Chinese fraud victims seeking to recover 61,000 seized Bitcoin face a legal setback after a UK court ruled that Chinese law governs their claims.

Chinese fraud victims seeking to recover 61,000 Bitcoin seized by the British government have lost a key legal battle after London’s High Court ruled that Chinese law, rather than English law, should govern claims to the assets.

On Monday, Justice Mark Turner rejected arguments for applying English law or a combination of English and Chinese law to the victims’ ownership claims. The judge ruled that Chinese law must determine whether the claimants have property rights in the seized Bitcoin, leaving the validity of claims for subsequent proceedings.

“The relevant damage occurred in China. The Applicants parted with their money in China,” Turner wrote. “The contractual relationships thereby induced were entered into in China.”

The dispute stems from an investment fraud scheme orchestrated by Zhimin Qian between 2014 and 2017, with British authorities seizing the assets during a money-laundering investigation. In March, victims challenged a proposed compensation arrangement involving a Chinese redress scheme, arguing that it could leave British authorities with much of the gains from Bitcoin’s appreciation.

The victims had sought to apply English law because it could have allowed them to claim direct ownership of the Bitcoin, rather than merely seek compensation as creditors. However, the UK ruling does not determine who ultimately owns the seized assets, with the victims’ property rights under Chinese law still to be assessed.

According to a Financial Times report, Law firm Fieldfisher, which represents claimants in the dispute, is pursuing an appeal against Turner’s ruling.

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