Issue link: https://digital.shearman.com/i/1479657
U.K. and U.S. Case Studies Cryptoassets & Insolvency 39 The Claimant had been induced into paying £577,000 in cryptocurrency for what it believed to be a legitimate investment in Initial Coin Offerings. However, the Claimant received no profits from the investment, nor did it receive back any of the amounts transferred. Significant portions of the funds were traced to wallets held with the Binance and Kraken exchanges, based in the Cayman islands and U.S., respectively. The Court granted a freezing injunction in respect of Persons Unknown on the basis that there was a real risk of dissipation. The Court held that the absence of evidence that assets would be caught by the freezing injunction did not prevent an order being granted (and was a common feature in persons unknown cases). When determining whether the Court had jurisdiction to serve parties outside the jurisdiction, the Court reflected the analysis by Professor Andrew Dickinson in his book "Cryptocurrencies in Public and Private Law" and took the interim view that the lex situs for cryptoassets is the place where the person or entity that owns the asset is domiciled. Ion Science Ltd v. Persons Unknown (2021) 01 The Claimant insurer sought a proprietary injunction over Bitcoins, which, following a ransomware attack, had been traced to a wallet controlled by the exchange Bitfinex, a BVI based cryptocurrency exchange. The Claimants initially sought Norwich Pharmacal* and/or Bankers Trust** relief against Bitfinex, to identify the owner of the wallet. However, it was unclear whether the Court had jurisdiction to grant such relief in respect of entities outside the jurisdiction (a question not definitively determined in English law), and the Claimant asked the Court to adjourn its application and proceeded only with its application for a proprietary injunction. The Court, observing that cryptocurrencies were neither a chose in action nor a chose in possession, held that this did not mean such assets could not be treated as property, as they still satisfied the requisite criteria of property, namely: (i) definable, (ii) identifiable by third parties, (iii) capable by their nature of assumption by third parties, and (iv) having some degree of permanence (National Provincial Bank v. Ainsworth). The Court was satisfied, at least to the extent necessary for the purposes of an interim injunction application, that Bitcoin constituted property capable of being the subject of a proprietary injunction. AA v. Persons Unknown (2019) 02 *A Norwich Pharmacal order is a disclosure order available in England and Wales which allows information to be obtained from third parties who have become "mixed up" in wrongdoing, helping victims to investigate, pursue those ultimately responsible and recover their losses. ** Bankers Trust orders are usually made against banks or other entities holding misappropriated or stolen funds or through whom such funds have passed. They require financial institutions to provide details ordinarily protected by duties of confidentiality concerning third-party bank accounts and are an effective way of tracing money. The judgement reflects an analysis of Professor Andrew Dickinson, in his book, Cryptocurrencies in Public and Private Law, that the lex situs of a cryptoasset is the place where the relevant participant in the Bitcoin system (in this case the person or company who owned the Bitcoin) is domiciled. The facts of the case were judged to arise out of acts committed or events occurring within the jurisdiction (i.e., the fraud) and related to assets within the jurisdiction (i.e., the Bitcoin).