is sought against exchanges or wallets without notice to the customers whose assets may be affected. Courts must distinguish between identifying a wallet connected to fraud and proving that the claimant’s particular assets, or traceable substitutes, reached it.
The court also questioned, without finally deciding, whether costs may properly be ordered in Bitcoin. It cautioned that cryptocurrency is treated as property rather than money under English law and that requiring costs to be discharged in crypto may create valuation problems and expose innocent asset holders to loss.