German Law Loophole Lets Suspect Avoid Charges in $2.9M Crypto Theft

A man accused of stealing $2.9 million (€2.5 million) in cryptocurrency has avoided criminal charges in Germany due to a legal loophole that highlights the country’s struggle to apply traditional law to decentralized digital assets. The decision, handed down by the Higher Regional Court of Braunschweig (OLG), underscores the need for urgent legislative reform as crypto becomes more integrated into financial systems.

Theft Without a "Thing"

The case involved the alleged unauthorized transfer of 25 million tokens after the defendant reportedly gained access to the victim’s 24-word recovery phrase while helping set up a crypto wallet. He later moved the funds to two wallets under his control. However, under Section 242 of Germany’s Criminal Code, theft requires the unlawful taking of “movable property.” Because cryptocurrencies do not exist in physical form, the court concluded they cannot be classified as “things,” and therefore the theft statute does not apply.

This interpretation, rooted in the traditional concept of property, left prosecutors unable to bring standard theft charges despite the large sum involved. It reflects a growing challenge for legal systems when dealing with decentralized, intangible financial assets.

Criminal Law Falls Behind Blockchain Reality

Additional charges such as computer fraud were also rejected by the court. The judges stated that no unauthorized manipulation of data could be demonstrated, since transactions on public blockchains are technically valid by design—even when maliciously initiated. The decentralized nature of blockchain systems, the court argued, complicates the question of whether a transaction is truly “unauthorized.”

Attempts to charge the accused with falsifying evidentiary data also failed. The court cited an inability to identify the issuer of the transaction, as well as the fact that any modification of data occurs not by the individual but through the consensus of the blockchain network.

The court similarly ruled that "data alteration" did not apply. While acknowledging that blockchain data had changed, judges concluded the modification was executed by the system's protocol and authorized participants, not by illegal outside interference.

Civil Case Still Possible, Legal Reform Likely

While the accused has avoided criminal prosecution for now, legal experts believe civil litigation remains a likely route given the financial loss. But the case has broader implications. According to a legal advisor from WINHELLER, a German law firm specializing in crypto regulation, the ruling exposes a serious gap in Germany’s legal framework. The firm described it as a “massive protection gap,” warning that current statutes allow the theft of millions in digital assets without triggering criminal accountability.

The case is already fueling calls for reform. Legal experts anticipate that Germany will be forced to update its theft statutes and introduce dedicated provisions for crimes involving cryptocurrencies and other digital assets. As decentralized technologies continue to challenge traditional legal definitions, lawmakers may soon face pressure to close the loophole before more high-value cases emerge.