Published by Nicola McKinney, Partner at Edmonds Marshall McMahon

Two different cases of Smithers and Anor v Persons Unknown have produced three recent judgments in the Commercial Court that raise noteworthy points in crypto asset jurisprudence.

Two of the decisions, handed down in January and July of this year, concern a fraudulent investment scheme in a crypto asset trading.  The Claimants together lost around £10.5m over a period of several months.  The Claimants obtained a freezing order against persons unknown, information orders against several virtual asset service providers, and later summary judgment.   

(1)   In the first judgment [2026] EWHC 207 (Comm), handed down following the first return date hearing on the freezing order, Waksman J considered a preliminary matter consequential upon the Claimants’ tracing expert having adopted a universal ‘last in, first out’ (LIFO) tracing methodology, in circumstances where the transfers had been made in both Bitcoin and other denominations of crypto currency.  The ‘UTXO’ methodology would have been more reliable for tracing/ following the Bitcoin, but the simpler LIFO methodology – which might wrongly identify wallet addresses as recipients of the traced funds – had been used because of time pressure. This was not known by the Claimants’ legal team at the time that the freezing order application was made, and in the event, there were such wallet addresses, i.e. that had been served with the freezing order but when the UTXO methodology was used were shown not to have received the Claimants’ Bitcoin. 

The decision highlights (again) the care needed when tracing crypto assets, including which methodology ought to be adopted in which circumstances.  In this case the criticism was not that the LIFO methodology had been adopted, per se; it was that this was not disclosed at the time that the application was made, so that the Court could then “make a decision as to whether that tracing methodology was correct or whether the preferable but slower methodology” should be used.  In hot pursuit cases, it may therefore still be the case that a non-UTXO tracing methodology can be used if the fact of, and reasoning behind, its use is properly disclosed to the court in accordance with the duty of full and frank disclosure. 

In the event, the Judge did not consider that any prejudice to the potentially wrongly served addresses was shown, and – provided that the addresses were informed of what had occurred so that they could claim for damages under the cross-undertaking if any had occurred – there was no need to discharge the freezing order.

There are, incidentally, also potentially helpful observations at para 9 of the same judgment, as to how exchanges are not banks and “do not operate in the regulatory regime in which banks operate” so the court does not have to treat them as banks in relation to whether they are given advance notice of applications for injunctive and ancillary relief.  This would appear to suggest that it may not be unreasonable to take the position that exchanges don’t need to be put on notice (or, as is often the case, even on informal notice), and that it is not taken for granted that they will not notify third parties.

(2)   In July, the case [2026] EWHC 1907 (Comm) came before Mr Justice Bright for a summary judgment hearing.  This very short judgment largely concerns questions of service, but is worth a read on how courts acknowledge the different characteristics of Bitcoin (non-fungible until spent) versus other crypto assets (fully fungible) when it comes to remedy: return/ delivery up of assets versus compensation (although the date of valuation of the compensatory remedy was not addressed in the judgment).

The second Smithers case [2026] 3WLUK 397 (presumably involving the same Claimant(s) as above), a decision of Stephen Midwinter KC, sitting as a Deputy Judge of the High Court, was handed down in March 2026.  The judgment also related to a freezing order return date hearing, and the case concerned the ‘Inferno Drainer’ fraud, in which crypto malware reportedly aided scams leading to global victim losses of over $80 million.  The question was whether the freezing order should be continued or discharged.  In relation to whether sufficient grounds were made out on the question of jurisdiction (i.e. at the application for injunctive relief), it was found that there was “at the very least a good arguable case” that the tort gateway (PD 6B 3.1.(9)(a), damage sustained in the jurisdiction) would apply where the crypto assets were taken from a Claimant resident in England and Wales.  The Judge stressed the importance of “taking a realistic and pragmatic approach…in particular in claims involving apparently international frauds relating to assets that exist on the internet…” (meaning cross-border crypto fraud cases) and that “[d]ebates as to where such 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 over disputes relating to them.”  While the use of this gateway based on the residence of the victim is not unusual, the reference to addressing the problem through a pragmatic lens echoes the Law Commission 2025 consultation paper (on Digital Assets…in Private International Law), where the difficulties of ‘omniterritoriality’ and jurisdiction [3.51] were ventilated. 

Each case may have useful points of reasoning for those making regular applications relating to crypto assets; taken together, the three decisions highlight a divide between questions which require rigorous consideration of the technical characteristics of crypto assets, and questions where those characteristics are likely to be a distraction and may limit access to justice.