diff --git a/modules/abstract-utxo/src/recovery/crossChainRecovery.ts b/modules/abstract-utxo/src/recovery/crossChainRecovery.ts
index 95485453f7..4455b1b297 100644
--- a/modules/abstract-utxo/src/recovery/crossChainRecovery.ts
+++ b/modules/abstract-utxo/src/recovery/crossChainRecovery.ts
@@ -108,7 +108,10 @@ export async function isWalletAddress(wallet: IWallet | WalletV1, address: strin
 
     return addressData !== undefined;
   } catch (e) {
-    return false;
+    if (e.status === 404) {
+      return false;
+    }
+    throw e;
   }
 }
 
diff --git a/modules/abstract-utxo/test/unit/recovery/crossChainRecovery.ts b/modules/abstract-utxo/test/unit/recovery/crossChainRecovery.ts
index ed397b1fac..9da3e0e230 100644
--- a/modules/abstract-utxo/test/unit/recovery/crossChainRecovery.ts
+++ b/modules/abstract-utxo/test/unit/recovery/crossChainRecovery.ts
@@ -11,6 +11,7 @@ import {
   CrossChainRecoverySigned,
   CrossChainRecoveryUnsigned,
   getWallet,
+  isWalletAddress,
   supportedCrossChainRecoveries,
   generateAddress,
   convertLtcAddressToLegacyFormat,
@@ -297,6 +298,70 @@ describe(`Cross-Chain Recovery getWallet`, async function () {
   });
 });
 
+describe('isWalletAddress', function () {
+  const coin = getUtxoCoin('btc');
+  const walletId = '5abacebe28d72fbd07e0b8cbba0ff39e';
+  const testAddress = '3GBygsGPvTdfKMbq4AKZZRu1sPMWPEsBfd';
+
+  function nockAddress(statusCode: number, body?: unknown): nock.Scope {
+    return nockBitGo()
+      .get(`/api/v2/${coin.getChain()}/wallet/${walletId}/address/${testAddress}`)
+      .reply(statusCode, body ?? {});
+  }
+
+  before('setup wallet nock', function () {
+    nockBitGo()
+      .get(`/api/v2/${coin.getChain()}/wallet/${walletId}`)
+      .reply(200, {
+        id: walletId,
+        coin: coin.getChain(),
+        label: 'isWalletAddress test',
+        keys: keychainsBase58.map((k) => getSeed(k.pub).toString('hex')),
+      })
+      .persist();
+    keychainsBase58.forEach((k) => {
+      nockBitGo()
+        .get(`/api/v2/${coin.getChain()}/key/${getSeed(k.pub).toString('hex')}`)
+        .reply(200, k)
+        .persist();
+    });
+  });
+
+  after(function () {
+    nock.cleanAll();
+  });
+
+  it('returns true when address belongs to wallet', async function () {
+    nockAddress(200, { address: testAddress, chain: 0, index: 0, coin: coin.getChain(), wallet: walletId });
+    const wallet = await getWallet(defaultBitGo, coin, walletId);
+    assert.strictEqual(await isWalletAddress(wallet, testAddress), true);
+  });
+
+  it('returns false for 404 (address not found in wallet)', async function () {
+    nockAddress(404);
+    const wallet = await getWallet(defaultBitGo, coin, walletId);
+    assert.strictEqual(await isWalletAddress(wallet, testAddress), false);
+  });
+
+  it('re-throws on 503 (server error during recovery silently excludes outputs)', async function () {
+    nockAddress(503);
+    const wallet = await getWallet(defaultBitGo, coin, walletId);
+    await assert.rejects(() => isWalletAddress(wallet, testAddress), { status: 503 });
+  });
+
+  it('re-throws on 500', async function () {
+    nockAddress(500);
+    const wallet = await getWallet(defaultBitGo, coin, walletId);
+    await assert.rejects(() => isWalletAddress(wallet, testAddress), { status: 500 });
+  });
+
+  it('re-throws on 401 (auth failure)', async function () {
+    nockAddress(401);
+    const wallet = await getWallet(defaultBitGo, coin, walletId);
+    await assert.rejects(() => isWalletAddress(wallet, testAddress), { status: 401 });
+  });
+});
+
 describe('convertLtcAddressToLegacyFormat', function () {
   const scriptPubKey = Buffer.from('a9149f0bf51fab4d33ab21977e1b89f776f64161ef4287', 'hex');
   it('should convert M... P2SH address to 3... legacy format', function () {