Crypto Exchange Found to Hold Stolen Assets on Trust for Victim of Crypto Crime

In Jones v Persons Unknown & Others[1] the High Court made several rulings of interest in the developing area of crypto fraud litigation.

After granting judgment in favour of the claimant for claims of deceit and unjust enrichment against fraudsters, the court went on to rule that a crypto exchange controlling the wallet holding the claimant’s stolen Bitcoin was a constructive trustee. The court ordered the fraudsters and the exchange to deliver up the Bitcoin to the claimant.

The decision that an exchange is a constructive trustee in these circumstances remains controversial and will likely be tested in future contested litigation where the stolen funds have been deposited and then withdrawn from an innocent exchange. Contested cases may also explore the question of whether and in what circumstances stolen crypto assets can be traced through intermediary accounts, particularly where they have been mixed with other assets that are not part of the fraud.


The claimant, Mr Jones, was the victim of a large-scale crypto fraud. The fraudsters set up a fake online crypto trading company called Extick Pro (‘EP’) promising high returns to clients. Mr Jones opened an EP account in 2019 and, over the course of a year, transferred 89.61616088 Bitcoin to the EP platform (valued at approximately £1.5 million on the date of the judgment).

Mr Jones did not operate the account himself but instead gave trading instructions to a so-called representative of EP. The platform reported to Mr Jones that large trading profits were accruing in his account. In fact, the fraudsters operating the EP platform had stolen the Bitcoin. After several largely unsuccessful attempts to withdraw his funds, Mr Jones instructed lawyers and investigators to recover his assets. The investigators traced the stolen Bitcoin to a wallet on the Huobi trading platform but were unable to identify the people who had carried out the fraud.  

Mr Jones commenced proceedings for the recovery of and relief in respect of the stolen Bitcoin, based on deceit and/or unjust enrichment against the fraudsters. Mr Jones also brought claims against Huobi as a constructive trustee of the Bitcoin.

At the outset, Mr Jones obtained worldwide freezing orders against the fraudsters, as well as Huobi, seeking to secure the funds that remained in the fraudsters’ wallet. The fraudsters and Huobi did not engage in the litigation and it appeared that, despite the injunctions, the quantity of Bitcoin held in the wallet was decreasing.

Mr Jones applied to court for:

  • summary judgment against the fraudsters for deceit and unjust enrichment, on the basis that they had no reasonable grounds to defend the claim;
  • an order for delivery up (i.e. the return) of the stolen Bitcoin traced to the wallet on the Huobi platform;
  • continuation of the interim proprietary and non-proprietary injunctions already obtained;
  • permission to serve the orders out of jurisdiction; and
  • permission for service by alternative means against the fraudsters and Huobi, namely by non-fungible token (‘NFT’) airdrop into the fraudsters’ wallet controlled by Huobi.

The High Court’s judgment

Mr Nigel Cooke KC gave summary judgment in favour of Mr Jones, ruling that:

  1. The fraudsters were liable for deceit and unjust enrichment

Noting that no rebuttal evidence was submitted by any of the defendants, the judge found Mr Jones’ evidence to be compelling and sufficient to establish the claims for deceit and unjust enrichment against the fraudsters.

  1. Huobi held the misappropriated funds on constructive trust for Mr Jones

The High Court has previously considered the question of whether a crypto exchange could hold crypto assets on constructive trust in cases such as D’Aloia v Person Unknown & Others[2] (as previously reported on here). However, in these cases the question arose in the context of applications for service of proceedings out of jurisdiction, and only required decisions that a claimant had a ‘good arguable case’, rather than final rulings on the point.

As such, this is the first instance where a ruling has been made that an exchange holds stolen crypto assets on a constructive trust. The judge made this decision on the basis that Huobi was the controller of the wallet into which Mr Jones’ Bitcoin was paid and there was no evidence that Huobi or any other party had any proprietary interest in the Bitcoin that would override Mr Jones’ interest.

  1. The fraudsters and the exchange must return the stolen Bitcoin to Mr Jones
  1. The freezing and proprietary injunctions should be extended post judgment to aid enforcement of the judgment
  1. Mr Jones could serve the orders out of jurisdiction

The judge found that Mr Jones was able to satisfy various gateways permitting service of the orders out of the jurisdiction on the basis that (among other things) he had suffered losses in England and, as against Huobi as constructive trustee, the claim arose out of events that occurred in England. 

  1. Mr Jones could serve the orders by NFT

Following the rationale in D’Aloia, the judge found that there were exceptional circumstances that permitted alternative service by NFT, namely that the identity and location of the fraudsters was unknown. Therefore, no traditional means of service was deemed likely to be effective and service by NFT was more likely to bring the proceedings and the orders to the attention of the fraudsters.

In respect of Huobi, the judge found that service by NFT was appropriate as it was important that the order come to its attention as quickly as possible because Bitcoin can be dissipated easily and quickly.


The imposition of a constructive trust on a crypto exchange holding misappropriated assets is significant as the first final ruling of its kind in England. However, Huobi did not contest the proceedings, perhaps because the balance of Bitcoin in the wallet available to meet a judgment apparently exceeded the value of the claim. In future contested cases, the court will be required to consider in more detail how exchanges receive and deal with crypto assets, and exchanges are likely to raise various defences that have not yet been fully explored, for example that:

  • as bona fide purchasers for value, and acting in good faith, exchanges are not constructive trustees, as they were not part of the underlying fraud, nor were they put on actual or constructive notice of the fraud; and
  • exchanges cannot be liable in unjust enrichment as they have provided value for the services they have provided. 

If these arguments succeeded a victim would still have routes to recover misappropriated assets that remain in wallets held by an exchange (or would be able to enforce a judgment for damages against those assets), but would not be able to recover from the exchange itself the value of assets which had initially been deposited in wallets controlled by the exchange but which were subsequently withdrawn (unless the victim establishes wrongdoing of some kind on the part of the exchange). This outcome is analogous, for example, to the position of other third parties which have innocently received misappropriated funds.

[1] [2022EWHC 2543 (Comm)

[2] [2022] EWHC 1723 (Ch)


Alicia Johnson-Cole