Commercial Court Finds Good Arguable Case That, Where Cryptoassets Were Taken From An English Resident, Damage Was Sustained In England

In a recent judgment involving an alleged cryptocurrency fraud, the Commercial Court continued a freezing order obtained against persons unknown over various accounts holding cryptoassets: Smithers & Anor v Persons Unknown [2026] 3 WLUK 397.

The court held there was a good arguable case that, where cryptoassets were taken from an individual resident in England and Wales, damage was sustained within the jurisdiction for the purposes of the tort gateway in Practice Direction 6B paragraph 3.1.9. The court emphasised the importance of taking a realistic and pragmatic approach to the jurisdictional gateways, noting that debates over where cryptoassets were located in a technical sense were unlikely to provide a sensible basis for identifying the appropriate jurisdiction.

Notwithstanding this decision, the question of which courts should have jurisdiction over disputes concerning digital assets remains unsettled. The Law Commission's 2025 consultation on digital assets considered this issue in some detail, noting that the courts to date had for the most part sought to locate digital assets by reference to the place where their owner was resident or domiciled, in contrast with the general rule of private international law that a defendant should be sued in their home court. The Law Commission proposed an alternative approach, namely that cross-border claims concerning digital assets should be heard in the court of the place where those assets could effectively be dealt with at the time proceedings were issued. While this formulation will not necessarily coincide with the claimant's home jurisdiction and therefore has some advantage over attempts to localise a digital asset by reference to the domicile or place of residence of the owner, it may give rise to practical factual difficulties and remains at odds with the general jurisdictional rule. The Law Commission's final report is awaited.

Background

The claimants alleged that they had been defrauded of cryptocurrency assets, and that those assets were taken by participants in what is known as the "Inferno Drainer" fraud. The claimants engaged experts who identified the respondents and accounts linked to them as being connected with the fraud.

The claim was not based on an allegation that the identified accounts held the claimants' specific assets, but rather that the accounts belonged to participants in the fraud, and those individuals (whoever they may be) were liable in the tort of unlawful means conspiracy. If that claim were proven, the respondents would be liable in damages to the claimants. The original freezing order was granted in support of that claim. 

The question for the court was whether to continue the freezing order. 

Decision

Stephen Midwinter KC (sitting as a High Court judge) continued the freezing order. 

The court was satisfied that the claimants had established a good arguable case on the merits that each of the respondents was involved with the Inferno Drainer fraud. The allegations were detailed, plausible and unanswered by the respondents.

There was also a risk of dissipation. The nature of the fraud alleged was sufficient to establish that those accused of participating in it were liable to dissipate their assets, and the risk was heightened by the nature of the assets concerned, their ready transferability and the difficulty of identifying where they might go.

Jurisdiction

The court held that the jurisdictional gateway for tort claims under PD6B paragraph 3.1.9 was satisfied. There was at least a good arguable case that, where cryptoassets were taken from an individual resident in England and Wales, the damage was sustained within England and Wales for the purposes of a tort claim. The court reached this conclusion for the same reasons given in Ion Science v Persons Unknown [2020] EWHC 3688 (Comm), another cryptocurrency fraud claim involving conspiracy allegations, considered here.

The judge stressed the need for a realistic and pragmatic approach when applying the jurisdictional gateways in PD6.B paragraph 3.1, particularly in claims involving apparently international frauds relating to assets that existed on the internet. Debates as to where cryptoassets were "located" in a technical sense were unlikely to be fruitful or to provide a sensible basis for identifying the courts that should have jurisdiction over disputes relating to them. The judge could see no difficulty in saying that such assets should be treated in law as existing at the place where their owner resided, and that the courts of that place should have jurisdiction over tort claims relating to them.

Enforcement

The judge noted that he had raised a concern about the practical utility of a freezing order against unidentified defendants and where the relevant exchanges who might be called on to enforce were located overseas. He noted the claimants' plan, once time had been allowed for any defences to be filed, to apply for summary judgment and, if obtained, to enforce it in the jurisdictions where the exchanges were based. In the meantime, the claimants' solicitors were considering seeking reciprocal enforcement of the freezing order in relevant jurisdictions if the exchanges did not voluntarily give effect to it.

On this basis, the requirements for continuing the freezing order were met and it was appropriate for the court to continue it on its current terms. 

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