With regard to crypto-assets, interim legal protection yields different outcomes depending on where the asset is held. If a crypto asset is held in custody by a Turkish crypto asset service provider, the court or enforcement authority may have access to the platform. If the asset is held in a non-custodial wallet, there may be no central custodian to whom the order can be directed.
For this reason, when drafting a claim, one should not merely request ‘the imposition of measures on crypto assets’ or ‘the precautionary attachment of crypto assets’. The application must be substantiated in terms of the platform account, the balance shown in the account, the right to withdraw from the platform, the known blockchain address, who holds the private key, and the risk of transfer.
A provisional measure is not the same as a provisional attachment. A provisional attachment is aimed at securing a specific monetary claim. A provisional measure, on the other hand, aims to protect the value of the right or asset at the centre of the dispute.
ENFORCEMENT AND INSOLVENCY ACT – BASIC CONDITIONS FOR A PRELIMINARY ATTACHMENT
The creditor of a monetary debt that is not secured by a pledge and has fallen due may have the debtor’s movable and immovable property, as well as their receivables and other rights, held by the debtor or a third party, provisionally attached.
In respect of a debt not yet due, a provisional attachment may be sought only in the following circumstances:
1 – Where the debtor has no fixed place of residence;
2 – Where the debtor is preparing to conceal or dispose of their property, or to abscond, with the intention of evading their obligations, or has already absconded, or engages in fraudulent transactions that infringe the creditor’s rights for this purpose;
If a provisional attachment is imposed in this manner, the debt becomes due and payable solely against the debtor.
CODE OF CIVIL PROCEDURE – CONDITIONS FOR A PROVISIONAL MEASURE
(1) Where there is concern that, due to a change in the current circumstances, the enforcement of a right would become significantly more difficult or entirely impossible, or that a detriment or serious harm would arise as a result of delay, a provisional measure may be ordered in respect of the matter in dispute.
(2) The provision of the first paragraph shall also apply, to the extent appropriate to its nature, in non-contentious proceedings.
Provisional Attachment
Condition of a specific monetary debt
A specific monetary claim must form the basis of an application for a provisional attachment. If the creditor wishes to obtain the debtor’s crypto-assets directly, such an application cannot always be classified as a provisional attachment. A provisional attachment is, first and foremost, a protective measure designed to secure the recovery of a monetary claim.
Therefore, the following points must be set out in the application:
- The legal basis of the monetary debt,
- The amount of the debt or the calculable amount of the claim,
- The due date of the claim,
- That the claim is not secured by a pledge,
- The risk that the debtor may transfer or conceal their crypto-assets,
- The assets, accounts or rights on which the attachment is to be enforced.
The high volatility of crypto assets makes it all the more important for the amount of the claim in the attachment application to be clearly stated in Turkish lira or a specific foreign currency. The purpose of a provisional attachment is not to compel the debtor to immediately hand over a specific amount of crypto assets to the creditor, but to secure the future recovery of the monetary claim.
With regard to assets held in an exchange account, a provisional attachment may be directed at the cryptocurrency balance held with the platform, the Turkish lira account, and any request by the debtor for withdrawal or delivery from the platform. However, an unrestricted phrase such as ‘provisional attachment of all the debtor’s crypto assets’ in the application may raise issues regarding enforceability and proportionality. The name of the platform, the user account, identity details, the type of asset and the balance as at the date of attachment should be specified as far as possible.
The Constitutional Court, whilst explaining the distinction between a provisional attachment and a provisional measure, has stated that a provisional attachment is the temporary seizure of the debtor’s property for the purpose of ensuring the timely payment of the creditor’s monetary claim; stated that provisional attachment is applied in cases involving monetary claims and security, whilst provisional measures are generally applied in disputes concerning matters other than money, such as rights, movable property and immovable property.
Constitutional Court 2023/102E. 2023/203K.
Provisional attachment, on the other hand, is the temporary seizure of the debtor’s assets by court order to ensure the timely payment of a monetary claim by the creditor, and is a specific type of provisional measure. Whilst provisional attachment applies only to cases or enforcement proceedings concerning monetary claims and security claims, provisional measures are, as a rule, adopted in cases concerning matters other than money (rights, movable property, immovable property). In a provisional measure, a preventative measure is taken regarding the disputed item (for example, a movable or immovable asset) that is the subject of the proceedings.
This distinction is of direct relevance to crypto-assets. If the claim is based on Turkish lira or a specific sum of money, a provisional attachment may be appropriate; if, however, the aim is to safeguard a specific wallet, account or crypto-asset in dispute, a provisional measure may be the more suitable legal instrument. It is possible to apply for both measures jointly or separately in the same case; however, the specific conditions for each application must be clearly defined.
Obligation to provide security
For the creditor seeking a provisional attachment, security is one of the fundamental procedural safeguards. The purpose of security is to compensate for any loss that the debtor or third parties may suffer should the attachment prove to be unfounded. For this reason, when applying for a provisional attachment, the creditor must provide evidence to a prima facie standard and indicate that they are prepared to provide security.
Whilst the amount of security is left to the court’s discretion, it may be argued that the damage to the other party could be substantial due to the price volatility of the crypto-asset and the restriction on the platform’s transaction capacity. The court must assess the scope of the application, the amount of the claim, the value of the asset to be seized, and the impact of the measure on third parties, taken together.
Once a provisional attachment order has been issued, it must be enforced in a timely manner through the enforcement office. Any delay between the issuance of the order and its actual enforcement may render the protective measure ineffective, particularly as crypto assets can be transferred to another wallet within minutes. For this reason, the order must be made accessible via UYAP, an application must be made to the enforcement office, and service of the order on the platform must be carried out within the same procedural framework.
Interim Measures
Measures concerning the subject matter of the dispute
In terms of interim measures, the subject matter of the dispute may be a specific crypto asset, a platform account or the economic value held in that account. The party requesting the measure must demonstrate that the enforcement of the right will become more difficult due to a change in the current situation, or that serious damage will arise as a result of any delay.
For example;
- Excluding assets in a specific exchange account from the division of property in the liquidation of a matrimonial property regime,
- A company partner preparing to transfer assets from the company’s multisig wallet unilaterally,
- An allegation that crypto assets are held under a custody or safekeeping agreement,
- A dispute over ownership or restitution regarding assets in a wallet belonging to the claimant,
may form the subject matter of a request for interim measures.
The request must be limited to the subject matter of the dispute. Freezing the debtor’s entire estate or all crypto accounts without distinction may give rise to issues of proportionality and specificity.
Communication of the order to the platform
With regard to an account on a Turkish exchange, the court order must clearly state the platform’s name, the debtor’s identity details, the user account, any known email or telephone contact details, and the scope of the interim measure.
Once the order has been served on the platform or communicated in accordance with due process, the platform may be required to carry out the following actions:
- Determination of the current balance in the account,
- Restricting withdrawals of crypto assets and Turkish lira,
- Not to close the account and to preserve the records,
- Not to execute any new transfer instructions,
- Submission of the transaction history and balance statement to the court,
- Notifying the court in the event of any transactions carried out in breach of the interim order.
The fact that the platform holds an operating licence does not imply that its transactions are covered by public guarantees. Law No. 6362 stipulates that disputes arising from the relationship between platforms and their customers are subject to general provisions, and that crypto-assets are not subject to investor compensation provisions.
CAPITAL MARKETS LAW – PLATFORM ACCOUNTS AND CUSTOMER RECORDS
There may be a time lag between the relationships between platforms and their customers and the transactions carried out on the platforms, and the platform’s technical implementation of the restriction.
The main issues are as follows:
- A court decision being sent only to a general email address,
- The platform being unable to match the user with their identity details,
- Turkish lira accounts and crypto-asset accounts being held on different systems,
- The platform outsourcing its custody services to another organisation,
- The order not specifying a particular asset or user account,
- The platform requesting further clarification regarding the scope of the court document,
- The fact that it takes several days in practice to submit the response to the court,
- The transfer being completed before the order is received.
For this reason, the letter of request should not merely seek ‘provision of information’, but should also require the immediate implementation of the interim order, the preservation of balance and transaction records, and a report on the current status as at the date of the order. In the event that the platform fails to comply with the interim measure, the framework within which liability arises, the content of the order, the method of service, the platform’s actual control over the transaction, and any disputes arising between the parties due to the transactions in question are subject to general provisions. The fact that platforms have been granted an operating licence by the Board does not imply that transactions are under public guarantee. Crypto-assets are not subject to the investor compensation provisions set out in Article 82 of this Act.
Records relating to the wallets through which customers’ crypto-asset transfers are carried out and the accounts through which fund transfers are carried out shall be maintained by crypto-asset service providers in a secure, accessible and traceable manner. The integrity, accuracy and confidentiality of all transaction records shall be ensured.
Court orders and practical issues regarding the Turkish exchange
In theory, a court order may require the platform to provide information regarding the current balance, account records, transfer history and any restrictions on the account. However, in practice, whether the order is served on the platform is assessed depending on the nature of the breach.
Interim Measures Against a Foreign Exchange Platform
A Turkish court’s order for interim measures does not directly bind an exchange located abroad. The fact that the order was issued in Turkey does not automatically ensure its enforceability in the country where the foreign company is based.
Three distinct issues arise in relation to foreign stock exchanges:
- Determining in which country the company is incorporated,
- Identifying which legal entity operates the account,
- Whether the Turkish order is recognised or enforced in that country.
The recognition and enforcement of an interim injunction depend on the law of the foreign country, relevant international treaties and the nature of the order. If the order has not become final, if the opposing party has not been duly served, if the foreign court lacks the authority to recognise interim measures, or if foreign law provides for exclusive jurisdiction, enforcement may not be possible.
Furthermore, even if an enforcement order is obtained, the process may remain slow compared to the speed at which crypto-assets are transferred. The foreign court may request a translation of the judgment, an apostille or certification, a certificate of finality, and proof of service in accordance with local procedure. It is possible that the assets may be transferred to other addresses whilst these documents are being prepared.
MASAK channel
The MASAK channel may come into play in cases involving suspected proceeds of crime or money laundering. Law No. 5549 provides that, where there is strong suspicion that offences of money laundering or the financing of terrorism have been committed, assets may be seized in accordance with the procedure set out in Article 128 of the Code of Criminal Procedure.
LAW ON THE PREVENTION OF MONEY LAUNDERING – SEIZURE
Where there is strong suspicion that the offences of money laundering or terrorist financing have been committed, assets may be seized in accordance with the procedure set out in Article 128 of the Code of Criminal Procedure No. 5271.
In cases where delay would be detrimental, the public prosecutor may also issue a seizure order. Any seizure carried out without a court order must be submitted to the competent judge for approval within twenty-four hours. The judge shall decide whether to approve or reject the seizure within twenty-four hours at the latest.
This mechanism is not a general remedy that can be used to secure an ordinary civil claim. An application to MASAK does not automatically transform a divorce, debt or contractual dispute into a criminal investigation. There must be a concrete suspicion of a criminal offence, assets linked to the offence, and a risk of delay.
Consequently, the limitations of the MASAK channel for assets held on foreign exchanges are clear. A civil creditor cannot secure a freeze on an account on a foreign platform by MASAK merely by citing a risk of non-payment. If there is a suspicion of a criminal offence, an application must be made to the Chief Public Prosecutor’s Office with concrete evidence; the platform, the bank used, the transfer addresses and the transaction identifiers must be specified.
Limits of the Measure in a Non-Custodial Wallet
In a non-custodial wallet, the private key is under the debtor’s control. There is no central administrator of the blockchain network or a single custodial entity to enforce such a decision. Consequently, whilst a court order directing that ‘assets in the wallet must not be transferred’ may be legally valid, it may not be technically enforceable by the network itself.
In this situation, the injunctions are directed at the debtor. The debtor may be obliged not to make transfers from specific addresses, not to transfer assets to third parties, not to disclose the private key to anyone else, and to preserve the wallet’s current balance.
If the debtor makes a transfer in breach of the order, the blockchain transaction is, in most cases, irreversible. However, this does not nullify the legal validity of the order. The transaction ID and timestamp may indicate a transfer made after the interim order was issued. The consequences of such a breach are assessed according to the content of the order and whether it was served in a manner that ensures its enforceability.
Obligations regarding the declaration of assets during the enforcement proceedings may also be of particular importance. The applicability of the provisions of the Enforcement and Bankruptcy Code regarding the debtor’s failure to declare subsequently acquired assets or increases in income must be examined in light of how the crypto-asset was acquired and the scope of the disclosure obligation in the enforcement file. No established case law specific to crypto-assets has yet emerged in this area.
A provisional attachment is intended to secure the recovery of a specific monetary claim that is not secured by a pledge. A crypto asset may be the subject of such an attachment; however, the application must be prepared by establishing a clear link between the specific monetary debt and the debtor’s platform account or other economic rights. The obligation to provide security and the requirement for prima facie evidence must also be taken into account.
A provisional measure, on the other hand, is suitable for protecting a dispute concerning a specific crypto account, wallet or asset. The decision to be sent to a Turkish exchange must clearly specify the platform, the user account, the type of balance and the restrictions to be imposed. Practical delays, technical system discrepancies and time lost in the decision reaching the platform may render the measure ineffective.
A Turkish court order sent to a foreign exchange is not directly binding. The recognition and enforcement process may be slower compared to the speed at which assets are transferred. The MASAK route, however, may only be effective in cases where there is concrete and strong suspicion of a criminal offence; it cannot be used as a guarantee for the recovery of ordinary civil law claims.
The concrete step that needs to be taken today is, first, to determine whether the asset is custodial or non-custodial; to prepare a request for a precautionary measure or attachment that clearly specifies the user’s identity, account and type of asset in relation to the Turkish platform; and, in the case of a foreign platform, to simultaneously assess the company’s legal personality, the applicable interim protection procedures in its country, and, where applicable, the judicial channels for making claims based on concrete suspicion of a criminal offence.