Court Reaffirms Bitcoin’s Status as Property but Limits Tort Claims in $172M Case

A United Kingdom High Court’s recent ruling has clarified the legal status of bitcoin, stating that while it is considered property, it cannot be subjected to traditional legal claims applicable to physical goods.

The $172 Million Bitcoin Dispute

In a landmark ruling, the High Court of Justice clarified the legal status of digital assets, specifically addressing whether bitcoin can be subject to traditional physical legal claims. In the case of Ping Fai Yuen v. Fun Yung Li and Anor, Justice Cotter ruled that while bitcoin is indisputably property, it cannot be converted or trespassed upon in the same way as physical goods.

The case centers on the alleged theft of 2,323 bitcoins—valued at about $172 million at today’s market price. Yuen claimed that during a breakdown in his marriage, his estranged wife covertly recorded him to obtain his 24-word seed phrase to his Trezor cold wallet. According to the claim, Li then used the phrase to transfer the funds to 71 different blockchain addresses.

To support his case, Yuen provided audio recordings from July 2023 in which his ex-wife reportedly discussed how to realize the funds without detection and questioned the origin of the “first pot of gold.”

While the theft itself remains disputed, the legal battle turned on a technicality of English common law. Yuen brought claims for strict liability tort, alleging wrongful interference with goods and direct interference with personal property.

The defendants moved to strike out those claims, arguing that because bitcoin is an intangible digital asset, it cannot be subject to torts designed for tangible goods.

Judicial Ruling on ‘Doctrinal Leaps’

Justice Cotter agreed, striking out the claims for conversion and trespass. His judgment highlighted two key points: first, that conversion has historically been rooted in interference with physical possession, and extending it to intangible assets would not be a “modest refinement” but a “doctrinal leap.”

Second, while a recent act confirmed that digital assets constitute a third category of personal property, Parliament had not intended for this to automatically extend to physical torts. Cotter cited the Supreme Court’s decision in OBG v. Allan (2008) as binding precedent, restricting conversion to tangible property.

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The ruling is seen as a double-edged sword for victims of digital asset theft. On one hand, it confirms that the law will not treat a digital transfer as a physical act of conversion, making it harder to use certain strict liability lawsuits to recover funds. On the other hand, the court reaffirmed that bitcoin is property, meaning victims can still pursue proprietary restitutionary claims. In practice, while one cannot sue for the conversion of bitcoin, they can sue to prove ownership and use tracing and following to freeze and recover assets wherever they end up.

FAQ ❓

• What was the key ruling of the High Court regarding bitcoin? The High Court clarified that while bitcoin is property, it cannot be subject to traditional legal claims like physical goods.
• What case prompted this legal clarification? The ruling arose from the case of Ping Fai Yuen v. Fun Yung Li, concerning the alleged theft of 2,323 bitcoins worth approximately $172 million.
• What implications does this ruling have for digital asset theft victims? Victims may find it more challenging to recover stolen bitcoin through traditional tort claims but can still pursue ownership recovery.
• How did Justice Cotter justify this ruling? Justice Cotter emphasized that extending torts designed for tangible goods to intangible digital assets would require significant legal changes, rather than minor adjustments.