By Robert Eastick is Director & Crypto Lead at iSanctuary

Transparency Notice: As this article has been written by Robert Eastick in his capacity as Director & Crypto Lead at iSanctuary and discusses technologies and approaches being developed by the company, we have included this notice in the interests of transparency.

One of the most significant challenges in cryptocurrency fraud litigation is not tracing the assets. It is serving legal proceedings against defendants whose identities are entirely unknown.

For litigation funders, that challenge is ultimately a recoverability problem: the ability to identify defendants, preserve assets and establish a credible pathway from blockchain tracing to enforceable recovery.

In many crypto fraud cases, the only identifiable link to the perpetrator is a blockchain wallet address. There may be no verified name, physical address or jurisdiction through which traditional legal service can take place. That challenge has forced courts and practitioners to consider whether the blockchain itself can become a legitimate channel for legal notice.

That is now beginning to happen.

Courts in both the United Kingdom and Singapore have approved forms of blockchain-based legal service in cases involving persons unknown, allowing legal documents and notices to be served directly to cryptocurrency wallets connected to disputed assets.

The English courts first permitted this in D’Aloia v Persons Unknown [2022] EWHC 1723 (Ch), authorising service by airdrop of a non-fungible token directly into the wallets to which the misappropriated assets had been transferred. The Singapore High Court took a comparable approach in an unreported May 2023 decision permitting service on persons unknown by transfer of a token to the wallets holding the stolen assets.

Notice and Attribution on the Blockchain

Building on that legal foundation, on-chain enforcement technology is now being explored as a mechanism for deploying legally backed notices directly onto cryptocurrency networks. These notices do not themselves create or enforce a freeze in the legal sense. Rather, they operate as blockchain-native notice and attribution tools designed to support underlying court orders by associating legal claims and restrictions with identified wallet activity on-chain.

At iSanctuary, aspects of this approach are being developed through REKTify, a blockchain-based legal notice and attribution framework designed to support digital asset investigations and recovery. This includes the development of mechanisms intended to allow court-backed notices and wallet markers to remain associated with relevant wallet activity across supported networks. The objective is to improve visibility, evidential continuity and constructive notice as assets move between wallets and across jurisdictions, while underlying judicial enforcement and custodial freezing orders remain the operative legal instruments.

Unlike traditional enforcement methods, which frequently depend on the co-operation of centralised exchanges across multiple jurisdictions, blockchain-native notices operate within the same environment as the assets themselves. However, they should not be mistaken for self-executing enforcement mechanisms. In most cases, practical recovery still ultimately depends upon off-ramp enforcement, including exchange co-operation, custodial compliance and the recognition of court orders within relevant jurisdictions.

Elements of this approach are already being explored in proceedings led by iSanctuary before the London High Court and the High Court of Singapore involving worldwide freezing orders across wallets on both Bitcoin and Ethereum.

What It Means for Litigation Funders

For litigation funders, crypto fraud claims have historically presented a difficult recoverability problem. The issue is rarely whether assets can be traced. Public blockchain analysis often allows investigators to follow the movement of assets with significant precision. The commercial difficulty has instead been enforcement: identifying defendants, obtaining effective service, preserving assets before dissipation and converting traced assets into recoverable value.

Blockchain-native notice mechanisms will begin to change the picture.

A worldwide freezing order remains the operative legal instrument; an on-chain marker or legal notice functions as a blockchain-native notice intended to assist an enforcement strategy, not to replace it.

That distinction is commercially important because funders assess crypto matters not only by legal merits, but by the probability that assets can still be identified, monitored and intercepted at an eventual off-ramp.

Exchange Liability and Constructive Notice

Blockchain-native mechanisms will also become specifically relevant to the litigation-risk analysis of exchanges themselves. Where a custodial intermediary receives assets from wallets carrying persistent legal notices or clearly identifiable tracing markers, questions arise as to the extent of the intermediary’s knowledge.

This, in some cases, will materially strengthen later arguments that an exchange or intermediary was on notice of a live dispute concerning the assets and failed to take appropriate compliance or risk-management steps before permitting onward dissipation or monetisation. On-chain notices also strengthen applications for Norwich Pharmacal or Bankers Trust relief against exchanges.

The significance of that possibility should not be understated. Both Norwich Pharmacal and Bankers Trust relief depend, in different ways, upon demonstrating that the respondent exchange has become sufficiently involved in, or possesses information relevant to, the alleged wrongdoing. A persistent on-chain notice linked to traced assets may strengthen the evidential basis for arguing that an exchange had constructive knowledge of a competing proprietary claim before assets were withdrawn, converted or dissipated.

While courts have not yet treated blockchain notices as creating legal knowledge in themselves, they have increasingly shown a willingness to engage with blockchain-derived evidence, wallet attribution analysis and digital tracing methodologies when assessing interim relief. Where an exchange can be shown to have received assets carrying a clearly identifiable on-chain legal marker associated with an extant court order or recovery process, a claimant may be better placed to argue that disclosure obligations should be compelled and that preservation measures were reasonably required. For litigation funders, the practical importance lies less in any single notice and more in the cumulative evidential record: persistent, publicly verifiable notice attached to wallet activity may help narrow disputes over knowledge, tracing and dissipation, thereby improving the prospects of obtaining information necessary to identify defendants and preserve recoverable assets.

For funders, this potentially improves the quality of recoverability analysis at the underwriting stage. The commercial question is no longer simply whether assets were stolen, but whether there is a credible pathway from traced wallets to identifiable counterparties or custodial institutions capable of complying with court orders.

That said, the practical recovery environment remains heavily dependent on centralised exchanges at the point of monetisation. Cryptoassets may move freely between private wallets despite the presence of on-chain legal notices, and meaningful enforcement still ultimately requires exchange co-operation within a jurisdiction recognising the underlying court order. Over time, the prevalence of on-chain notices will increase the commercial and reputational pressure on exchanges to co-operate.

The importance of recoverability analysis in crypto disputes has already been demonstrated in the insolvency proceedings involving FTX, Celsius and Genesis, where blockchain tracing, asset attribution and cross-border recovery became central to creditor outcomes. Those matters highlighted both the value of sophisticated digital asset investigations and the practical bottlenecks that continue to affect recovery efforts, particularly at the point of exchange co-operation, asset custody and monetisation. Blockchain-native notice and attribution mechanisms may represent the next stage in that evolution by improving tracing continuity, evidential persistence and enforcement readiness throughout the lifecycle of a claim.

Outlook

Jurisdictional complexity remains. Courts are still developing the legal framework surrounding blockchain-based service, enforcement against persons unknown and the interaction with existing cross-border recovery mechanisms.

However, the trajectory is clear. Courts are becoming more comfortable with digital asset litigation and with the use of blockchain mechanisms where conventional legal processes are ineffective or impractical. These mechanisms are moving from novel to mainstream in crypto dispute recovery practice.

The blockchain is no longer simply a place where assets disappear. Progressively, it is becoming part of the evidential and enforcement-support infrastructure around digital asset recovery.