Effectiveness of Methods for Tracing Debtor’s Digital Assets: What Works

In this article, we will outline several approaches to tracing and recovering a debtor’s digital assets, as well as the conditions under which these methods prove most effective.

Compelled disclosure of information and keys. Effectiveness: high, if the debtor is within the jurisdiction of a court and faces sanctions (fine, imprisonment) for refusing to cooperate. Conditions: the existence of a court order requiring the debtor to disclose their crypto assets. Such orders are particularly effective in criminal cases. In civil matters, this approach is also applied—debtors may be jailed for contempt of court until they comply. However, if the debtor is willing to go to extremes (hiding, accepting imprisonment), the method reaches its limit. In other words, it works against most rational debtors, but not against fanatical ones.

Freezing assets through exchanges and VASPs. Effectiveness: very high, if the debtor’s crypto assets are held on a centralized exchange or service that falls under a legal jurisdiction. Conditions: precise knowledge of where the account is located and jurisdictional authority to act. For instance, if a debtor holds 50 ETH on Kraken (USA), the optimal step is to obtain a court order in the U.S. or in a country where Kraken has representation—the exchange will freeze the assets and enforce the order. This approach also works domestically (as seen in South Korea, where tax authorities effectively seize crypto via exchanges). Ukraine currently has no licensed exchanges, but if established, the mechanism should operate similarly to freezing bank accounts. The key is proving the debtor’s link to the exchange. Bank transfer data or blockchain analysis (debtor’s wallet interacting with an exchange wallet—clustered by analytics platforms) can help.

Worldwide Freezing Orders and other judicial instruments in favorable jurisdictions. Effectiveness: high for large sums and international debtors. Conditions: creditor resources to act abroad and access to jurisdictions where orders can be obtained quickly. The English WFO has proven effective for wealthy debtors with assets in multiple countries. It is especially useful when speed is essential: a debtor can move funds within minutes, but an English court can issue an ex parte order very rapidly. Similarly, U.S. courts can issue a temporary restraining order. These measures act as preventive tools to “freeze” assets before a final judgment. Without them, crypto may “vanish” and become unrecoverable.

Blockchain-OSINT investigations. Effectiveness: high, but indirect. Analytical reports alone will not return funds, but they underpin the success of other methods. Conditions: skilled specialists and initial leads (transactions, wallet addresses, or even just the debtor’s name). If the debtor has conducted transactions, a trail can often be traced—analysts can uncover even carefully concealed operations with some probability. For example, if 100 BTC pass through a mixer, disperse to 50 addresses, and then reconverge into 2 new addresses—those 2 addresses are highly suspect, likely where the funds ended up. Such findings become part of the evidentiary base.

Importantly, courts are gradually accepting blockchain analytics as evidence. In the U.S., this is standard practice, in the UK as well; in Ukraine—not yet, but experts may soon testify in court that “Address X belongs to Debtor Y, based on blockchain evidence.” Thus, blockchain intelligence is essentially the “eye” that sees hidden assets, while the “hand” of the court or enforcement authority must seize them based on these findings.

Cooperation with state authorities and international assistance. Effectiveness: moderate, but can be decisive in complex cases. For example, if the debtor hides abroad, international legal assistance becomes essential. Conditions: the existence of intergovernmental agreements or willingness of foreign authorities to cooperate. In the crypto context, there is a paradox: cooperation in criminal cases is faster (everyone wants to catch criminals), while in civil matters it is slower. Still, if a Ukrainian debtor owes money to a U.S. company and holds crypto in Europe, recovery can be achieved via recognition of judgments or direct lawsuits in Europe.

This path is long and costly, making it effective only for large sums or high-value debtors. For debts of tens of thousands of dollars, few would pursue international litigation. But for global investors or funds, it is highly relevant—they are ready to litigate anywhere to recover millions.

Legislative changes (preventive methods). Effectiveness: high in the long term. This includes measures such as mandatory crypto disclosure (already required for Ukrainian officials), automatic international exchange of crypto-asset information (possibly in the future, analogous to CRS for banks), creation of national registries or whitelists of wallets. These initiatives make life harder for evasive debtors. Of course, some may remain in “maximum shadow” (e.g., memorizing a seed phrase and using anonymous coins). But such cases are rare. Most people follow rules when they are established.

For example, if tomorrow Ukrainian banks automatically block debtors’ attempts to buy crypto (possible if integrated with the Unified Debtors’ Register), moving money into crypto will become more difficult. Legislation could also impose a requirement: during enforcement proceedings, a debtor must provide access to their crypto wallets under threat of harsher sanctions. This becomes a political question—how far society is ready to go. But the global trend is clearly toward tighter control.

In conclusion: the best outcomes come from combining methods. For instance, OSINT identifies a debtor’s potential wallet; then a court freezes assets on the relevant exchange; simultaneously, the debtor is compelled to disclose keys; if they refuse, they are fined or jailed; eventually, either the debtor gives in, or the exchange releases the funds.

This multi-step approach has been applied successfully in many international cases, and it is precisely this algorithm that Ukrainian creditors should adapt to local realities.