This koinly blog gives cryptic info on when losses can be treated as tax deductible

This blog on HMRC tax states:

Being a victim of fraud

If your cryptocurrency is stolen/hacked, the HMRC does not consider this a disposal. That’s because the individual still owns the assets and has a right to recover them. As a result, no loss can be claimed. However, in case someone pays for crypto assets but doesn’t end up receiving any, they can claim a capital loss.

HMRC’s treatment for claiming losses against your lost and stolen cryptocurrency is very strict, however this paragraph seems to imply that cryptocurrency can be claimed as a tax deductible loss if it was paid for but never received.

Can anyone provide more information:

  • How exactly would this work?
  • Where is HMRC’s explicit guidance on this?
  • Is there any test case law covering this?

I bought some cryptocurrency on an exchange with bitcoin, but the funds were frozen and then the exchange disappeared. I am keen to claim the losses at the price I paid at the time and not for the original price of the bitcoin I bought them with.