Bitcoin: He accuses his wife of having embezzled 2,323 BTC thanks to his recovery phrase

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According to the Ping Fai Yuen judgment against Fun Yung Li and another defendant, the bitcoins were accessible from a Trezor hardware wallet protected by a six-digit code. However, its 24-word recovery phrase allowed restoring access to funds on another device.

The plaintiff claims that his wife obtained these words by secretly recording him, while a divorce was being considered. Alerted by his eldest daughter, he himself installed audio recorders. It presents conversations from July 29 and 31, 2023, focusing in particular on transfers, their traceability and the difficulties in converting funds.

The bitcoins left their address on August 2, 2023, before arriving at 71 addresses! At the time of the judgment, they had not moved since December 21, 2023. Their value had fluctuated between 160 and 180 million pounds (between approximately 192 and 216 million euros) during the procedure.

After discovering the transfers, the husband assaulted his wife. He was sentenced in September 2024 after pleading guilty. For their part, the police arrested the wife in December 2023 and seized ten hardware wallets as well as five recovery sentences. According to the judgment, she had not initiated any further action pending new evidence.

The dispute raises a legal difficulty: recognizing Bitcoin as property does not automatically make all actions protecting physical objects applicable.

Judge Cotter thus dismisses the claim based on conversion, an English civil action punishing certain offenses against corporeal property. He considers that existing case law prevents its extension to Bitcoin, despite the British Digital Assets Act of 2025.

The magistrate also rejects the request for security for legal costs, initially set at nearly 679,000 pounds. He considers the estimates excessive and considers that the husband has a very high probability of success, given the available elements.

This assessment remains provisional. The defense notably contests the accuracy of the transcriptions and mentions other possible responsible parties. The file nevertheless illustrates two concrete issues: the recovery sentence can circumvent the protection of a hardware wallet, and the ownership of a digital asset must be accompanied by appropriate remedies to allow its restitution. The battle for custody of his BTC is not over.

An editorial article. Le Journal du Coin, the first French-speaking news media on cryptocurrency, Bitcoin, and blockchain protocols.

Machine-translated from French