Crypto Chaos in Court: Seychelles Sets Precedent on Commingled Assets in Yield App Liquidation

The following key developments from the Seychelles Supreme Court ruling in Stephen Cork & Hadley Chilton (liquidators) v. Jason Corbett & Others have been reported.

The ruling is concerning.

• Commingled crypto assets in the liquidation of Yield App Limited:

Background & Parties Involved

• Yield App Limited, a Seychelles-registered company, entered insolvent liquidation on 1 July 2024, overseen by joint liquidators Stephen Cork and Hadley Chilton of Cork Gully.  
• The liquidators subsequently petitioned the Supreme Court (Case MA 149/2025 arising from CC 71/2025), seeking to hold directors and associated entities—Jason Corbett, Justin Wright, Tim Frost, James Sutherland, Lucas Kiely, and Unifi Group Limited—personally liable for alleged fraudulent or wrongful trading under the International Business Companies Act, 2016.  

Court’s Decision on Jurisdictional Service

• The court approved ex parte service of the petition outside Seychelles, under Section 48(d) and the purposive interpretation of the SCCP, because the alleged breaches were statutory duties closely tied to the company's incorporation in Seychelles. [
• In delivering its ruling, Justice N. Burian emphasised that a narrow reading of service rules would frustrate enforcement of the IBC Act and legitimate statutory claims.  

Commingled Crypto Assets

• OffshoreAlert reported this ruling as a significant decision on the "fair treatment of commingled crypto assets subject to competing claims from creditors," though full details weren't publicly accessible.  
• The court recognised that Yield App's crypto holdings were intermingled with other assets, potentially complicating creditor claims. The issue centres on delineating ownership and equitable distribution of these assets.

Implications & Next Steps

• The judgment paves the way for prosecuting allegations of fraudulent and wrongful trading by the former directors and associated parties.
• It establishes judicial clarity on how commingled crypto assets should be treated within liquidation proceedings—particularly where multiple parties assert claims.
• Respondents must appear before the Supreme Court, already scheduled for 17 September 2025, to contest the petition.

Summary of Key Insights

• Liquidators authorised to pursue personal liability claims under IBC Act §§340–341.
• Service outside jurisdiction permitted via Section 48(d), recognizing the on‑island legal nexus.
• Courts acknowledging complexity in handling interwoven crypto assets and creditor rights.
• Next hearing set for September 2025 to adjudicate the substantive fraud/wrongful trading claims.

This ruling marks a notable precedent in Seychelles for addressing the equitable distribution and treatment of commingled crypto assets during offshore insolvency proceedings under the IBC framework.

What are the practical implications of this ruling for crypto insolvency cases?

Here are the practical implications of the Seychelles ruling on commingled crypto assets in Yield App Ltd.’s liquidation:

1. Establishes Judicial Recognition of Crypto Complexity

• Courts now explicitly acknowledge that crypto assets are often pooled or commingled, making ownership attribution difficult.
• This sets a precedent for equitable distribution frameworks rather than strict tracing, which is hard in blockchain environments.

2. Strengthens Liquidators’ Authority

• Liquidators can seek court directions on how to treat commingled digital assets, rather than relying on traditional insolvency norms.
• This empowers them to apply fairness principles when multiple creditors claim rights over the same wallet or pool.

3. Moves Toward Pro Rata Allocation

• The ruling signals that pro rata distribution (creditors sharing proportionally based on claims) may be favoured over “first-in, first-out” or tracing-based approaches.
• This reduces litigation risk and speeds up asset recovery.

4. Cross-Border Enforcement

• By allowing service outside Seychelles, the court ensures offshore directors and entities can be held accountable.
• This is critical for crypto firms with global operations but local incorporation, reinforcing that statutory duties follow the company’s jurisdiction.

5. Precedent for Future Crypto Insolvencies

• Other offshore jurisdictions (e.g., BVI, Cayman) may look to this case when drafting guidance for digital asset liquidations.
• It could influence model laws or best practices for handling commingled wallets in insolvency.

6. Risk Management for Crypto Businesses

• Firms should maintain segregated wallets and clear ownership records to avoid commingling disputes.
• Compliance teams may need to update internal controls to align with emerging judicial expectations.

briefing note for compliance officers:

Briefing Note: Seychelles Ruling on Commingled Crypto Assets – Practical Implications

Context

The Supreme Court of Seychelles, in the liquidation of Yield App Ltd., addressed the treatment of commingled crypto assets subject to competing creditor claims.

This sets a precedent for offshore insolvency cases involving digital assets.

Key Implications

1. Recognition of Crypto ComplexityCourts acknowledge that crypto assets are often pooled, making ownership attribution difficult.
2. Liquidators’ AuthorityLiquidators can seek court directions for equitable distribution rather than relying on strict tracing.
3. Pro Rata Distribution LikelyFair allocation among creditors is favoured over “first-in, first-out” or blockchain tracing.
4. Cross-Border EnforcementService outside jurisdiction permitted—directors and entities abroad remain accountable.
5. Precedent for Other JurisdictionsMay influence similar rulings in BVI, Cayman, and other offshore centres.

Recommended Actions for Compliance:

• Segregate Client Assets: Maintain separate wallets for each client to avoid commingling.
• Enhance Record-Keeping: Implement robust systems to track ownership and transaction history.
• Update Risk Frameworks: Include crypto-specific insolvency risks in compliance and governance policies.

• Monitor Jurisdictional Developments: Stay informed on evolving case law in offshore centres.
• Educate Stakeholders: Train staff on implications of commingled crypto and insolvency scenarios.

Source

• https://corkgully.com/liquidators-appointed-to-yield-app-to-oversee-insolvency-proceedings/
• https://www.offshorealert.com/yield-app-ltd-commingled-crypto-ruling-seychelles/
• [seylii.org ]attached