Blue Sky bitcoin: High Court rules that Chinese law governs victims' claims

On 12 October 2026 the High Court handed down judgment in Director of Public Prosecutions v Qian and others. Mr Justice Turner was asked to decide a single, preliminary question: whether the law of England, the law of China or a combination of the two will govern the substantive issues raised by the claims of the victims of the Tianjin Lantian Gerui investment fraud. His answer is Chinese law.

Background

On the agreed assumed facts, between 2014 and July 2017 Ms Zhimin Qian orchestrated a series of Ponzi schemes, most of them implemented in the name of Tianjin Lantian Gerui Electronic Technology Co Limited. The schemes were designed and carried out in China, and the company was never licensed to provide financial products to investors. Part of the money raised was converted into bitcoin, which was later held in England.

The Director of Public Prosecutions brought civil recovery proceedings under Part 5 of the Proceeds of Crime Act 2002. Section 281 of the Act allows a person who claims that property belongs to them to apply for a declaration to that effect, and many thousands of investors have done so. For the purposes of this issue, the Court directed that one firm be designated as Lead Firm and that one team of counsel instructed by that firm make submissions on behalf of all individual applicants.

Issue

To succeed under section 281, an applicant must show that the property "belongs to" them. As the Judge explained, that requires a proprietary interest. Section 281 does not create any broader compensation scheme (NCA v Robb [2015] Ch 520 at [70]), so a personal claim against the fraudsters, as a creditor for the value of the money paid, is not enough.

Which legal system decides whether such a proprietary interest exists was therefore the question before the Court. For the DPP, the answer was Chinese law. Against that, the applicants argued for English law or, in the alternative, a hybrid of English and Chinese law, on four bases. One, described as the "rescission constructive trust" claim, was that, on rescinding their investment contracts for fraud, investors could assert a constructive trust over the proceeds and trace into the bitcoin.

No evidence of Chinese law has yet been heard; the issue was decided on agreed assumed facts.

Decision

The Judge held that, whether the issues are analysed under Rome I, Rome II or the common law rules of private international law, the law governing the issues on which the applicants rely is Chinese law. English law is engaged only to the extent, common ground between the parties, that the statutory machinery of Part 5 governs how those rights are asserted and determined before the Court.

The applicants' statutory argument, based on the Act's own tracing provisions, also failed. In the Judge's analysis, "recoverable property" is a statutory concept that tells the enforcement authority what it may recover, whereas property that "belongs to" an applicant depends on private law rights arising independently of the Act. Those tracing provisions "do not purport to create, define or enlarge the proprietary rights of third parties".

Because Rome I was held to apply, and Rome II would lead to the same result, the hybrid argument fell away: it cannot displace the pure application of Chinese law if either Regulation applies. As the Judge put it, the existence and content of any proprietary rights relied on "must be assessed by reference to Chinese law", and issues concerning the content, effect or proof of that law are matters for a later stage.

Reasoning

The Court applied the conflict of laws issue by issue, not claim by claim. On the assumed facts, the law governing the investment contracts is Chinese law, and it is that law which determines whether a contract induced by fraud is void or voidable and what consequences follow.

A constructive trust said to arise from the breach of an underlying obligation does not, in the Judge's view, generally carry its own choice of law rule. It follows the law governing the obligation from which it arises.

On tracing, the Judge noted that the bitcoin was purchased in China. If, under Chinese law, investors did not retain property rights in the bitcoin after that purchase, tracing in England cannot later re-establish them.

The Judge reached the same result under Rome II and under the common law. At common law, if the issues were characterised as proprietary, the relevant dealings, including the payment and receipt of investors' money and its conversion into bitcoin, were centred in China, so Chinese law would apply as the relevant lex situs.

Comment

Jackson Ng, Partner at Duan & Duan UK LLP, said:

"Today's judgment is an important decision for the many thousands of Chinese investors who lost money in the Tianjin Lantian Gerui scheme. The Court has held that whether victims retain rights in the frozen bitcoin is to be decided under Chinese law. That puts the focus on the law of the place where the investments were made, and on what happened to investors' money in China. We are considering the judgment carefully with our clients and will continue to pursue their claims."

Duan & Duan UK LLP acts for applicants in the proceedings.