Cryptocurrency fraud, civil law & the Isle of Man

Four English decisions earlier in 2026 illustrate how future Isle of Man civil courts may deal with different aspects of technically complex civil claims alleging cryptocurrency fraud.

These recent decisions follow earlier significant decisions, such as D’Aloia v Persons Unknown Category A & Ors [2024] EWHC 2342 (Ch) (12.09.24) (on the availability of “methodologically sound and properly evidenced” methods to trace assets in digital fraud claims) and Jones v Persons Unknown & others [2025] EWHC 1823 (Comm) (10.06.25) (unsuccessful application to set aside summary judgment, despite misleading of judge).

Smithers (1)

Smithers & another v Persons Unknown Category 1 & others [2026] EWHC 207 (Comm) (23.01.26) concerned alleged cryptocurrency theft (an investment of around £10.5 million).

At the return date hearing after granting a freezing injunction and asset disclosure order on 31st October 2025, Waksman J held (at § 6) that it would have been “entirely disproportionate” to discharge any of the relief granted. There had been an “entirely innocent” (§ 4) non-disclosure that the original expert asset tracing methodology used could have captured innocent third parties’ assets.

He defended (at § 9) not giving a cryptocurrency exchange advance notice as: “… such exchanges do not yet have the status of banks and do not operate in the regulatory regime in which banks operate, and the Court does not have to treat them as banks, where it may have been appropriate to put them, at least, on notice”.

He held (at § 10) that: “there is jurisdiction on the face of it. There has not yet been a successful attempt to say that that the Court in these circumstances has no jurisdiction to deal with cryptocurrency-related injunctions of this kind”.

He also agreed at (at § 15) that it would be in the interests of justice to permit disclosure of those holding cryptocurrency assets to law enforcement agencies as: “such disclosure can potentially assist this claim because once the exchanges know that the enforcement agencies are involved, they are apparently more receptive to providing information which they otherwise may not be…”.

The order was, therefore, continued.

Smithers (2)

Meanwhile, a separate without notice freezing injunction obtained in February 2026 was followed by a return date hearing in March 2026, this time before Stephen Midwinter KC (sitting as a Deputy High Court Judge).

The Claimants sought, via expert reports and witness statements, to show that each of the Respondents was involved with a fraud amounting to an unlawful means conspiracy.

In a judgment reported at [2026] 3 WLUK 397, the Court accepted that there was a “good arguable case” that, where cryptocurrency assets were taken from an English resident, “damage” was sustained in England and Wales (for the purpose of the tort service out gateway in Practice Direction 6B paragraph 3.1.9).

Citing Ion Science v Persons Unknown [2020] EWHC 3688 (Comm) – which considered, without deciding, whether the location of cryptoassets, for the purposes of determining the applicable law of a given dispute, is the place where the owner of the cryptoassets is domiciled – the Court held (at § 9) that:

“where crypto-assets are taken from an individual who is resident in England and Wales, the damage is sustained within England and Wales for the purposes of a claim in tort”.

The Court emphasised: “the importance of taking a realistic and pragmatic approach” to the application of the jurisdictional gateways, “in particular in claims involving apparently international frauds relating to assets that exist on the internet”.

The Court noted (at § 9):

“[d]ebates as to where such [crypto-] assets are ‘located’ in a technical sense are unlikely to be fruitful or to provide a sensible basis for identifying the courts that should have jurisdiction”.

The Court also found that the speed, portability, and cross-border transferability of cryptocurrency creates a structurally inherent risk of asset dissipation.

The Court raised a concern about the practical utility of a freezing order against unidentified defendants and where the exchanges, who might be called on to enforce, were located overseas.

The Court noted the Claimants’ proposal to apply for summary judgment and, if obtained, to enforce it in the jurisdictions where the exchanges were based. In the interim, the Claimants were considering seeking reciprocal enforcement of the freezing order in relevant jurisdictions, if the exchanges did not voluntarily give effect to it.

The freezing injunction was, therefore, continued.

A further significant point here was the Court’s acceptance that a conspiracy claim could be pleaded against defendants identified only descriptively (via expert blockchain analysis) rather than by name.

In cases where allegedly misappropriated digital assets are said to have been mixed, such recognition may enable WFO relief, in support of a conspiracy claim, to extend to the alleged conspirators’ assets, rather than merely to traceable proceeds.

Smithers (3)

Finally giving summary judgment last month for the Claimants at [2026] EWHC 1907 (Comm) (24.07.26), Bright J said this:

“17. Assuming that the Claimants’ property can still be identified, it remains their property. In so far as any of the Defendants are in possession of such property, they can be ordered to return it to the Claimants.

18. The most significant components of the overall claim relate to Bitcoin assets… Bitcoin transaction outputs do not merge or blend into a single homogeneous balance. Each unspent transaction output remains a discrete and identifiable unit until it is spent. In that sense, Bitcoin transaction outputs are not akin to liquid funds that mix irreversibly upon co-mingling. Rather, they resemble distinct assets that coexist without losing their individual identity.

19. Thus, the Bitcoin assets received and held by the relevant receiving addresses were precisely the same assets as were taken fraudulently from the Claimants. They remain the Claimants’ property. They should be returned to the Claimants.

20. The same is not true of USD Coin or Ethereum, which are the other significant species of cryptocurrency that make up the claim. They are fungible assets. They will have lost their identify upon transfer to and receipt by the receiving addresses. It therefore is not possible to identify precisely the same assets as were removed fraudulently from the Claimants or to order that the very same assets be returned to them. In relation to these assets, Mr McIlroy therefore sought a compensatory remedy, expressed in fiat currency. He rightly pointed out that, in the case of USD Coin (which is pegged to the US Dollar), this makes no real difference to the Claimants.”

Yuen

Meanwhile in Yuen v Li & Anor [2026] EWHC 532 (KB) (10.03.26) involved the alleged misappropriation of Bitcoin valued at between £160-180 million.

The Claimant had originally claimed in conversion; conspiracy to convert; trespass to goods; and conspiracy to trespass to goods.

The Claimant applied to amend to claim in: conversion; unjust enrichment; breach of confidence and misuse of private information; causing loss by unlawful means; and proprietary restitution/constructive trust.

Cotter J struck out the claim for conversion.

At § 48, he referred to two distinct recognised categories of personal property rights: rights relating to things in possession (tangible things), and rights relating to things (choses) in action (legal rights or claims enforceable by action).

At § 50, he referred to the Law Commission’s 2023 report Digital Assets:

“… the common law of England and Wales has over the last ten years clearly moved toward the explicit recognition of a “third” category of things to which personal property rights can relate. Over time, the courts of England and Wales have deliberately and iteratively redefined the scope of things that the common law treats as capable of attracting personal property rights even where those things do not fall easily within either of the two traditionally recognised categories. (paragraph 33)”.

At § 66, he held that the decision of the Supreme Court in OBG -v- Allan [2008] 1 AC 1 was a clear block to the extension of the law of conversion for this purpose. At § 75 he said:

“I recognise that in so far as there is any lacuna within the current range of protections and remedies for the rights of “third category” property owners there may be scope for development of another cause of action/remedy; with some elements similar to the law of conversion; but not of conversion itself.”

The Claimant was afforded 7 days to consider further amending the trespass to goods claim or risk that being struck out.

Existing Isle of Man case-law on cryptocurrency

The Isle of Man High Court is no stranger to considering cryptocurrency issues.

In Caldwell & others v Eminence Ltd & others (ORD 2021/0018) (31.08.21), Acting Deemster Gough discharged an interim injunction granted in respect of a cryptocurrency wallet.

In May 2021, the Applicants had, on a without notice basis, sought an order from the Court, pursuant to s 42 of the High Court Act 1991, requiring the Respondents to: “release the Applicants[‘] wallets which hold the crypto currency known as CasinoCoin (CSC)” and that “the Respondents enjoin the Applicants[‘] CSC [h]oldings from the “old ledger” to the new XRP ledger”.

As the Court put it (at § 2), the Applicants effectively sought: “a mandatory injunction requiring the Respondents to “unlock” the digital wallet holding the Applicants’ CSC and to register the CSC on a new platform operated by the First Respondent”.

An initial interim injunction maintaining the status quo was granted by Deemster Corlett in May 2021. Acting Deemster Gough’s decision to discharge the interim injunction was reached largely by reference to American Cyanamid (as applied in the Isle of Man in Tobin v Dohle (IOM) Ltd (CHP 20/124) (22.12.20)).

Acting Deemster Gough concluded (at § 32):

“(i) Damages will provide an adequate remedy to the Applicants if they are successful at trial; and

(ii) The injunction sought will be almost impossible to manage and supervise.”

Isle of Man case-law on damage sustained within the jurisdiction

The Isle of Man tort gateway for service out of the jurisdiction is Rule 2.41(1)(i) of the RHCJ 2009 (which provides that: “a claim is made in tort and – (i) damage was sustained within the jurisdiction; or (ii) the damage sustained resulted from an act committed within the jurisdiction”).

Various Isle of Man courts have already wrestled with this tort gateway issue in alleged financial loss cases, including Deemster Corlett in Old Mutual International Isle of Man Ltd v Leonteq Securities AG (ORD 2018/12) (27.02.20) (at § 39 citing Lord Sumption at §§ 26-27 of Brownlie v Four Seasons Holdings Inc [2018] 1 WLR 192).

FSA guidance

In March 2025, the Isle of Man FSA published guidance on Virtual Assets and the Regulatory Perimeter (“The guidance is aimed at those who are considering carrying on business activities in relation to virtual assets (e.g. selling, issuing, managing or administering virtual assets), and illustrates which virtual asset-related activities may be subject to financial services regulation”).

Note for practitioners: These recent English decisions are likely to inform future Manx Courts considering alleged cryptocurrency fraud. This is especially so on jurisdiction, asset dissipation and appropriate causes of action, including the interplay between a conspiracy claim and WFO relief. This remains a highly dynamic area. The anticipated further update from the Law Commission, following its June 2025 consultation, will be of particular interest.

Disclaimer: professional advice should be sought before applying any information in a given case.

For advice on Isle of Man civil procedure, enforcement, or civil fraud, contact Coren Law.

See also Coren Law’s Isle of Man civil procedure portal: Click On | Coren Law.

Photo credit: Kanchanara