Bitcoin seizure: Debtor's duty to cooperate and what the Cologne Higher Regional Court ruling means for creditors

Bitcoin seizure: Why cryptocurrency works differently than a bank account

In a traditional account garnishment, the creditor contacts the bank. The bank is the third-party debtor; it holds the funds and freezes them after the garnishment order is served. With cryptocurrencies, this central entity only exists if the coins are held on an exchange. If the debtor holds their Bitcoin in their own wallet, there is no third-party debtor to hold liable.

Legal precedent classifies crypto assets as "other property rights." The Berlin Court of Appeal has, for the first time, confirmed this classification at a higher court level: Crypto assets have economic value and are therefore, in principle, subject to seizure. For practical enforcement, this means two separate procedures, depending on where the coins are located.

The crucial difference remains control. Whoever possesses the private key has complete control over the coins. Without this key, a holding can be seen on the blockchain, but not moved. Therefore, when seizing Bitcoin, the focus is not on blocking an account, but rather on how the creditor obtains the key or a forced transfer.

Furthermore, there is the volatility. The value of a seized Bitcoin holding can fluctuate considerably between seizure and liquidation. This increases the pressure to act quickly and with solid facts, rather than wasting months with unclear jurisdictions. The anonymity of the blockchain is also often overestimated: addresses are pseudonymous, not anonymous, and can be traced back to a specific individual using the right methods.

Seizure of Bitcoin as another property right pursuant to Section 857 of the German Code of Civil Procedure (ZPO).

If the coins are held in a non-custodial wallet for which there is no third-party debtor, the seizure as other property rights is effected directly against the debtor. The seizure order is served on the debtor and includes a directive to refrain from any disposal of the holdings. From this moment on, the debtor may no longer transfer, sell, or use the coins in a mixing process.

The problem: A restraining order legally prevents transfer, but not technically. Whoever has the key can send the coins at any time. While a violation carries risks of liability for damages and criminal prosecution, this is of little use to the creditor once the coins have been transferred. Therefore, it is all the more important to identify the holdings early and to monitor the addresses forensically.

Release of the private key: the debtor's duty to provide information

In order for the seized cryptocurrency to be liquidated, the creditor needs access. The debtor is legally obligated to provide the information necessary to assert the claim and to surrender any existing documents. Applied to crypto, this means: They must provide information about the private key, the Seed phrase and provide the relevant wallet addresses.

This obligation to provide information is the key lever. It transforms the technical question "Who has the key?" into an enforceable legal obligation. If the debtor refuses to provide information or claims to have lost the key, the dispute shifts to the question of whether this objection is credible. And this is precisely where the Cologne Higher Regional Court's decision comes in.

The Cologne Higher Regional Court decision 11 W 15/24: Cooperation up to and including coercive detention

In the case at hand, a trustee held Bitcoin, Ether, and other cryptocurrencies. Token He managed his clients' funds in two wallets. After the termination of the escrow agreement, he was supposed to transfer the holdings to the new escrow agent, but refused, citing, among other things, that he no longer had functioning access.

The Higher Regional Court of Cologne classified the transfer as a non-fungible act under Section 888 of the German Code of Civil Procedure (ZPO), because only the debtor himself had access to his wallets and no one could perform this act on his behalf. This opened the way for a coercive fine and, alternatively, coercive detention. The court imposed a coercive fine of €25,000, or alternatively, coercive detention, and emphasized that detention would only be considered as a last resort.

The real crux of the ruling, however, lies in the scope of the duty to cooperate. The court stated that the imposition of a coercive fine or coercive detention is only precluded if it is unequivocally established that the debtor has unsuccessfully undertaken all reasonable measures, including involving third parties. A mere reference to lost access data is insufficient.

What specific measures must the debtor take?

The court outlined concrete steps a debtor must exhaust before invoking impossibility of performance. These include checking whether an old hardware storage device containing stored keys still works, and attempting recovery via the recovery phrase—the multi-part sequence of words from which access can be reconstructed.

If the debtor's own efforts are insufficient, they must engage specialized service providers: IT forensic experts with professional recovery software or regulated custodians for key recovery. The court even deemed it inadequate that the debtor had only commissioned an expert with a limited number of hours, despite the availability of more extensive expertise on the market.

For creditors, this passage is invaluable. It shifts the burden of proof: the creditor no longer has to prove that access is possible, but rather the debtor must provide comprehensive documentation that they have exhausted all reasonable and standard market avenues. Anyone who fails to provide this evidence risks fines and imprisonment.

Caution when transferring the decision: Who can carry out the transfer?

The Cologne Higher Regional Court's ruling is not a carte blanche for every situation. Its classification as a non-fungible act, which only the debtor can perform, was based on the specific fiduciary situation in which only the debtor had access. Other courts consider the return of cryptocurrency to be a fungible act, which a third party could also perform, if it is economically irrelevant by whom and how the transfer is carried out.

For legal strategy, this means that choosing the right enforcement method depends on the circumstances of each individual case, such as whether only the debtor has the key or whether a third party could carry out the transfer. Choosing the wrong method wastes time. A thorough investigation of the facts beforehand, supported by forensic findings, helps to file the appropriate application and substantiate it.

Bitcoin on an exchange: The role of the third-party debtor

If the coins are not in your own wallet, but in the account of a Crypto exchange, The picture changes. With these custodial wallets, the platform operator manages the keys. The debtor only holds a contractual claim against the exchange for payment or release of the funds. The creditor can seize this claim for release, similar to a claim against a bank.

The stock exchange then assumes the role of a third-party debtor, similar to a bank. The garnishment only becomes effective upon service on the stock exchange. Practically speaking, things become more complicated if the platform is located abroad, as service and enforcement are then more difficult. Therefore, it is all the more important to clarify early on which stock exchange a debtor actually holds accounts with.

This demonstrates the value of forensic preparation. By analyzing deposit and withdrawal patterns on the blockchain, it is often possible to narrow down which exchange a fund was transferred to. This attribution provides the basis for identifying the correct third-party debtor and serving the garnishment order effectively.

What competitors are overlooking: Forensic wallet identification as the key

Most legal analyses of Bitcoin seizure end with the question of which paragraph applies. In practice, however, enforcement rarely fails due to the legal provision itself, but rather due to the facts. As long as no one can prove that the debtor actually holds any crypto assets and which addresses belong to them, all applications are futile.

This is precisely the gap that forensic work fills. Through blockchain analysis, clustering techniques, and linking to open sources, we assign wallet addresses to individuals and reconstruct transaction flows. Our methods reveal whether a claimed loss of access is plausible or whether transactions continued to occur after the alleged loss.

We work closely with law firms and deliver court-admissible reports that can be directly incorporated into enforcement applications. Like the Blockchain analysis in crypto forensics We will explain the specific process and the possible level of exploitation transparently in the initial consultation.

The Cologne Higher Regional Court ruling requires the debtor to involve IT forensic experts if necessary. The creditor should not leave this step to the debtor. If we are responsible for the forensic support from lawyers Providing the wallet assignment creates the factual basis with which cooperation can be enforced and defense claims refuted.

Practical application: From suspicion to enforceable Bitcoin seizure

The process begins with identification. Before a seizure application makes sense, it must be established that crypto assets exist and to whom they belong. Similar questions arise with hidden assets, for example, when Crypto assets in a divorce It is concealed. The forensic methodology is the same in both cases.

Once the assets are established, the legal allocation of the correct enforcement procedure follows, and, where necessary, the interaction with a Forensic legal strategy for asset recovery. In the case of coins that have already been moved or obfuscated, we continue to track the transactions and document where the value has flowed.

Time is of the essence. As soon as a debtor suspects that a seizure is imminent, they may attempt to distribute assets across multiple addresses or using asset mixing services. Early forensic documentation of the current state of assets and ongoing monitoring of relevant addresses increase the likelihood that a usable asset will ultimately remain.

This results in a clear process for legal representation: first, forensic clarification of where and to what extent crypto assets exist; then, the appropriate enforcement application; and finally, the enforcement of cooperation with reference to the obligations confirmed by the Higher Regional Court of Cologne. Each of these steps is supported by documented findings that will stand up in court. It is precisely this integration of technology and law that distinguishes a successful Bitcoin seizure from an application that fizzles out due to a lack of evidence.

Enforcing Bitcoin seizure: Talk to us

If you, as a creditor or lawyer, suspect that a debtor holds crypto assets, the facts determine the success of enforcement proceedings. We provide the forensic foundation: wallet identification, transaction tracking, and court-admissible reports that can be used to enforce obligations to cooperate.