German Court Dismisses $2.9M Crypto Theft Charge Due to Legal Loophole

A German court’s recent ruling has exposed a legal loophole in the country’s criminal code, allowing a man to evade charges for allegedly stealing $2.9 million (€2.5 million) in cryptocurrency. The case, tried in the Braunschweig Higher Regional Court (OLG), centered on the unauthorized transfer of 25 million unspecified tokens, which the accused reportedly accessed by obtaining the victim’s 24-word seed phrase during a wallet setup process. Despite the clear financial harm, prosecutors faced insurmountable challenges in securing a conviction due to ambiguities in how German law defines property and digital assets [1].

The court dismissed the primary charge of theft under Section 242 of the German Criminal Code (StGB), which requires the “taking of another’s movable property.” Since cryptocurrencies lack physical form, they were not classified as “things” under the statute, rendering the traditional theft charge inapplicable [1]. Additional charges, including computer fraud and falsifying evidentiary data, were also rejected. Judges ruled that blockchain transactions cannot be tied to unauthorized data manipulation in decentralized networks, as no single entity controls the system [1]. Furthermore, the court determined that altering data on the blockchain was permissible under the network’s operational rules, as modifications are executed by authorized participants [1].

While the accused escaped criminal liability, legal experts emphasize that civil recourse remains a viable option for the victim. The potential for civil action—particularly given the substantial sum involved—highlights the distinction between criminal and civil remedies in asset disputes. However, the ruling underscores a critical gap in Germany’s legal framework for digital assets. A lawyer from WINHELLER, a firm specializing in crypto law, warned that the decision “creates a massive protection gap where millions in crypto can be stolen without criminal consequences,” and that legislative reforms are “highly likely” to address this vulnerability [1].

The case has sparked urgent discussions about modernizing Germany’s criminal code to account for the unique nature of cryptocurrencies. Current proposals include expanding theft laws to explicitly cover digital assets and introducing crypto-specific provisions to close interpretive gaps. Such reforms would align with broader global trends in regulating digital finance, ensuring that legal systems evolve alongside technological advancements.

The incident also raises questions about the practical enforcement of blockchain-related crimes. The decentralized structure of cryptocurrencies complicates traditional notions of authorization and control, challenging courts to reconcile legal principles with the realities of digital ecosystems. As lawmakers and regulators grapple with these complexities, the outcome of this case may serve as a catalyst for clearer guidelines and protections in the crypto space.

Sources:

[1] German Law Creates Loophole for Alleged $2.9M Crypto Theft (https://decrypt.co/332346/german-law-creates-loophole-for-alleged-2-9m-crypto-theft)