Ex Parte Cryptoasset Injunctions: English Courts’ Trend and Exchange Guidance
Introduction
Cryptocurrency exchanges are increasingly facing urgent court orders issued ex parte (without prior notice) in the wake of crypto-related frauds and thefts. English courts have shown a willingness to grant freezing injunctions, proprietary injunctions and disclosure orders (such as Bankers Trust or Norwich Pharmacal orders) to assist victims of crypto-asset misappropriation . Strikingly, these powerful orders are often granted on minimal evidence – frequently relying on untested expert blockchain tracing reports that purport to link stolen assets to exchange wallets . This article examines the trend through key English cases, analyses the courts’ approach to urgency and the duty of full and frank disclosure, and discusses how misstatements or mistakes by applicants can lead to discharge of orders. It further emphasizes why exchanges should scrutinize the reliability of expert evidence (e.g. wallet attribution and blockchain tracing) and provides practical guidance on how exchanges should respond upon receiving such orders. The goal is an accessible yet detailed roadmap for crypto exchange owners, in-house legal teams, and compliance counsel to navigate this fast-evolving area of law.
Types of Ex Parte Orders in Crypto Litigation
English courts have adapted traditional interim remedies to the context of crypto-assets, often deploying them in combination at urgent without-notice hearings. The main types of orders include:
Freezing Injunctions (Mareva orders): These prevent a defendant from dissipating or dealing with assets up to a certain value. In crypto cases, courts have issued worldwide freezing orders against unknown fraudsters controlling misappropriated tokens . Exchanges may receive notice as third parties to effectuate the freeze on accounts, even if not named as defendants . Proprietary Injunctions: A form of injunction preserving specific assets claimed to belong to the claimant. English judges have readily deemed cryptocurrency to be “property” capable of being subject to proprietary claims . For example, in AA v Persons Unknown [2019], the High Court treated Bitcoin ransom proceeds as property and granted a proprietary injunction over 96 BTC traced to an exchange wallet . Proprietary injunctions in crypto cases often run in tandem with freezing orders, strengthening the claimant’s hand by asserting a property right in the digital assets. Bankers Trust / Norwich Pharmacal Orders: These are disclosure orders against innocent third parties who unwittingly became mixed up in wrongdoing. In crypto litigation, exchanges frequently receive such orders compelling them to disclose information about account holders and transaction history to aid asset tracing . The Bankers Trust order (from Bankers Trust v Shapira [1980]) is traditionally used to obtain confidential bank documents in fraud cases, and English courts have repurposed it to force crypto exchanges to provide KYC data and blockchain transaction records . A Norwich Pharmacal order (NPO) similarly requires a third party to divulge information to identify wrongdoers. In practice, claimants may seek either or both forms, depending on jurisdictional technicalities, to get exchanges to reveal who is behind particular wallets and where stolen crypto went .
These orders are commonly sought ex parte due to the acute risk that crypto-assets can be transferred or dissipated instantly. Courts recognize that giving notice to a suspected fraudster would likely cause the assets to vanish, defeating the purpose of the injunction. As a result, judges are prepared to grant interim relief within hours of an application in appropriate cases . However, proceeding without notice imposes rigorous obligations on applicants, as discussed later. First, we examine the evidentiary basis of these applications – and how relatively thin evidence has sufficed at the interim stage.
Minimal Evidence and Blockchain Tracing Reports
A notable feature of cryptoasset injunctions is the courts’ reliance on blockchain analysis evidence presented by claimants at the ex parte stage. Typically, a victim of crypto theft or fraud will submit a witness statement and an expert tracing report explaining how the stolen cryptocurrency was followed through the blockchain to a particular exchange or wallet. This evidence is often provided by specialist investigatory firms using blockchain analytics tools. While powerful, such reports are essentially untested hearsay from the claimant’s expert at the point of the without-notice hearing.
English courts have thus far been willing to accept this minimal yet cogent evidence to establish a good arguable case that the claimant’s assets can be traced to the defendant or to an exchange account. For example, in Ion Science Ltd v Persons Unknown (Butcher J, High Court, 21 Dec 2020), the claimants alleged they were induced into sending Bitcoin in a fraudulent ICO investment. Expert evidence in that case “suggested that the transferred Bitcoin or their traceable proceeds were deposited in accounts held by the Binance and Kraken cryptocurrency exchanges,” which formed the basis for seeking injunctions and disclosure . The court accepted this evidence and granted a proprietary injunction and worldwide freeze, even though the tracing analysis had not been challenged or cross-examined at that stage . Similarly, in AA v Persons Unknown [2019], consultants tracked a ransom payment through blockchain transactions to a specific exchange address, and the court relied on that tracing to grant a proprietary injunction over the Bitcoin remaining in that account .
The evidentiary threshold at a without-notice hearing is that there is a “serious issue to be tried” on the merits of the claim and a real risk of dissipation of assets . Detailed proof is not required at this interim stage. Judges often emphasize speed and pragmatism: the priority is to preserve the assets; disputes about ultimate ownership or the finer points of tracing can be dealt with later . In practice, so long as the claimant’s evidence shows a prima facie fraud and a plausible tracing of the proceeds into identifiable accounts or wallets, the courts will lean in favor of granting relief to prevent irreparable harm .
However, this approach means that exchanges can find themselves subject to court orders based on forensic assumptions that have not been fully tested. For instance, an expert might attribute a certain blockchain address to an exchange (labeling it as a deposit wallet for Exchange X), but this attribution might be erroneous or outdated. At the interim stage, the court usually has no contrary evidence and will proceed on the expert’s assertions. It is only later, if the exchange or defendant challenges the order, that the robustness of the tracing evidence is scrutinized. As discussed below, recent cases show that when exchanges do push back on shaky evidence or nondisclosure, injunctions can be varied or discharged . First, we turn to the key cases illustrating the courts’ developing jurisprudence.
Key Judicial Developments in Cryptoasset Injunctions
Several English High Court cases since 2019 have shaped the landscape of crypto litigation. These decisions demonstrate the courts’ readiness to innovate – from recognizing novel property rights in crypto to permitting unprecedented methods of service – all to ensure interim relief remains effective in the digital asset realm. Below we analyze the salient points from these leading cases and their implications:
AA v Persons Unknown [2019] EWHC 3556 (Comm)
AA v Persons Unknown was a landmark decision where the Commercial Court first clearly confirmed that cryptocurrency can be treated as property under English law . In this case (decision dated 13 December 2019), an English insurer had paid a Bitcoin ransom to hackers who encrypted an insured customer’s data. The insurer, as claimant, traced 96 of the paid bitcoins to an address on the Bitfinex exchange and urgently applied for a proprietary injunction to freeze those funds .
The court (Bryan J) granted the proprietary injunction and related disclosure orders, accepting that the Bitcoin were a form of property and thus capable of being subject to a trust or injunction . Notably, this was done ex parte and in anonymity (the case name is stylized to protect identities). The judge cited the UK Jurisdiction Taskforce’s Legal Statement on Cryptoassets and Smart Contracts, aligning with its reasoning that crypto-tokens are property in principle . This finding was crucial – it meant the claimant had a proprietary claim to assert, strengthening the case for an injunction.
The facts illustrated the typical use of minimal evidence: consultants had tracked the ransom payment on the blockchain to Bitfinex, establishing a link to that exchange . With that evidence, the court was satisfied there was a serious issue to be tried as to the claimant’s proprietary rights over the 96 BTC and that, if not frozen, they could be dissipated. As a result, a proprietary injunction and a Bankers Trust disclosure order were granted . The AA case is often cited as kicking off the modern trend of aggressive interim remedies in crypto disputes, indicating that victims of crypto-extortion or theft can indeed leverage the English courts for relief if they can trace the assets .
Ion Science Ltd v Persons Unknown (Butcher J, 21 December 2020)
In Ion Science (unreported in official law reports, Commercial Court, 2020), the court expanded on the principles from AA and demonstrated flexibility in serving proceedings out of the jurisdiction. Ion Science Ltd and its director were victims of fraud in an initial coin offering (ICO) – essentially, they were tricked into sending their Bitcoin to fraudsters on the promise of a fake investment . They sought a worldwide freezing order, a proprietary injunction, and disclosure orders against two cryptocurrency exchanges (Binance and Kraken) where the trail of the stolen Bitcoin ended .
Butcher J granted all the requested relief. Echoing AA, he found there was a serious issue to be tried that cryptoassets are property and that English law would treat them as such . One significant aspect of Ion Science was how it addressed jurisdiction and the location (situs) of cryptoassets. The court held that for the purposes of English law, a cryptoasset is located at the place of domicile of its owner . Since the claimants were based in England and suffered the loss in England, the judge was satisfied that England was the proper forum and that the English court could assume jurisdiction over the claim . This reasoning has been influential – it provides a solution to the thorny issue of where a borderless asset like Bitcoin is “situated” for legal purposes.
Furthermore, Ion Science underscored that English courts can permit service out of the jurisdiction on persons unknown, using the traditional framework for service out in cases of urgent injunctive relief . The claimants in Ion Science were allowed to serve the fraudsters outside England and also serve the foreign exchanges (in the Cayman Islands and US) with the disclosure orders. This set the stage for later cases that formalized new service gateways for such orders (as discussed below in LMN v Bitflyer).
The case is also known for being the first in which a third-party debt order in relation to crypto was reportedly granted , though that is beyond our scope here. For present purposes, Ion Science demonstrated the court’s willingness to combine multiple interim orders – freezing, proprietary, and disclosure – to maximize the chances of recovering stolen crypto. It did so on the basis of an expert’s unchallenged tracing report (linking funds to exchanges), exemplifying how minimal evidence can suffice when speed is of the essence.
Fetch.ai Ltd v Persons Unknown [2021] EWHC 2254 (Comm)
The Fetch.ai case (High Court, July 2021, Pelling QC) highlighted the court’s adaptable approach when cryptoassets are misappropriated through exploitation of exchange accounts. Fetch.ai, an English technology company, kept cryptocurrency tokens on the Binance exchange for trading . Unknown hackers obtained access to its account and sold its tokens at artificially low prices to accounts controlled by themselves, causing an estimated loss of $2.6 million to Fetch.ai . In response, Fetch.ai and a related party urgently applied for a suite of remedies: a proprietary injunction and worldwide freezing order against the fraudsters (persons unknown), and Bankers Trust / Norwich Pharmacal orders against Binance entities to reveal information about the fraudsters’ accounts .
The High Court granted these orders. Judge Pelling QC treated the case as one of imaginative cryptocurrency fraud and readily applied established principles to the novel facts . Key points from the judgment include:
Crypto as Property / Choses in Action: The court implicitly affirmed that the crypto assets in question could be considered property (or a species of chose in action when held through an exchange account). Although not analyzed in depth in the short ex tempore decision, Pelling QC noted that previous cases (like AA and Ion Science) had already paved the way . Serious Issue and Risk of Dissipation: The judge found a serious issue to be tried on causes of action including breach of confidence (the hack involved misuse of private keys and confidential credentials), unjust enrichment, and a proprietary constructive trust claim . Given the fraudulent scheme and the unknown identity of the perpetrators, there was a clear risk that any remaining assets would vanish unless frozen . Worldwide Freezing Order Nuances: The Fetch.ai order was carefully structured to target the right classes of defendants. The court was “anxious to separate the different types of ‘persons unknown’” involved . Classically, English cases define categories of unknown defendants (e.g., the initial wrongdoers, secondary recipients, innocent third parties). In Fetch.ai, the freezing injunction was applied to the fraudsters and those who knowingly received the discounted crypto, but it expressly did not apply to innocent third-party purchasers who bought the assets at full value without notice of the fraud . This prevented overreach – ensuring that innocent market participants were not inadvertently caught by the order. Disclosure Orders against Exchange: The court issued a Bankers Trust order against Binance Holdings (the Cayman parent company) and a Norwich Pharmacal order against Binance Markets Ltd (the UK entity) . This reflected uncertainty over Binance’s corporate structure – the judge noted the group’s “opaque structure” made it challenging to pin down which entity held relevant information . By targeting both, the claimant ensured someone in the Binance group would have to cough up information. The orders compelled Binance to identify the fraudsters’ accounts, provide contact details, and transaction records – critical information for pursuing recovery. Permission for service out of the disclosure application was also granted, even though Binance Holdings was abroad, because the court followed Ion Science in finding a gateway for service out in these exceptional circumstances .
The Fetch.ai case underscored that English courts could effectively assist victims even when the fraud is executed entirely online and the perpetrators are anonymous. It also highlighted issues exchanges face: Binance was given notice of these orders and had to navigate compliance across its entities. The case prefigured later developments about exchanges’ potential liability (as constructive trustees) and showed the courts’ commitment to tailoring orders to avoid unfairness (i.e., not freezing assets of innocent parties). Ultimately, Fetch.ai demonstrated an enhanced approach to crypto fraud – combining existing tools (freezing, proprietary claims, disclosure) in one coordinated strike .
D’Aloia v Persons Unknown & Others [2022] EWHC 1723 (Ch)
If Fetch.ai showcased effective use of existing tools, D’Aloia v Binance & Others took a step further by introducing novel elements to the litigation arsenal. Fabrizio D’Aloia, an Italian national, was the victim of a sophisticated scam in which he was deceived into transferring substantial sums of cryptocurrency (around $2.1 million in USDT and $230,000 in USDC) to a fraudulent online brokerage that impersonated the brand of a legitimate company . When his account was frozen and the fraud became clear, D’Aloia traced the funds with the help of investigators (Mitmark) and found they had been dispersed to various private addresses and exchange addresses associated with several major exchanges (Binance, Poloniex, Luno, Bitstamp, etc.) .
In June 2022, D’Aloia applied to the High Court (Trower J) for urgent interim relief. The court granted an array of orders, notably: (1) a freezing injunction and proprietary injunction against the persons unknown (the fraudsters) and against the relevant exchange-held assets, (2) disclosure orders against the exchanges, and (3) permission to serve the proceedings by alternative means – including service by NFT airdrop to blockchain addresses .
Two aspects make D’Aloia particularly significant:
Exchanges as Constructive Trustees: D’Aloia advanced a legal argument that the misappropriated crypto assets, once deposited in the exchanges, were held on constructive trust for him by both the fraudsters and the exchange operators . In other words, he alleged the exchanges were involuntary bailees/trustees of his property since they controlled the wallets into which his stolen funds had been traced. Trower J held that there was a good arguable case for this proposition (at least against the major exchanges; one Binance entity was excluded as it didn’t actually hold the wallets) . This was a landmark acknowledgement. It opened the door for claimants to assert proprietary claims not just against the thief, but also against the exchange holding the assets – treating the exchange as a potential defendant if it has the stolen assets in its custody . The court relied on the trust “gateway” in the civil procedure rules to allow service out of the jurisdiction on this basis . This approach built on a prior case (Wang v Darby [2021] EWHC 3054 (Comm)) which had hinted crypto could be held on trust, though no trust was found on the facts there . In D’Aloia, by contrast, the facts supported an interim finding of a likely constructive trust. This finding put exchanges on notice that if they have notice of a claim that assets in their custody are stolen, they could risk liability if they facilitate their dissipation . The practical effect was that the injunction order explicitly bound the exchanges to freeze the identified assets, treating them effectively as constructive trustees who must preserve the trust property. Service by NFT: Perhaps the most headline-grabbing aspect was the court’s approval of service of court documents by way of airdropping an NFT to the blockchain wallets controlled by the fraudsters . Because the fraudsters’ identities and locations were unknown, D’Aloia sought an alternative service method to increase the likelihood of bringing the proceedings to their attention. The judge allowed service by two means: email (to addresses believed to be used by the scammers) and NFT drop into the wallets to which D’Aloia had sent his crypto . An NFT (non-fungible token) containing the court notice was created and sent to those wallet addresses. This made use of the immutability of blockchain – effectively “embedding” the notice of the lawsuit in the transaction history of the scammer’s wallets . The court was satisfied that this was an appropriate and innovative way to serve persons unknown in the circumstances, especially given the digital nature of the dispute. This order was the first of its kind in England and was widely publicized as a sign of the courts’ tech-savvy approach in crypto cases .
The D’Aloia case thus illustrates both substantive and procedural innovations: extending liability to exchanges as constructive trustees (increasing the pressure on exchanges to freeze and disclose) and embracing cutting-edge methods of service. For exchanges, D’Aloia’s constructive trust finding was something of a double-edged sword. On one hand, by being bound to comply with the injunction (as constructive trustees), exchanges reduce their risk of later being accused of “dishonest assistance” if they were to ignore obvious red flags . On the other hand, it raises the stakes – if an exchange were aware (or put on notice) that assets in an account are likely stolen, it could face future claims from victims if it lets those assets be withdrawn. The case thereby encourages exchanges to cooperate and freeze assets proactively when served, but also to be vigilant about such claims.
LMN v Bitflyer Holdings Inc & Others [2022] EWHC 2954 (Comm)
In late 2022, the High Court delivered another significant judgment in LMN v Bitflyer, underlining the English courts’ commitment to assisting crypto fraud victims even when that means reaching across borders. LMN (an anonymized claimant, believed to be a crypto exchange or platform) had suffered a hack in which millions of dollars’ worth of cryptocurrency were illicitly transferred out of its wallets . LMN’s investigators traced those funds to addresses at several foreign cryptocurrency exchanges. However, LMN could not identify the perpetrators without information from those exchanges .
LMN applied for third-party disclosure orders (Bankers Trust orders) against six overseas exchanges, including Bitflyer, Binance, Coinbase, Kraken, KuCoin, and Luno (all incorporated outside England). The relief sought was essentially to compel each exchange to provide details of the accounts that received the stolen crypto and related transaction information . The challenge was not only to meet the test for a disclosure order, but also to establish jurisdiction over foreign non-parties.
Mr Justice Butcher granted the orders in full, marking a few important firsts and confirmations:
Extensive Information Orders: The court required each exchange to hand over extensive KYC information (customer identities, documents) and transaction records for the accounts implicated by LMN’s tracing analysis . The orders were broad but tailored to what was needed to track the stolen assets. The judge was satisfied that the standard Bankers Trust criteria were met – namely, (i) a realistic claim that the stolen property belongs to the claimant, (ii) a real prospect that the information sought would lead to locating or preserving those assets, and (iii) the order was no wider than necessary . Here, LMN showed a good arguable case that whoever holds its misappropriated crypto does so as a constructive trustee for LMN (echoing the approach in D’Aloia) . This constructive trust assertion strengthened the basis for disclosure by framing the exchanges as holders of the claimant’s property (albeit innocently). New Service-Out Gateway: This case was the first to use a newly created provision in the Civil Procedure Rules – Gateway 25 in Practice Direction 6B – which had come into force in 2022 to specifically facilitate service out of the jurisdiction for information orders in fraud cases . Gateway 25 allows a claim or application for disclosure to be served on a foreign entity where it seeks information about: (i) the true identity of a defendant or potential defendant, and/or (ii) the whereabouts of the claimant’s property . LMN’s application fit squarely within this gateway: they needed the exchanges to identify wrongdoers and trace the property. Butcher J’s judgment confirmed that this new rule is available and apt for crypto cases . He found that the three general conditions for service out were satisfied: there was a serious issue to be tried on the merits; the claim fell within a PD6B gateway (the new gateway for disclosure); and England was clearly the appropriate forum given that the victim was based in England and the losses were suffered there . Jurisdiction and Forum: Consistent with earlier cases, the court took the view that English law applied and England was the proper forum because the claimant was an English company, the hack occurred on its systems (presumably in England), and the losses were sustained in England . This mirrors the logic of Ion Science and Fetch.ai regarding lex situs and forum.
The LMN decision is a powerful precedent for victims of crypto-hacks: it shows that an English court can compel even non-UK exchanges to divulge information, provided the legal criteria are met and the proceedings are properly served. For exchanges, it serves as notice that they may be subject to English orders even if they have no physical presence in the UK, especially now that clear service gateways exist. Practically, many exchanges complied with such orders voluntarily in the past; LMN formalizes the process and makes it harder for an exchange to refuse cooperation without risking enforcement actions. It’s worth noting that while compliance may not be directly enforceable abroad without further steps, a major exchange will usually comply to avoid being seen as uncooperative or to avoid jeopardy if they have any UK nexus.
In summary, these key cases – from AA through LMN – collectively illustrate an expanding toolkit for claimants and a judiciary that is responsive to the unique challenges of crypto disputes. The theme is clear: urgency and innovation. Courts will move swiftly to grant relief (freezing assets, ordering disclosure, even permitting novel service methods) to prevent crypto-assets from slipping away, while striving to maintain fairness (through careful definition of defendants and upholding duties of disclosure).
Urgency, Full & Frank Disclosure, and Risk of Discharge
One recurring aspect in all these cases is the urgency with which the courts act. Judges have explicitly recognized that in crypto matters, delay can be devastating – digital assets can be transferred across the globe in seconds, potentially beyond reach. Thus, courts are prepared to list hearings on very short notice. In Fetch.ai, for example, the court convened and granted relief within a day of the application to stop further dissipation of assets . Likewise, AA, Ion Science, D’Aloia and LMN were all heard urgently and without notice to the defendants. The judicial approach to urgency is to assume the risk of dissipation is both high and imminent in crypto fraud cases, which generally satisfies the requirement of demonstrating urgency for an ex parte application.
However, with great power (obtaining drastic orders in secret) comes great responsibility. Applicants have a stringent duty of full and frank disclosure at without-notice hearings. This means they must disclose to the court all material facts, including those that might be unfavorable or raise possible defenses for the absent defendants. Courts have not hesitated to emphasize this duty in crypto cases. If a claimant fails to meet the obligation – whether by omission, oversight, or misstatement – the resulting order can be set aside at the return hearing and the claimant can face heavy costs.
A vivid illustration is Piroozzadeh v Persons Unknown & Others [2023] EWHC 1024 (Ch), a case in which Binance (as a respondent) successfully applied to discharge an interim proprietary injunction that had been obtained against it without notice . Piroozzadeh, the claimant, alleged he was defrauded of a large sum of money (including 870,000 USDT stablecoins) which he traced to deposit addresses on Binance . He obtained an ex parte proprietary injunction requiring Binance to preserve the USDT in those accounts. At the return date, Binance challenged the injunction on multiple grounds – importantly, that the claimant had not presented the full picture to the judge initially .
Trower J (who heard the return hearing) discharged the injunction against Binance and awarded indemnity costs against the claimant . The judgment (as reported) highlighted several points relevant to full and frank disclosure :
Notice vs Non-Notice: The court questioned whether it was even appropriate to name Binance as a defendant and seek an injunction against the exchange itself without notice . In many cases, a freezing order is made against the asset-owner (fraudster) and then served on an exchange as a third party to enforce. Here the claimant went a step further by making Binance a respondent. If doing so, the claimant needed to justify proceeding ex parte against the exchange and explain any possible defenses Binance might have – which was not adequately done . Material Non-Disclosure: One crucial fact was that the USDT, once deposited into Binance, was likely mixed in a central pooled wallet (per Binance’s usual operations) . This means the specific USDT tokens originally traced were no longer identifiable – the customer’s balance is a debt from Binance, not segregated coins. The claimant’s initial application apparently did not explain this clearly to the judge. This omission was material because if assets have been mixed or dissipated already, an injunction freezing “those assets” serves no purpose . An applicant must candidly inform the court if, for example, an exchange uses omnibus wallets or if there’s a question as to whether a proprietary asset still exists in traceable form. Failing to do so breached the duty of candor. Potential Defenses: Binance argued, and the judge accepted, that the claimant had not addressed potential defenses in the ex parte application – for instance, that Binance could contend it was not a constructive trustee at all once funds were in its pooled accounts, or that damages would be an adequate remedy against a solvent exchange . Had these points been raised initially, the court might have been more circumspect in granting an injunction against the exchange. The duty of full and frank disclosure required the claimant to raise these counterpoints, even though they undermined his case.
The upshot is that the injunction was set aside entirely, leaving the claimant to rely on other routes (like freezing orders against the fraudsters themselves, and third-party disclosure). The penalty for nondisclosure was severe: not only lost the injunction but also had to pay £90,000 in costs to Binance .
This outcome sends a strong message. For claimants: do not cut corners on your disclosure obligations. If you know of facts or legal issues that the judge should weigh – like delays in bringing the application, alternative remedies, technical details of how an exchange operates, or any innocents who might be affected – you must inform the court. Otherwise, you risk losing the very relief you urgently obtained and damaging your credibility in the eyes of the court (not to mention incurring costs).
For exchanges and respondents: a granted ex parte order is not the end of the matter. If there are grounds to believe the order was improperly obtained – e.g., key facts were omitted, evidence was misrepresented, or the legal basis is flawed – you have the opportunity at the return date (or via an interim application) to challenge and potentially discharge the order. Courts will carefully scrutinize whether the draconian without-notice relief was justified and whether the claimant played fair in obtaining it. The Piroozzadeh case is likely the first of many where exchanges push back against overbroad or ill-founded injunctions, helping calibrate the system so that only genuinely meritorious orders survive.
In sum, English judges balance urgency with fairness: they will act fast to freeze crypto assets, but they also expect absolute candor and accuracy from applicants. Misstatements, omissions, or undue overreach can lead to an injunction being unwound. This reinforces the importance of robust evidence and transparent lawyering in ex parte crypto applications – and it empowers exchanges to call out deficiencies rather than assuming they are helpless under an order.
Questioning Expert Evidence: Wallet Attribution and Tracing Reliability
Crypto exchanges served with freezing or disclosure orders should not passively accept all assertions made in a claimant’s evidence. Given that much of the court’s initial decision may rest on a single expert report or investigative affidavit, there is ample room to scrutinize the reliability of that expert evidence, especially regarding blockchain tracing and wallet attribution.
Some considerations for exchanges include:
Accuracy of Wallet Attribution: Often, tracing reports will claim that certain blockchain addresses belong to a particular exchange (e.g., “Address 0x123 is a deposit address on Binance”). Exchanges should verify these claims against their own records. Chain analytics databases, while advanced, are not infallible; cases have occurred where addresses were mis-tagged or outdated. If an order is premised on the idea that “stolen funds are sitting in your exchange account X”, the exchange’s internal data might reveal that account X received those funds from a different source or that the address in question isn’t actually one of the exchange’s wallets. If an exchange finds a discrepancy, it should raise it with the claimant’s lawyers or the court promptly – this could narrow or eliminate the order. For example, if Exchange Y can show that the flagged address isn’t operated by them, the basis for including Exchange Y in the proceedings falls away. Tracing Gaps and Assumptions: Blockchain tracing can be complicated by factors like mixers, privacy coins, or simply incomplete data. An expert might assume that because funds went from address A to B to C (with C being an exchange wallet), the holder of C is in possession of the original funds. But what if there were intermediate hops the expert missed, or if address B was wrongly assumed to belong to the fraudster? Exchanges can question whether the tracing truly leads to their platform or if the claimant might have leapfrogged over some steps. In LMN v Bitflyer, the tracing stopped once funds hit the exchanges; it was then assumed the exchanges’ customer accounts held the loot . While likely true, the exchanges are entitled at the return hearing to ask, for instance, whether any portion of the funds had already moved on from their platform by the time of the order. If the stolen crypto was quickly withdrawn or converted, an exchange might argue the injunction is too late or should be modified. Untested Methodologies: Different experts use different methodologies (heuristic clustering, address tagging, etc.). Without cross-examination or disclosure of the expert’s techniques, there may be unknown error rates. An exchange could consider asking the court for permission to file evidence in response at the return hearing, perhaps from its own blockchain analytics expert, to highlight any potential flaws. While courts at the interim stage won’t demand a full trial on these issues, a well-founded critique can influence whether an injunction is continued or whether additional safeguards are added (like requiring the claimant’s expert to meet with the exchange’s expert to reconcile discrepancies). Mixing and Pooling Issues: As seen in the Binance case (Piroozzadeh), one critical factual point was the pooling of assets . Many exchanges operate omnibus wallets – multiple customers’ crypto are co-mingled. A tracing report that simply identifies a deposit address on an exchange might mislead one to think the specific coins are still there, when in reality they’ve been swept into a master wallet. Exchanges should be ready to explain their wallet infrastructure to the court. If the subject assets are pooled, the exchange can argue (as Binance did) that a conventional proprietary injunction is ineffectual or ought to be limited to the fiat/traditional assets of the fraudster (or converted to a monetary freezing order). At the very least, the order should be drafted clearly about what exactly the exchange must freeze (e.g., not “freeze 100 USDT in address X” when address X is just a conduit, but perhaps “prevent any transfers out of the account credited with X amount”). Chain of Custody and Identifiers: Exchanges receiving disclosure orders should pay close attention to how the order identifies relevant accounts or transactions. If an order lists specific transaction hashes or wallet IDs, the exchange should verify they correspond to its own data. There have been instances where applicants, in haste, provided a wrong digit or a mistaken account number. Challenging those errors is important – compliance with an order that is based on incorrect data could either be impossible or might lead to freezing the wrong person’s account, which brings liability risks. An exchange can apply to court to correct or clarify any such issue.
In essence, exchanges can and should question the reliability of the evidence against them. Courts do not assume infallibility of expert reports; they simply have little choice at ex parte hearings but to go on what is presented. By the time of a return hearing, however, the court expects a more complete picture. Indeed, the duty of full and frank disclosure includes drawing attention to potential limitations in the evidence . A diligent exchange, through its counsel, can assist the court by providing a more balanced view.
This is not to say exchanges should adopt an overly adversarial stance when truly faced with clear evidence of fraud. The goal is accuracy and fairness. If an exchange’s own investigation corroborates the claimant’s story (e.g. the account identified does have suspicious funds from the timeframe), it may choose not to contest the factual basis, and instead focus on cooperation or negotiating order terms. But if the evidence is shaky, the exchange’s skepticism is warranted and can prevent unjustified orders from remaining in effect.
Finally, questioning expert evidence is also a matter of developing the law. As more crypto cases progress, we may see courts issue guidance on acceptable standards for blockchain evidence. For now, exchanges play a role in indirectly testing these standards by highlighting when an emperor of blockchain analysis has no clothes.
Responding to an Ex Parte Order: Guidance for Exchanges
From the moment a cryptocurrency exchange is served with an English court order (be it a freezing injunction, proprietary injunction, or disclosure order), the clock is ticking. Exchanges must navigate a tightrope: comply swiftly to avoid contempt, yet assess the order’s scope and their options to possibly challenge or modify it. The following guidance outlines how exchanges should respond:
1. Act Immediately – Do Not Ignore the Order: Upon receipt (which might occur by email, mail, or even an NFT airdrop in novel cases), the exchange should promptly acknowledge the order. Time is often “of the essence” – some orders may require action within hours or by the next day. The first step is to halt any dissipation of the identified assets. This usually means freezing the relevant customer account or wallets internally . Even if the order is not from your home jurisdiction, do not assume it can be ignored. English courts assert authority via these orders, and failure to comply could lead to serious consequences if the exchange or its officers are ever within reach of the English jurisdiction. Moreover, non-compliance could damage the exchange’s reputation for cooperating with law enforcement and courts.
2. Read and Understand the Order’s Terms: Carefully review the order with legal counsel. These orders can be lengthy and technical (often following standard High Court forms). Key points to identify include: the penal notice (which warns of consequences for non-compliance), the exact assets or accounts to be frozen, the scope of any disclosure (what information must be provided, by when, and to whom), any prohibitions on informing the customer (commonly, freezing injunctions have a clause forbidding tipping off the account-holder), and the date of the return hearing or deadline to respond. Make sure to note any geographic scope – e.g., is it a worldwide freezing order or limited to England and Wales? – and whether there are exceptions (like allowing the account-holder to make limited withdrawals for living expenses, which sometimes appear in freezing orders for individuals).
3. Engage Legal Counsel (UK counsel if needed): In-house legal teams should involve external counsel experienced in civil fraud and crypto cases. If the exchange has U.K. counsel on standby, contact them immediately. They can help interpret the order, communicate with the claimant’s lawyers, and prepare for the return hearing or any application to vary. Given the complexity and high stakes, having a knowledgeable solicitor and/or barrister is critical. They can also advise on jurisdictional issues – for example, if the exchange is not U.K.-based, whether to contest jurisdiction or simply comply without submission to jurisdiction (a nuanced decision).
4. Ensure Internal Compliance Teams Are Coordinated: The legal team should coordinate with the compliance, risk, and technical departments. Freezing an account might require steps by an operations team; pulling transaction logs and KYC documents for disclosure likely involves the compliance or fraud department. It’s important to involve a single point of contact or project manager (often a senior compliance officer or the “legal escalation officer” discussed later) to manage the internal response. All steps taken should be documented (time-stamped), as these records may be needed to demonstrate the exchange’s good-faith compliance or to defend against any allegation of contempt.
5. Freeze First, Then Communicate: If the order includes a freezing injunction affecting assets on the exchange, implement the freeze immediately on the specified accounts/wallets . Do this prior to informing the customer or any external party, as the order likely mandates no notice to the account holder (to prevent a tip-off). Once frozen, the exchange can internally secure the assets (some exchanges even transfer the crypto to a secure cold wallet for the duration, if permitted, to avoid any accidental transfers). After securing the assets, the exchange (through counsel) can then communicate with the claimant’s lawyers to confirm compliance. It’s often prudent to send a formal letter or email: e.g., “We acknowledge receipt of the order dated X and confirm that Account #12345 holding 2 BTC and 50 ETH has been frozen in compliance with paragraph Y of the order.” This builds a record of cooperation.
6. Assess Grounds to Vary or Discharge: With counsel, examine if there are reasons to challenge the order. Possible grounds:
The order may be too broad or unclear. For example, it might freeze “all assets up to £10M” of a defendant when only a specific crypto amount is at issue – an exchange might seek to limit it to identifiable crypto assets. The order might impose unrealistic deadlines for disclosure (e.g., produce all documents within 48 hours). If that is not feasible, the exchange should consider applying to court for an extension or variation, rather than rushing and risking incomplete compliance. Jurisdictional protest: If the exchange has no U.K. presence, it might reserve the right to contest jurisdiction. Exchanges sometimes comply without prejudice to jurisdiction (meaning they don’t concede the English court’s authority over any substantive dispute by complying with the interim order). This can be tricky – advice of counsel is key here. Material nondisclosure or mistake by claimant: As discussed, if you suspect the order was obtained on a false premise or missing key facts (e.g., they didn’t mention that the account was already frozen by you earlier, or they misidentified a wallet), you might apply to discharge or vary the order sooner than the return date. Generally, such an application should be made promptly once the issue is known.
Crucially, any decision to challenge the order must be made in compliance with the order until changed. Unless and until the court amends it, the exchange should not unfreeze assets or withhold information unilaterally. Instead, file an application and get the court’s decision. In the interim, comply as best as possible.
7. Prepare the Disclosure (if ordered): Many crypto injunctions come paired with disclosure orders compelling the exchange to reveal information about the account in question (holder’s identity, KYC documents, transaction history, etc.) . Treat customer data carefully and follow the order exactly – deliver the information in the manner required (often by affidavit or witness statement from an officer of the exchange). Make sure to redact anything not required (the order usually limits what must be disclosed). Also consider data privacy laws – compliance with a court order is typically a lawful basis for disclosure under GDPR or other privacy regimes, but ensure your legal team is comfortable that the disclosure sticks to what is necessary and ordered. If multiple exchanges are involved in a case (like in LMN), there may be coordination or similar requests; handle yours independently but be aware of the broader context.
8. Avoid Contempt – Be Meticulous: Contempt of court is a real risk if an exchange does not obey the terms. This could include not freezing when required, tipping off the user contrary to the order, or delay in providing information. The safest course is strict compliance. If something is impossible to do literally (say the order asks to freeze “crypto assets” and the account has already been emptied), document that and immediately inform the claimant’s solicitors and/or the court. Usually, the order will have a provision allowing variation by agreement with the claimant’s side or by returning to court. It’s far better to proactively explain a difficulty than to let time pass and be accused later of non-compliance. Even perceived foot-dragging can be dangerous – in one case, an exchange that took too long to respond might be criticized for enabling dissipation. Therefore, treat deadlines as hard deadlines; if you truly cannot meet them, seek an extension from the claimant’s lawyers or the court ahead of time.
9. Plan for the Return Date (if you are a party): Often the ex parte order will have a return date (a hearing where the court reconsiders the order with all sides present). If the exchange has been named as a defendant or respondent (like Binance was in D’Aloia and Piroozzadeh), it should participate in that hearing. Through counsel, the exchange can present its position: whether it consents to the order continuing, seeks variation, or outright opposes it. The exchange should use the period before the return date to gather any evidence or arguments in support of its stance. For example, if arguing to discharge, compile the facts that were not disclosed or have changed; if you’re mainly concerned about cost of compliance, perhaps seek an undertaking from claimant for costs. If the exchange is not named as a defendant but just a third-party, it might not formally attend, but it can often provide a letter to the court updating on compliance.
10. Maintain Open Communication with Stakeholders: Throughout this process, it’s wise for the exchange to keep a log of all actions (as discussed later) and maintain open lines of communication with the claimant’s legal team. Sometimes, cooperation can yield flexibility – claimants might agree to slight deadline extensions or clarifications if the exchange is acting in good faith. Also, internally communicate with management about the implications – for instance, freezing a large account could have business impacts; leadership should be aware and supportive of legal compliance taking precedence.
Following this guidance helps an exchange navigate the immediate turbulence of receiving an ex parte order. The overarching principle is: comply first, then (if needed) contest – never the other way around. By promptly securing assets and information, the exchange avoids the worst-case scenario of being in contempt. By then thoughtfully evaluating the order, the exchange can decide if it must fight any portion of it. Many exchanges ultimately find that working under the supervision of the court and cooperating with claimants is preferable to a reputational battle. Yet, as seen, they are within rights to challenge orders that overreach or are founded on error.
Next, we turn to proactive measures exchanges can implement so that when such an order arrives, they are not caught flat-footed.
Internal Protocols and Best Practices for Exchanges
The surge in crypto-related court orders means exchanges should prepare in advance for the possibility of being on the receiving end of an injunction or disclosure order. Here are practical internal recommendations for exchanges to handle these situations efficiently and compliantly:
Establish a Litigation-Response Protocol: Every exchange should have a written protocol for responding to legal orders and law enforcement requests. This playbook should outline the steps to take when an injunction or court order is received. It would cover points like: who must be notified immediately (e.g., General Counsel, Head of Compliance), how to verify the authenticity of the order (checking that it is sealed by a court, etc.), and what preliminary actions to take (such as checking whether the affected assets are on the platform). The protocol ensures that even junior staff know not to shrug off or mishandle an order. Given the time-sensitive nature of ex parte injunctions, the protocol should require that any such communication – whether from a law firm or directly from a court – is treated as urgent priority. Appoint a Legal Escalation Officer or Team: Identify a specific individual (or committee) responsible for handling urgent legal orders. This legal escalation officer could be, for example, the Head of Legal or Compliance. They will coordinate the response across departments. Having a clear owner avoids confusion – employees who receive the order will know exactly to whom they should send it immediately. The escalation officer’s duties include assessing the order, liaising with external counsel, and ensuring that the required internal actions (freezing accounts, gathering documents) occur promptly and correctly. Essentially, this person becomes the quarterback for the crisis, ensuring nothing falls through the cracks. Maintain External Counsel on Standby: Time is of the essence, so having relationships with external counsel (solicitors) who are experienced in U.K. crypto litigation is invaluable. Rather than scrambling to find a lawyer after an order arrives, an exchange should pre-engage counsel or at least identify who they will call. The counsel can even help design the aforementioned protocol. They should be familiar with freezing injunctions, disclosure orders, and the specifics of blockchain asset cases. In a crunch, they can rapidly review an order and advise on compliance or challenges. For global exchanges, it might be wise to have both U.K. counsel and local counsel (in the exchange’s jurisdiction) to work in tandem – the former for the English law aspects, the latter for any local law limitations (for instance, if complying with the order might conflict with local privacy laws, etc., you’d need to navigate that carefully). Train Key Staff and Simulate Scenarios: Conduct training sessions for customer support, compliance, and legal teams on what to do if they receive a court order. Many exchanges have automated systems for law enforcement requests, but a High Court injunction is a more delicate matter. Role-play scenarios: e.g., “London law firm emails an injunction at 5pm on Friday – what do you do?” This helps staff recognize the seriousness and handle it correctly. Some exchanges run mock drills similar to cybersecurity incident drills. The more prepared the team is, the less likely they’ll panic or err in real events. Implement Technical Measures for Rapid Freezing: Ensure that the exchange’s technical infrastructure allows for quick freezing of accounts or specific assets. This might involve having a back-end tool where a compliance officer can flag an account and instantly suspend all withdrawals. The faster and more granular the control, the better – sometimes you might need to freeze just certain assets or a certain amount (to comply exactly with an order’s terms). Work with your IT/security team to have these capabilities. It’s also prudent to have after-hours contacts for tech support, since injunctions don’t always arrive 9-to-5. Preserve Detailed Logs of Compliance Actions: From the moment an order is received, document everything. This includes logs of who received the order and when, when it was escalated, when the account freeze was executed (timestamp), what was frozen (e.g., “froze account #XYZ, which at time of freeze held 1.234 BTC and 50 ETH”), and when/how disclosure was provided. Also keep copies of any communications with the claimant’s lawyers or the court. These records serve multiple purposes: they protect the exchange by showing diligent compliance (vital if later someone alleges contempt or delay), and they help internal review of the incident to improve future responses. In complex cases, it might be wise to have someone draft an internal timeline of all events. If the court later asks for an explanation of compliance or if the exchange needs to explain to a regulator, these logs will be invaluable. Ensure a Mechanism for Notifying Affected Customers (When Permitted): While initial orders usually forbid tipping off the customer, at some stage that restriction may be lifted (for instance, after a return date or if the order lapses). The exchange should have a plan for how to lawfully and delicately handle the customer relationship. This includes template communications to inform a user that their account is frozen due to a court order (once it’s allowed). Customer support should be briefed to handle inquiries from the user whose funds are frozen, as they will inevitably contact the exchange if they notice an account block. The support team must know what they can or cannot say. Being prepared avoids ad hoc, inconsistent messaging that could risk a breach of the order or harm reputation. Review Insurance and Financial Reserves: Compliance with court orders can incur costs (legal fees, operational burden) and, in worst cases, an exchange might face liability (say if it’s later found to have wrongfully released funds or for being a constructive trustee). Exchanges should review whether their insurance (such as professional liability or cyber insurance) covers legal compliance costs or errors in this context. At minimum, be financially ready to post security or cover legal expenses – for example, sometimes a court might require a non-party’s costs to be paid. In Piroozzadeh, the claimant had to pay Binance’s £90k costs , but had Binance not won, they would have borne their own costs. An exchange should treat this as part of the cost of doing business in a high-risk industry and budget accordingly. Foster Relationships with Law Enforcement: Many crypto fraud cases also involve law enforcement investigations. While separate from civil orders, having a channel of communication with police or investigative agencies can be useful. Sometimes, an exchange might receive parallel requests (a court order from the victim’s civil case and an information request from police for a criminal case). Handling these consistently and lawfully is important. Goodwill with authorities can also mean they alert you if they are aware of an order coming (not always, but if, say, a victim first went to the police, the police might inform an exchange liaison).
By implementing these internal measures, exchanges can move from reactive to proactive. Instead of scrambling when an order hits, the team will have a blueprint to follow. This not only reduces the risk of errors but also demonstrates to courts and customers that the exchange is responsible and competent in legal compliance. Given the trend of increasing litigation, such preparedness is fast becoming a standard part of operational resilience for crypto businesses.
Conclusion
The evolving English case law on cryptoassets makes one thing plain: the courts are determined to ensure that the traditional remedies of injunctions and disclosure adapt to the digital age. For crypto exchange operators, this has translated into a growing number of ex parte orders landing at their doorstep – sometimes at odd hours, often with sweeping obligations, and usually founded on evidence that has yet to be tested. Exchange legal teams and compliance officers must therefore be well-versed and well-prepared to handle these situations.
We have seen how English judges, through cases like AA, Ion Science, Fetch.ai, D’Aloia, and LMN, are pushing the boundaries of interim relief: recognizing crypto as property subject to injunctions, allowing worldwide service against anonymous fraudsters, considering exchanges as constructive trustees of stolen assets, and even embracing blockchain-based service by NFT . Alongside this judicial ingenuity comes an insistence on procedural fairness – especially the duties of urgency and full disclosure. Claimants have been reminded (at pain of costs and discharge) that they must approach the court with candor and rigor, presenting all material facts including those that affect exchanges or third parties .
For exchanges, the key takeaway is that vigilance and proactivity are the best response. Question the evidence – you are entitled to ensure that an order freezing assets on your platform is grounded in accurate information. Work with the court and claimants – prompt compliance and open dialogue can protect your interests while fulfilling legal obligations. And invest in internal systems – a robust response plan and team can turn a potential fire drill into a managed process.
In a broader sense, this trend also underscores a maturing market: crypto businesses are no longer operating in a wild west separate from traditional law. They are squarely within the reach of courts and must conduct themselves with the same level of legal discipline expected of banks or other financial institutions. By adhering to the guidance above – from scrutinizing blockchain reports to keeping meticulous compliance logs – exchanges can not only avoid the pitfalls of these orders (like contempt or unnecessary liability) but can also play a constructive role in the resolution of crypto disputes. After all, an exchange that responsibly freezes illicit funds and provides timely disclosure is aiding in the fight against crypto fraud, bolstering the industry’s reputation as a safer environment for all.
English courts are likely to continue refining their approach as new fact patterns emerge (for instance, disputes involving DeFi platforms or NFTs). But the direction is set: ex parte relief in crypto cases is here to stay, and it will often be swift and sweeping. Exchanges, armed with knowledge of the case law and a solid action plan, can ensure that they respond professionally and effectively – protecting their operations while respecting the rule of law. In the high-stakes intersection of cryptocurrency and litigation, preparation is the best antidote to panic, and cooperation the best strategy to navigate the storm.
Sources:
AA v Persons Unknown [2019] EWHC 3556 (Comm) (Commercial Court) . Ion Science Ltd v Persons Unknown (unreported, Butcher J, 21 Dec 2020) . Fetch.ai Ltd v Persons Unknown [2021] EWHC 2254 (Comm) (Pelling QC) . D’Aloia v Persons Unknown & Others [2022] EWHC 1723 (Ch) (Trower J) . LMN v Bitflyer Holdings Inc & Others [2022] EWHC 2954 (Comm) (Butcher J) . Piroozzadeh v Persons Unknown & Others [2023] EWHC 1024 (Ch) (Trower J) . Herbert Smith Freehills, “High Court sets aside interim proprietary injunction against Binance” (Litigation Notes, May 2023) . Eversheds Sutherland, “Developing Crypto Caselaw – Exchanges as constructive trustees… and service by NFT” (Sept 2022) . Taylor Wessing, “Disputes Quick Read: information orders against crypto exchanges following hack” (Jan 2023) . Fieldfisher, “Fetch.AI case enhances English courts’ approach to crypto fraud” (Aug 2021) . Linklaters, “Ion Science – traditional approach to governing law and jurisdiction for cryptoassets” (March 2021) . Norton Rose Fulbright, “Freezing of cryptocurrencies in fraud (Part 2)” (Feb 2020) .