Jones v Persons Unknown: Crypto tracing – easy, so they thought

Last year, the High Court’s judgment in D’Aloia v Persons Unknown [2024] EWHC 2342 (Ch) highlighted the risks of claimants pursuing cryptoasset disputes based on flawed evidence. Mr D’Aloia, the victim of a fraud, sought to fix Bitkub with liability as a constructive trustee based on expert evidence that proceeds of the fraud had been received into a Bitkub account. Unfortunately for Mr D’Aloia, his claim failed at trial because of errors in his expert’s tracing methodology. ^[1]

The recent High Court judgment in Jones v Persons Unknown [2025] EWHC 1823 (Comm) demonstrates that when claimants pursue claims based on flawed expert evidence, they also risk causing damage to third parties. We examine this judgment in more detail below.

Lay claimants face considerable challenges choosing between the many businesses that promise expertise in crypto tracing. It is incumbent on those law firms that pursue their cases to test experts’ credentials at an early stage to check, insofar as they can, that their expert possesses a high level of technical sophistication and meticulous attention to detail.

Background

Mr Jones was defrauded into “investing” in a fake cryptocurrency platform.^[2]  Between January 2019 and January 2020, he purchased BTC 89.616 and “invested” it via the platform. The fraudsters then dissipated his BTC.

In 2022, Mr Jones obtained a without-notice worldwide freezing injunction against two categories of “Persons Unknown” and proprietary injunctions against both categories of “Persons Unknown” and the cryptoexchange Huobi Global Ltd (‘Huobi’).  Mr Jones was able to obtain the injunction against Huobi because he had expert evidence that was said to trace his BTC to a deposit address for a wallet at Huobi (the ‘tHEL wallet’). The freezing injunction froze assets up to the value of £1.75 million.

On 6 September 2022, the High Court granted summary judgment on Mr Jones’ claim. It required the fraudsters and Huobi, as constructive trustee, to deliver up BTC 89.616 to Mr Jones. Huobi had not responded to the proceedings until that point.  However, it delivered up BTC to Mr Jones by transferring BTC from a different wallet (the ‘RwrmV wallet’) and then reimbursing the RwrmV wallet by debiting assets held in the tHEL wallet.

It later transpired that Mr Jones’ expert evidence was inaccurate: the assets held in the tHEL wallet were not traceable to the fraud perpetrated on Mr Jones. Instead, they belonged to Kyrrex Ltd (‘Kyrrex’) and other third parties. Huobi had used Kyrrex’s assets to reimburse the RwrmV wallet. Kyrrex discovered the debit in September 2022. After obtaining disclosure and investigatory evidence, Kyrrex issued a CPR 40.9 application in the High Court on 27 November 2024, more than two years after the judgment had been satisfied.

The CPR 40.9 Application

A CPR 40.9 application is a procedure by which a person who is not a party to proceedings but who is “directly affected” by a judgment or order may apply to have that judgment or order set aside or varied. The applicant must demonstrate that they have a legally recognisable interest that is materially and adversely affected by the judgment or its enforcement. The court will consider whether the applicant is directly affected, whether there is a real prospect of successfully defending the claim if the judgment is set aside, and will also weigh factors such as delay in making the application and any resulting prejudice to other parties. The process is discretionary and is often used in cases involving “Persons Unknown” or where third-party property rights are engaged.

Kyrrex sought:

• to be joined as a fifth defendant;
• to set aside the September 2022 judgment;
• that Mr Jones return the BTC 89.616 (or its fiat equivalent) to the tHEL wallet; and
• consequential directions.

The judge, HHJ Pearce, noted that “both of the litigants before [him] are entirely innocent of any fraud and whoever ends up bearing the loss as a result of the fraud on Mr Jones will be somebody who is uncompensated in spite of being innocent of any misconduct”. 

It was therefore with “considerable sympathy for the position of Kyrrex” that HHJ Pearce dismissed its application.  He concluded that Kyrrex was not “directly affected” by the judgment because it had not required Huobi to access any BTC that belonged to Kyrrex in order to satisfy the judgment.  Kyrrex had suffered loss because of Huobi’s approach to complying with the judgment, not as a result of the judgment itself. He also found that the application had been brought with undue delay.

Key takeaways

This judgment offers practical lessons for parties involved in cryptoasset disputes, particularly where assets have been dissipated through fraud and traced across multiple wallets and exchanges. The case demonstrates the complexities inherent in identifying, freezing, and recovering cryptoassets, especially when dealing with custodial wallets and the involvement of third-party exchanges, as well as the importance of getting it right.

A key takeaway is the importance of accurate tracing and expert evidence. When considering the evidence regarding the flow of cryptoassets and the ownership of specific wallets, mistaken assumptions about the provenance of assets can undermine a claimant’s case or expose them to challenge from innocent third parties.  This case is a reminder that any application for proprietary relief should be supported by robust, up-to-date blockchain analysis and a clear understanding of the technical arrangements between exchanges and their customers.

The judgment also underscores the challenges posed by the custodial nature of most exchange wallets.  In practice, exchanges often pool customer assets, making it difficult to assert a proprietary claim to specific coins or tokens. This has practical implications for the formulation of claims and the likelihood of success in seeking proprietary remedies or constructive trusts over assets held by exchanges. Parties should be prepared to address the evidential hurdles in establishing a direct link between the misappropriated assets and the property held by the exchange.

Another practical implication is the risk of dissipation and the need for speed. The case illustrates how quickly cryptoassets can be moved and how delays in investigation or legal action can prejudice recovery efforts. The dissolution of a key defendant (the exchange in this case) during the course of proceedings further complicated matters, demonstrating the need for claimants to act swiftly and decisively to secure and enforce interim relief.

Finally, the judgment highlights the potential for innocent parties to be caught up in cryptoasset recovery litigation, and the difficulties in unwinding transactions or reallocating losses where assets have passed through multiple hands. This reinforces the need for careful consideration of the rights and interests of all parties potentially affected by proprietary orders, and the importance of full and accurate disclosure to the court.

Please click here for a copy of the judgment: Gary Jones v Persons Unknown & Ors (No. 2) [2025] EWHC 1823 (Comm)

Article co-authored by Hafsah Iqbal, Solicitor Apprentice at CMS.

^[1] For more information, please see our Law-Now on D’Aloia v Persons Unknown (here).

^[2] For more information, please see our Law-Now on Jones v Persons Unknown [2022] EWHC 2543 (Comm) (here).