You Lost My Ethereum!

A South Australian respondent was served with a Pre-Action Claim alleging a verbal contract to store Ethereum (ETH) on a hardware wallet and a subsequent loss. The Applicants threatened litigation for “lost opportunity” damages.

Talon Legal dismantled the pleaded contract theory at its weakest point (consideration) and mapped the genuine risks across bailment, conversion and detinue, and forced the matter into a commercially rational settlement corridor during the pre-action phase.

The dispute ended without court proceedings, without any finding of liability, and on terms reflecting first-principles contract law and the reality of impecuniosity that would have followed any judgment.

Matter Snapshot

• Jurisdiction: Civil proceedings in the Magistrates Court of South Australia, at the pre-action stage under the Uniform Civil Rules 2020 (SA).
• Nature of complaint: Verbal agreement to hold Applicants’ ETH on a hardware wallet; alleged loss; claimed “lost opportunity” to sell at market peaks.
• Cause of action: Breach of contract (with stray references to “breach of trust”).
• Our posture:
  • Attack contract formation (especially consideration).
  • Preserve defences across bailment and proprietary torts (trespass to goods, conversion, detinue) if the pleading shifted.
  • Constrain “digital communications” evidence to what could actually be authenticated and admitted.
  • Drive negotiations under the pre-action regime to avoid sunk litigation costs and to align any dollar figure with historic fiat outlay, not speculative peaks.

The Pre-Action Rules We Used to Control Process

South Australia’s Uniform Civil Rules 2020 (SA) require parties to exchange detailed Pre-Action Claims and Pre-Action Responses within strict timeframes and to convene a pre-action meeting in good faith.

Non-compliance can trigger a special directions hearing and indemnity-basis costs against the defaulting party pursuant to r 61.

Why this matters:

• The Rules force front-loaded evidence and reasoned offers, making poor pleadings and speculative claims expensive to maintain.
• We signalled readiness to comply, proposed meeting dates, and built a documented record of good-faith negotiation, positioning the Applicants to bear process risk if they pressed on without curing defects.

Challenges in Digital Asset Disputes

Cryptocurrency-related legal disputes present novel challenges.

The decentralised architecture and pseudonymity can complicate proof of title, control and agreement formation unless parties maintain robust records and key management evidence.

In this case, the absence of a formal contract made it particularly challenging for the claimants to substantiate their allegations.

Key issues in this matter included:

• The enforceability of verbal agreements in cryptocurrency transactions;
• The legal definition of property rights in digital assets under Australian law;
• The burden of proof in contractual disputes involving digital evidence;
• The applicability of fiduciary duties and equitable claims; and
• Procedural non-compliance under the Uniform Civil Rules 2020 (SA).

With no written agreement, the matter squarely raised how courts approach verbal agreements, equitable duties and digital evidence in crypto disputes.

Our Litigation Strategy

Contract: Formation First, Damages Later

The Applicants’ pleaded breach of contract depended on proving all five essential elements: agreement, consideration, capacity, intention and certainty.

Their own narrative conceded the arrangement was a “friendly gesture” with no compensation. On those facts, consideration was absent.

1. Strategy: make consideration dispositive. We framed the Response around the absence of any bargained-for benefit to the respondent. Friendship is not consideration.
2. Tactics: insist that if they persisted with a contract pleading, they would be bound by their pleadings; a failure to make out consideration would justify a summary-judgment application if proceedings were issued.
3. Outcome leverage: once the Applicants understood that lost-opportunity damages hang on a valid contract (and that their own case narrative destroyed consideration), the value of the claim materially collapsed.

Equity: “Breach of Trust” — Say It; Then Prove It

The Claim made passing reference to breach of trust. We invited the Applicants to particularise any trust:

1. trust property (the ETH),
2. trust terms, and
3. the respondent’s trustee status.

Without a written instrument or clear indicia of a fiduciary undertaking, the allegation was forensic rhetoric rather than a pleaded, provable equity. The evidentiary burden sat squarely with the Applicants.

Property and Possession: Bailment, Conversion, Detinue

We planned for the Applicants to pivot away from contract to bailment or proprietary torts:

1. Bailment: Did the Applicants deliver goods (ETH keys or effective control) for safekeeping, and did the respondent owe a bailee’s duty of reasonable care? The intangible nature of the asset and the absence of a clear delivery/redelivery paradigm were factual vulnerabilities for them.
2. Conversion: Requires an unauthorised assumption of the rights of the owner. In modern practice, common-law courts have increasingly treated cryptoassets as property capable of being converted, but title, control and the precise dealing must be proved.
3. Detinue: Arises on refusal to return goods upon demand, with damages usually at market value at the date of detinue. Without a clear demand and refusal, and with contested facts about what was held and when, a detinue theory faced serious evidentiary hurdles.
4. Comparative authorities: while South Australian appellate guidance is still sparse, common-law sources and comparative UK authorities/statements treat cryptoassets as property in principle; we used this by analogy while maintaining the Applicants’ proof burdens on title, control and dealing.

Evidence: Authenticity Before Weight

The Applicants relied on social-media messages as “documents”. Under s 54 of the Evidence Act 1929 (SA), a record of an electronic communication carries presumptions as to form, sender, timing and receipt, absent contrary evidence. However, authenticity and tamper risk remain live issues. Our stance was precise:

• We do not accept screenshots at face value.
• If relied upon for truth of contents, hearsay and authenticity objections arise unless exceptions apply.
• Proper authentication (metadata, source exports, platform records) would be required before weight could be given.
• This approach put the evidentiary onus back where it belonged and neutralised the rhetorical force of curated chat excerpts.

Where authenticity cannot be established to a forensic standard, we put the other side to strict proof and reserve objections on admissibility and weight.

Commercial Reality as a Settlement Engine

Even if the Applicants surmounted formation and evidence hurdles, collection risk loomed. The respondent had minimal assets and family support.

We anchored negotiations in enforcement reality: even with a judgment, recoverability was low.

1. If a judgment were obtained, enforcement prospects were poor.
2. Litigation would likely exceed the value of the alleged lost opportunity for either party before trial.
3. A sensible resolution aligns with historic fiat outlay (original acquisition cost of ETH at the time of purchase), not with volatile peaks or speculative missed gains.

By combining doctrinal pressure (consideration), evidentiary pressure (authenticity), and commercial pressure (collection risk), we drove the matter into a low-exposure settlement before issue of proceedings.

Why This Worked

1. We chose the battlefield: The pre-action regime penalises sloppy work. We complied scrupulously, proposed dates, and documented good faith, forcing the Applicants to either cure defects or risk indemnity-basis costs at a directions listing.
2. We attacked the cornerstone: No consideration meant no contract damages for lost opportunity.
3. We controlled the evidence: Without rigorous authentication, social-media artefacts were unreliable. Section 54 helps with presumptions, but it is not a free pass to admission and weight.
4. We priced reality: Even a paper win would be a Pyrrhic victory for the Applicants. That clarity short-circuited escalation.

The Outcome

1. No proceedings issued.
2. No finding of liability.
3. Resolution achieved on commercial terms aligned to historic fiat outlay, not speculative crypto peaks.
4. Time, cost and stress avoided.
5. The client moved on without public litigation footprint.

Our Suggestion for Crypto Holders & Helpful Friends

Never act as a free custodian.

If you must assist, document scope, risk and fees. A written agreement prevents friendly-gesture disputes. Ideally, never mix friends or family with money or items of value.

Authenticate everything.

If your case depends on chats, export platform data and maintain device integrity.

Price enforcement reality early.

Legal merit without recoverability is not value.

Use the pre-action rules to your advantage.

They reward parties who bring evidence and reasoned offers first.

Expert Crypto Lawyers

Cryptocurrency disputes require a deep understanding of contract law, digital assets and evolving legal frameworks. Talon Legal provides expert guidance to navigate complex digital-asset matters, including:

• Cryptocurrency-related contractual disputes.
• Digital-asset recovery and ownership claims.
• Regulatory compliance in blockchain transactions.
• Defending claims involving cryptocurrency mismanagement.

Book a Free 30-Minute Consultation

If you are facing a cryptocurrency-related dispute, early legal intervention is key. Talon Legal offers strategic, results-driven advice to protect your rights.

Book a free 30-minute consultation with expert crypto lawyers in Adelaide.