In the English High Court case of Mr Dollar Bill Limited v Persons Unknown and two others [2021] EWHC 2718 (Ch), the Court granted a proprietary injunction against approximately 3.7 bitcoins (approximately GBP 105,000) and certain discovery orders against the two cryptocurrency exchanges, Binance and Huobi.
Brief Facts
Between May 2021 and June 2021, the claimant sent 3.759 bitcoins (equivalent to GBP 105,000 at the time) to two wallet addresses controlled by BitTrust, a seeming cryptocurrency trading platform.
Subsequently, BitTrust’s website trading platform appeared to show exceptionally profitable trading activity on the account. The amounts seemingly reached in excess of GBP 1 million in fiat currency value. The evidence indicated that this trading activity was probably a scam.
The claimant tried to withdraw money from the account, and BitTrust instead replied that the claimant needed to invest more for various reasons.
Subsequently, the claimant’s bitcoins moved across several intermediary accounts. The claimant could trace these movements as it had commissioned tracing reports. The claimant identified that there is another wallet held in the name of Huobi, which holds over 3 bitcoins.
The claimant sought for:
- A proprietary injunction to restrain the further dissipation of the bitcoins. As there is no identified person or persons behind the BitTrust account, the 1st Defendant was named as “Persons Unknown”.
- Certain Norwich Pharmacal and Bankers Trust relief to assist in the claimant’s tracing exercise to determine what had happened to the claimant’s bitcoin.
Decision
The Court noted that the claimant was seeking proprietary orders as there is a good arguable case that the bitcoins transferred to the BitTrust account remains the claimant’s property. This is not a case where the claimant only has personal rights against those behind the BitTrust website account, like in a normal banking relationship.
Grant of the proprietary injunction restraining the further dissipation of the bitcoins
Serious issue to be tried: There is a serious issue to be tried justifying the proprietary injunction. The claimant appeared to be a victim of a Bitcoin fraud. The Court was satisfied that Bitcoin is a form of property in respect of which a proprietary injunction will, in principle, lie.
Adequacy of damages: Damages would not be an adequate remedy if the injunction was not allowed. One of the key reasons is that there is a good arguable case that the claimant, being a victim of fraud, would have a low prospect of recovery via a personal remedy for damages.
Balance of convenience: Balance of convenience was in favour of the grant of the proprietary injunction.
Discovery Orders via Norwich Pharmacal and Bankers Trust Relief against the Two Cryptocurrency Exchanges
The Court granted the Norwich Pharmacal and Bankers Trust relief against the two cryptocurrency exchanges, Binance and Huobi. The entities behind the two exchanges are based and trading outside of jurisdiction. The Court allowed permission to serve the court papers out of jurisdiction against the two exchanges.
Comments
This case demonstrates how the law has evolved to now accept the persons unknown jurisdiction and that cryptocurrency can indeed be treated as property for the purposes of the grant of a proprietary injunction.
Cryptocurrency exchanges will often be a significant intermediary when an alleged victim of cryptocurrency fraud carries out a tracing exercise and requires legal relief for tracing. Victims will need urgent and quick injunctive relief to prevent the exchanges from allowing further movement of the cryptocurrency subject to the fraud litigation.