Served on the blockchain: Service by NFT and a £10.5m cryptoasset recovery

The recent judgment in Smithers and Usanova v Persons Unknown, given by Mr Justice Bright, shows how the English courts continue to adapt established fraud and tracing principles to cryptoassets, including through innovative methods of serving anonymous, blockchain-based Defendants. The Commercial Court granted summary judgment against a group of Defendants, many of them still unidentified, who had received the proceeds of a sophisticated cryptoasset fraud. The court ordered the return of traced Bitcoin and awarded compensation for other misappropriated digital assets.

How the fraud unfolded

The Claimants, a Canadian national residing in Canada and a Maltese national residing in Switzerland, were not professional investors, though both had a personal interest in cryptocurrency. In May 2025, the First Claimant was contacted by a man calling himself Richard Coleman, who claimed to be an expert trader with a cryptoasset business first known as Raliplen and later rebranded as Servelius. Over the following months, Coleman persuaded her to transfer money and cryptoassets into what she believed was her own trading account. The First Claimant then introduced the Second Claimant to the platform, and she too began transferring cryptoassets, believing they would be traded on her behalf.

The final transfer, made by the First Claimant on 10 October 2025, involved Bitcoin worth around US$2.8 million. In reality, “Mr Coleman” was able to access and control the account himself, and removed all of the cryptoassets. In total, the Claimants had been induced to invest the equivalent of around £10.5 million, only to discover it was gone.

Tracing the cryptoassets and identifying the Defendants

The Claimants identified two distinct groups of Defendants. The first were those behind the fraud itself, including “Richard Coleman” and two further individuals known only as “Steve Arcos” and “Joseph”. Beyond a handful of email addresses and a UK mobile number, the Claimants had no way of identifying them.

The second group were those who ultimately received the stolen cryptoassets. Specialist investigators instructed by the Claimants successfully traced the exchange deposit addresses and final destination private addresses connected to the fraud, meaning proceedings could be brought even though the individuals behind most of those addresses remained unknown.

Serving anonymous, blockchain-based Defendants

Serving proceedings on unknown Defendants is no small challenge, and this case shows the Courts’ continuing willingness to sanction creative solutions. The first group of Defendants were served by email, under an order for alternative service. Questions later arose, however, about how effective that service had actually been, and the Claimants ultimately did not pursue summary judgment against this group.

The second group, those who received the cryptoassets, were served in March 2026 using a novel technique: transferring, to each relevant receiving address, either a non-fungible token or an OP_RETURN message containing a link to the proceedings, depending on the type of address involved. This method reflects a growing body of English case law permitting service directly “on the blockchain” where Defendants cannot otherwise be identified or contacted.

The judgment forms part of a growing line of authorities demonstrating the English courts’ willingness to adapt procedural rules to blockchain technology where traditional methods of service would otherwise make recovery impossible.

Proceeding in the Defendants’ absence

Service could not be effected for three receiving addresses, and judgment was not sought against anyone connected to them. Three individuals who were served did respond, offering what they described as an exculpatory account of their involvement, and the Claimants’ summary judgment application did not extend to them either. None of the remaining Defendants, in either group, acknowledged service or engaged with the proceedings in any way.

Before determining the application for summary judgment, the Court considered the established principles on proceeding with a hearing in a defendant’s absence. Mr Justice Bright was satisfied it was appropriate to do so. Having heard submissions for the Claimants and reviewed the evidence, he found that they had a good claim for fraudulent misrepresentation and that, since none of the remaining Defendants had put forward any answer, there was no defence to it.

The Court found that the Claimants had a good claim in deceit, demonstrating that traditional causes of action such as fraudulent misrepresentation remain an effective means of recovery in cryptoasset fraud cases. The judgment also serves as a reminder that obtaining permission for alternative service is only one step in the process; claimants must still satisfy the Court that proceedings can fairly continue in a defendant’s absence.

Bitcoin can be recovered as property, whereas fungible cryptoassets may require compensatory remedies

One of the more technically interesting aspects of the judgment is the distinction drawn between Bitcoin and other cryptoassets when it came to remedy. Relying on expert evidence from the Claimants’ investigator, the court accepted that Bitcoin transaction outputs do not merge into a single, homogeneous balance. Each unspent transaction output remains a discrete, identifiable unit until it is spent, behaving more like a specific asset than like cash, which mixes irreversibly once co-mingled.

On that basis, the Bitcoin held in the relevant receiving addresses was found to be the very same property fraudulently taken from the Claimants, and the Court ordered its return. USD Coin and Ethereum, by contrast, are fungible: they lose their individual identity the moment they are transferred and received, making it impossible to trace and recover the same assets. For those cryptoassets, the court instead awarded compensation in fiat currency, noting that, given USD Coin’s peg to the US Dollar, this made no real practical difference to the Claimants. Where the relevant asset can be identified as the claimant’s property, recovery may be available through a proprietary claim requiring its return, rather than being limited to a personal claim for monetary compensation.

Key takeaways

• The courts remain willing to approve innovative methods of serving anonymous Defendants in cryptoasset fraud cases, including via non-fungible tokens and OP_RETURN messages sent directly to blockchain addresses.
• Bitcoin’s transaction structure means that specific, identifiable coins may potentially be traced and recovered as the victim’s own property, whereas fungible cryptoassets such as USD Coin and Ethereum may require compensatory remedy.
• Traditional causes of action, such as deceit and fraudulent misrepresentation, continue to provide an effective route to recovery in cryptoasset fraud claims.
• Summary judgment remains a valuable and cost-effective route to recovery for cryptoasset fraud victims where Defendants fail to engage with proceedings.
• The Court’s award of indemnity costs reflects its willingness to make robust costs orders in cases involving fraud and deliberate wrongdoing.
• Cryptoasset fraud continues to generate novel legal issues around service, tracing and remedies, and the courts are showing real flexibility in response.

If you have any questions in relation to the issues raised in this article, please contact the Burges Salmon Dispute Resolution team or your usual Burges Salmon contact. This article was written by Will Cadbury and Eve Jenkins.