What happened: The Court of Appeal set aside a crypto fraud judgment after finding the victim's stolen Bitcoin never reached the wallet the court had ordered emptied
Who's involved: Kyrrex Ltd (crypto exchange platform), Huobi Global Ltd (now defunct crypto exchange), and a fraud victim
What's at stake: 98.2 Bitcoin - worth nearly £1.7 million when transferred in 2022 and over £5 million by late 2024
Why it matters: Non-parties whose assets are caught in fraud-recovery orders now have a clearer path to challenge those orders, and crypto custodial risk just got a Court of Appeal-level spotlight
Where it stands: Order set aside; consequential orders on security for the Bitcoin pending further proceedings
Ninety-eight Bitcoin, taken from a wallet that had nothing to do with the fraud. That is the starting point of a Court of Appeal ruling that has unwound a four-year-old judgment and left open a question worth millions: who now gets the money back?
The case began with a familiar kind of loss. Between January 2019 and January 2020, an investor spent nearly half a million pounds buying 89.6 Bitcoin and transferring them to what he believed was a legitimate online trading platform called Extick Pro. It was not. The platform was, according to his pleaded case, simply a vehicle for large-scale cyber fraud. The supposed trading profits shown on his account were entirely fictional. When he asked for his money back, he received roughly £3,000. The rest was gone.
The investor hired a cyber investigation consultancy, CiRO Global Risks LLP, which reported that a particular wallet - known in the proceedings as the "tHEL wallet" and controlled by Seychelles-based crypto exchange Huobi Global Ltd - was connected to the fraud. On the strength of that report, and with no other party turning up to contest it, the investor obtained a court order in September 2022 requiring Huobi to hand over 98.2 Bitcoin from the tHEL wallet: 89.6 Bitcoin as the claimed property, plus a further 8.6 Bitcoin to cover costs of £148,000.
Huobi complied. But here is where the story turns. When Huobi went looking for the Bitcoin, it debited the entire 98.2 from the account of Kyrrex Ltd, a crypto exchange platform registered in St Vincent and the Grenadines and regulated by the Malta Financial Services Authority. Kyrrex had deposited its customers' Bitcoin into the very same tHEL wallet. On the evidence before the Court of Appeal, over 97.5% of all Bitcoin transferred into that wallet came directly or indirectly from Kyrrex.
Kyrrex knew nothing about the proceedings until Huobi locked the Bitcoin in September 2022. By the time it got hold of the underlying court documents - after months of resistance from the investor's lawyers and a court-approved disclosure order - and instructed its own expert, the picture looked very different. The expert's conclusion, in a report dated October 2024, was unequivocal: none of the investor's stolen Bitcoin could be identified as ever having reached the tHEL wallet. The original tracing was fundamentally flawed.
That finding was never contested.
Armed with its expert report, Kyrrex applied to the High Court under a procedural rule that allows a non-party whose interests have been directly hit by a court order to ask for that order to be set aside. The High Court dismissed the application, reasoning that Kyrrex was only indirectly affected: Huobi, after all, could have debited someone else's account.
The Court of Appeal saw it differently. The tHEL wallet was, on the evidence, very much Kyrrex's wallet. Huobi's own correspondence described it as "associated exclusively" with Kyrrex's account. Whether Kyrrex's rights in the Bitcoin amounted to an ownership interest or simply a contractual right to withdraw them did not matter - both were legally recognised interests that had been directly affected by the order.
On the central question - should the order stand? - the court was emphatic. The strength of the case for setting it aside was "overwhelming." The judgment the investor had obtained "now appears quite insupportable." One member of the panel put it more starkly: the practical effect of the original order had been to make Kyrrex "the unwitting insurer" of the fraud victim's loss.
The court set aside the relevant paragraphs of the 2022 order. It did not, however, order the Bitcoin returned to Kyrrex immediately, noting that the investor has not been finally barred from trying to establish a claim and that Kyrrex's own rights remain to be determined. The parties were directed to agree on security arrangements for the Bitcoin in the meantime.
In an extended postscript, the court raised serious doubts about one other feature of the original order: the requirement that costs of £148,000 be discharged not in sterling but in Bitcoin. Citing the Law Commission's 2023 report on digital assets, the court noted that English law treats cryptocurrency as property, not money, and that ordering costs in Bitcoin was a "most unusual provision" that had been made without the point being properly argued. The court expressly declined to endorse that form of order.
The ruling gives non-parties caught in the crossfire of crypto fraud recovery a clearer route to challenge orders that target assets with no proven connection to the underlying loss - and it puts custodial crypto exchanges and the professionals who advise them on notice that wallet-level tracing will face serious scrutiny.
