Victims of cryptocurrency theft cannot pursue claims in conversion
In Ping Fai Yuen v Fun Yung Li & Another,[1] the High Court has found that a victim of cryptocurrency theft cannot pursue a remedy in the tort of conversion. This is because OBG v Allan[2] is binding authority that only tangible assets can be converted.
Victims of cryptocurrency theft typically found their claims against perpetrators in unjust enrichment and proprietary restitution. The claimant’s attempt to found his claim in conversion was novel and perhaps optimistic. However, had it been successful, it would have presented victims with a simpler route to recovery.
The judgment highlights the challenges that victims face in obtaining a remedy and raises the question of whether there should be legislation to expand a conversion-like cause of action to cryptocurrency.
Background
The claimant stored the private keys to his BTC 2,323 on a PIN-protected Trezor hardware wallet. The Bitcoin was valued at £160 - £180m during the proceedings.
The claimant alleges that the first defendant, his estranged wife, covertly recorded him to obtain his seed phrase, used it to recreate his wallet, and stole his Bitcoin – possibly with the help of her sister, the second defendant.
The claimant brought proceedings against the defendants in the torts of conversion and trespass to goods. The first defendant applied to strike out the claim on the basis the claims in conversion and trespass to goods were bad in law. The claimant then filed an amendment application to include more typical causes of action in his claim.
Conversion
The first defendant applied to strike out the claim in conversion on the basis this tort requires a tangible asset.
The claimant asserted that the law was in a state of flux. His position was that the common law could develop the tort of conversion to recognise Bitcoin and other assets that can fall within the “third category” of property acknowledged by the Property (Digital Assets etc) Act 2025.
The Court recognised that the purpose of the 2025 Act was, in part, to allow the common law to develop a robust framework of personal property rights for digital assets. However, it found that OBG v Allan was a clear block to the extension of the law of conversion for this purpose and struck out this claim.
Trespass to goods
The first defendant applied to strike out the claim in trespass to goods on the same grounds, namely that the action requires a physical asset.
The Court considered that whilst the Bitcoin was not a physical asset, the claimant’s pleadings were ambiguous on whether the first defendant had interfered with the physical hardware wallet. The Court allowed the claimant seven days to consider whether to apply further to amend the particulars of claim to include the trespass claim, failing which it would be struck out.
Amendments
The claimant was given permission to amend his pleadings to include more traditional causes of action including unjust enrichment and proprietary restitution.
Commentary
The case raises the question of whether a conversion-like cause of action should be available in respect of cryptoassets. Whilst conversion has traditionally been tied to ideas like possession, which it has been difficult to apply to intangibles, cryptoassets have some qualities of both tangible and intangible assets.
It would present claimants with an easier route to a judgment if they could pursue claims in conversion. Unlike unjust enrichment claims, which require proof of enrichment, proof the enrichment was at the claimant’s expense, proof the enrichment was unjust, and may be met with various defences, conversion is a strict liability offence.
It is worth noting that obtaining a judgment can be quite different to obtaining a remedy. This case is unusual in that the identity of the alleged wrongdoer is known to the claimant. In many cases involving stolen cryptocurrency, the identity of the wrongdoer will be unknown. Unless the assets are readily available and a third party (e.g. an exchange) can be ordered to release them to the claimant, there will remain practical difficulties.
One of the aims of the 2025 Act was to allow for personal property rights law to develop to encompass digital assets. Whilst the intention was for developments to be made under the common law, the case demonstrates the challenges where there are longstanding judgments from appellate courts. It is likely to take either legislation or an appeal to change or challenge them.
This article was drafted with the assistance of Jessica Nsinga, Solicitor Appentice.
[2] [2007] UKHL 21
