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Seychelles Supreme Court Clarifies Treatment of Commingled Cryptoassets in Yield App Liquidation
The Supreme Court of Seychelles has issued a landmark judgment in the liquidation of Yield App Limited, providing long-awaited guidance on how commingled cryptoassets should be treated when competing creditor claims arise in an insolvency.
Yield App operated a “Withdrawal Pool” of interconnected wallets into which user deposits, redeemed tokens, platform-lent assets and company funds were routinely swept. Despite contractual terms promising segregation, investigations revealed habitual sweeping of user assets into omnibus wallets, creating extensive commingling and making it practically impossible to trace specific digital assets back to individual users.
The Joint Liquidators, Hadley Chilton and Stephen Cork of Cork Gully, sought the Court’s direction on how to treat these assets for distribution following an interim distribution earlier in the liquidation. The judgment provides much-needed clarity on this issue—a point emphasised by Stephen Cork, who noted: “Our priority remains ensuring a fair and transparent process for all creditors.”
The Court reaffirmed that cryptoassets constitute “property” under Seychelles law. However, it found that pervasive commingling and incomplete internal records substantially weakened proprietary claims for most users. Only a very small number of users – whose assets were never swept into pooled wallets – might retain an equitable proprietary interest, though verifying these claims would be difficult and costly.
After reviewing tracing methodologies including first-in-first-out, pari passu, and rolling charge, the Court concluded that a pari passu distribution among unsecured creditors was the only commercially viable approach.
The judgment aligns with global developments confirming that digital assets can, in principle, be subject to express or constructive trusts – as seen in cases such as D’Aloia v Persons Unknown and Re Celsius Network. However, the ruling departs from these principles by emphasising factual impossibility: even where a custodial trust might theoretically exist, the inability to trace assets can defeat proprietary claims in practice.
The Court directed the Joint Liquidators to administer the estate on this basis and provide transparent claim schedules prior to final distributions.
Cork Gully has extensive experience in managing complex insolvencies involving digital assets and advising on emerging challenges in the crypto sector. The firm combines insolvency expertise with deep knowledge of blockchain technology, supported by initiatives such as its “Navigating the Future of Insolvency in the Crypto Era” webinar, enabling it to deliver innovative solutions for creditors and stakeholders.
Hadley Chilton explained:
"The Court’s decision reflects the practical realities of tracing digital assets in complex structures. We are committed to implementing the judgment efficiently and responsibly."
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