Delaware Can’t Hold the Keys: Court of Chancery Limits Back-Door Personal Jurisdiction in Crypto Theft Case

Can a person steal property located in Delaware, and yet a Delaware court lack personal jurisdiction over the thief? For tangible assets like real property or money held in a Delaware bank, the answer would plainly be “no.” But, as the Court of Chancery recently held in a matter of first impression, the analysis changes when the property is cryptocurrency. In Timoria LLC v. Chaib Anis, et al., C.A. No. 2025-0883-JTL (Del. Ch. Oct. 6, 2025), Vice Chancellor Laster considered whether the Court could exercise in rem or quasi in rem jurisdiction over a cryptocurrency (Ether) held by foreign defendants — and concluded that although the digital assets were technically “located” in Delaware, that fact alone was not enough to satisfy due process.

Background

The case starts with a Curaçao-based online casino operating as Duelbits, which alleged that two former employees — residents of Algeria and Saudi Arabia — wrongfully transferred over 1,000 Ether (valued at about $3.7 million) to a private cryptocurrency address. After Duelbits discovered the transfers, it assigned its rights to its subsidiary, Timoria LLC, a Delaware limited liability company. Timoria then filed suit in Delaware seeking to freeze and recover the Ether and asserting claims that could affect any persons holding the Ether.

One defendant appeared and moved to dismiss for lack of personal jurisdiction; the other did not appear. Timoria voluntarily dismissed the appearing defendant, but continued to seek injunctive relief directed at both individuals and unnamed third parties, arguing that the Ether’s location in Delaware (by virtue of Timoria’s domicile) provided a sufficient jurisdictional basis for the Court to bind all holders or custodians of the property.

The Court’s Analysis

Vice Chancellor Laster’s opinion provides a comprehensive treatment of in rem and quasi in rem jurisdiction under Shaffer v. Heitner, 433 U.S. 186 (1977), and applies those principles to cryptocurrency for the first time in Delaware.

1. Ether as Intangible Property

The Court held that Ether is intangible property, rejecting the so-called “Key Theory” (which locates cryptocurrency where its private key resides) in favor of the “Owner Domicile Theory”(which says the situs of intangible property follows the domicile of its owner). As the Court explained, drawing from the common-law concept of mobilia sequuntur personam, meaning “movable things follow the person,” because Timoria is a Delaware LLC, the Ether was deemed located in Delaware for jurisdictional purposes.

This did not end the inquiry, however. As the Court explained, “Ether is intangible property, but unlike a corporation, title to a corporate office, or corporate stock, Delaware did not use its sovereign authority to create Ether. No statute puts the world on notice that Ether has its situs in Delaware, and the LLC has not pointed to any other document or agreement that might serve that function. The fact that the Ether currently is located in Delaware does not create contacts sufficient to satisfy due process on its own.”

2. Due Process Constraints After Shaffer

Under Shaffer, even where property is located within Delaware, an assertion of jurisdiction must satisfy constitutional standards of due process. Situs alone does not establish sufficient minimum contacts unless the property and the underlying dispute are inextricably intertwined with Delaware’s sovereign interests — as is the case for Delaware real estate or entitlement to corporate office of a Delaware corporation. As the Court put it, “[w]hen the property is inextricably intertwined with the State of Delaware, and when the claims are inextricably entwined with the property, the property establishes the necessary minimum contacts such that parties must anticipate litigating the claims in a Delaware court.” By contrast, Ether lacks that connection because it is created and maintained independently of any sovereign authority.

3. Application to Timoria’s Claims

Timoria’s attempt to use in rem jurisdiction to impose personal obligations on the foreign defendants and cryptocurrency exchanges constituted quasi in rem jurisdiction, which the Court called “constitutionally fraught” after Shaffer. “The relief Timoria seeks implicates both in rem and quasi in rem jurisdiction. First, Timoria seeks an order freezing the Ether that would affect the rights of all persons. That is classic in rem relief. Second, Timoria seeks to impose obligations on [Defendants], the John Doe defendants, and several cryptocurrency trading platforms by requiring them to cooperate with Timoria. By seeking to use in rem jurisdiction to support personal relief, Timoria crosses the boundary of in rem jurisdiction and enters the world of quasi in rem jurisdiction.”

Because neither defendant had any contacts with Delaware, and the alleged wrongdoing occurred when the Ether was owned by a Curaçao entity, the Court found that the defendants could not reasonably foresee being haled into a Delaware court. Vice Chancellor Laster illustrated the point: “For example, assume the casino had been a Delaware entity when the transfers occurred. The Ether would have been located here at the time of the wrong, and the wrongdoers would have metaphysically reached into Delaware to take the Ether. In that setting, the wrongdoers would have created a contact with Delaware sufficiently strong to support suit here. But the casino was organized under the laws of Curaçao. It was only after the taking that the casino transferred its rights to the LLC. The takers of the Ether could have reasonably anticipated being sued in Curaçao. They could not have reasonably anticipated being sued in Delaware.”

Thus, the Court of Chancery dismissed the action without prejudice, reaffirming that Delaware’s jurisdictional reach, even over digital assets, remains bounded by constitutional principles of fair play and substantial justice.

Key Takeaways:

• Cryptocurrency is intangible property located, at a minimum, in its owner’s domicile.
• Situs alone is insufficient to confer personal jurisdiction unless the property and claims are inherently tied to Delaware law.
• Plaintiffs seeking relief against foreign defendants involving digital assets must establish additional Delaware-directed conduct to satisfy due process.
• The decision underscores that Delaware’s role as the domicile of choice for business entities does not automatically extend to disputes involving foreign actors and non-Delaware conduct.

This post is as of the posting date stated above. Sidley Austin LLP assumes no duty to update this post or post about any subsequent developments having a bearing on this post.