Chinese fraud victims seeking to recover 61,000 Bitcoin seized by the British government have lost a key legal battle, after London's High Court ruled that Chinese law, rather than English law, should govern their claims to the assets.

On Monday, Justice Mark Turner rejected arguments for applying English law, or a combination of English and Chinese law, to the victims' ownership claims. In a ruling published online, the judge held that Chinese law must determine whether the claimants hold property rights in the seized Bitcoin, leaving the validity of their claims to subsequent proceedings.

“The relevant damage occurred in China. The Applicants parted with their money in China,” Turner wrote. “The contractual relationships thereby induced were entered into in China.”

The dispute stems from an investment fraud scheme orchestrated by Zhimin Qian between 2014 and 2017. British authorities seized the assets during a money-laundering investigation, a haul UK authorities have described as the country's largest cryptocurrency seizure. In March, victims challenged a proposed compensation arrangement involving a redress scheme, arguing that it could leave British authorities with much of the gains from Bitcoin's appreciation.

The victims had sought the application of English law because it could have allowed them to claim direct ownership of the Bitcoin, rather than merely seek compensation as creditors. The ruling, however, does not determine who ultimately owns the seized assets, as the victims' property rights under Chinese law remain to be assessed. The distinction between the two legal regimes is central to cross-border crypto fraud cases: jurisdictions define property rights in digital assets differently, and the governing law can determine whether claimants pursue specific assets as owners or compete for recovery as creditors.

Fraud victims plan to appeal

According to a Financial Times report, law firm Fieldfisher, which represents the claimants in the dispute, is pursuing an appeal against Turner's ruling.

Despite the decision, the case will remain before the High Court in London rather than being transferred to a Chinese court. The FT reported that the next stage will involve expert evidence on Chinese law to determine whether the victims can establish ownership interests in the Bitcoin.

The Crown Prosecution Service told the FT that a further hearing would examine how Chinese law applies and whether any victims can establish an interest in the seized assets.

More than 128,000 investors were reportedly affected by the fraud, according to earlier Cointelegraph coverage. In March, Cointelegraph reported that law firm Candey represented about 5,700 victims. Prosecutors previously argued that certain claims could allow a smaller group of victims and litigation funders to recover more than their actual losses.

The seized Bitcoin is currently worth more than $5 billion, according to CoinGecko.