Cryptocurrency assets (Ethereum, USDT, and USDC) valued at approximately USD 800,000 as of the date of the theft were stolen from my client, a U.S. citizen. In my view, the judgment is noteworthy, as it contains determinations concerning the legal status of cryptocurrency assets, the admissibility of compensation claims denominated in foreign currency, and the issue of reciprocity-which is a matter of significant concern for private international law practitioners. Each of these topics remain contentious both in practice and in doctrine.

The presiding judge conducted the proceedings expeditiously and from what I observed, approached the matter with dilligence. Accordingly, I was also academically curious about the judge’s reasoning and conclusions. Another thought-provoking aspect of the decision is that, despite the case being won, full justice has not truly been achieved. My observations regarding this point appear in the final paragraphs.

In the proceedings before the Bakırkoy 4th Civil Court of First Instance, in which I acted as plaintiff’s counsel, our claims-submitted alternatively-were as follows:

1) A determination that cryptocurrency assets constitute movable property and that, accordingly, our restitution in kind claim be upheld, ordering the restitution of the assets in kind, followed by the execution of enforcement procedures under Article 24 of the Turkish Enforcement and Bankruptcy Code (İİK), meaning that no monetary value would be stated in the judgment and that the value of the cryptocurrency assets at the time of enforcement would be taken into account.

2) In the alternative, should the court determine that cryptocurrency assets are not governed by the rules applicable to movable property, compensation should be decided in the amount of the U.S. dollar value of the assets as of the date of the lawsuit.

3) In the further alternative, should all claims be rejected, compensation should be decided in Turkish lira for the loss incurred as a result of the theft of the cryptocurrency assets.

It is already a well-established fact that U.S. citizens are not required to post security when filing lawsuits in the Republic of Turkey. In private international law, reciprocity may take three forms: Contractual, statutory, and de facto.

The fact that Turkish citizens are not required to post security in the United States is, in itself, sufficient to establish the existence of de facto reciprocity. Thus, in the present case, there is no genuine controversy as to the existence of reciprocity.

However, the academically interesting dimension of this case concerns contractual reciprocity-a matter that (because de facto reciprocity already existed) we did not practically need to rely on but were nevertheless curious about.

We submitted to the court a treaty signed between Turkey and the United States in 1931, which contains a “most-favored-nation treatment” clause. It should be noted that whether such a clause is sufficient to establish contractual reciprocity is not definitively settled and could be argued either way. In a 2016 judgment, the 19th Civil Chamber of the Court of Cassation (Yargıtay) held that such a clause does indeed indicate the existence of contractual reciprocity.

Accordingly, in our statement of claim, we submitted evidence demonstrating that both contractual and de facto reciprocity exist between the Republic of Turkey and the United States of America. Although our arguments regarding the existence of reciprocity were accepted, and the court did not request the posting of what is commonly referred to in practice as “security for foreign plaintiffs,” neither the court nor the Directorate General for Foreign Relations and the European Union at the Ministry of Justice-responding to the court’s inquiry-made any determination regarding the 1931 treaty specifically. The existence of de facto reciprocity was established, and this was (rightly) deemed sufficient. Therefore, our academic curiosity remained unaddressed as the court proceeded to the merits of the dispute.

1) The court held that cryptocurrency assets cannot be considered movable property and therefore cannot be the subject of a restitution in kind claim and consequently rejected our principal claims for recovery in kind and for execution under Article 24 of the Enforcement and Bankruptcy Code.

2) Although our compensation claim was accepted, the court awarded damages in Turkish lira-despite the plaintiff being a U.S. citizen who conducts his life in U.S. dollars.

The reason I sought recognition of cryptocurrency assets as movable property was, of course, that such a result would be far more favorable for my client. In substantiating this argument, we relied on the expression “natural forces… capable of being acquired” in Article 762 of the Turkish Civil Code and on an expert opinion by a highly esteemed scholar.

Had this argument been accepted and enforcement proceeded under Article 24 of the Enforcement and Bankruptcy Code, the significant appreciation in Ethereum’s value since the commencement of the proceedings would have yielded a substantial gain. (This may yet turn out to be the end result after the higher court proceedings conclude.)

In the event that our initial restitution in kind claim was rejected, we provided numerous grounds supporting our claim for compensation in U.S. dollars, submitting to the court the judgment of the General Assembly of the Civil Chambers of the Court of Cassation (Yargıtay HGK) dated 11.11.2009, numbered E. 2009/4-238, K. 2009/493, along with several other favorable chamber decisions. Nevertheless, our claim at this stage was also rejected by the court of first instance, which awarded compensation exclusively in Turkish lira.

Consequently, at the first-instance stage, although we prevailed in the lawsuit, the client was able to recover only a portion of the loss-valued at approximately USD 800,000-as the amount corresponded to roughly TRY 18,000,000 at the time of the theft and the subsequent depreciation of the Turkish lira significantly diminished the effective recovery. Naturally, the case will proceed to appellate stages such as the regional court review and potential enforcement/execution proceedings, and it is both possible and likely that the amount ultimately compensated will increase.

However, the result as it currently stands indicates that, in the Republic of Turkey between 2022 and 2025, individuals asserting claims arising from losses incurred in relation to foreign currency, gold or silver and other precious metals, or cryptocurrency assets-regardless of the reasons for such losses-face severe difficulty in recovering their full damages even if they are substantively correct, pursue their cases diligently, and ultimately win.

At a time when our country is experiencing an extraordinary economic crisis, it is of course not surprising that the outcome should be as such. It is likewise unrealistic to expect the law to fully anticipate situations of this kind. Yet acknowledging these realities does not preclude one from recognizing that the outcome, so far, has failed to deliver full justice.

For my article about acquiring a Turkish crypto license: https://cemilsaar.com/tpost/vasp-fiat-rails-turkey-kvhs-license

For my glossary of terms regulating the Turkish crypto landscape: https://cemilsaar.com/tpost/crypto-asset-fiat-money-electronic-money-turkish-law