Syed Rahman considers the issues in the case of Bitcoin worth hundreds of millions being discarded on a tip.
A court has rejected a man’s legal action to gain access to a landfill site to search for a hard drive containing Bitcoin worth an estimated £598 million.
James Howells was seeking to compel Newport City Council to either let him onto the site to look for the hard drive or pay him £495 million in compensation. He had said his former partner had mistakenly dumped the hard drive, which contained the Bitcoin wallet, in 2013.
But Judge Keyser KC agreed with the council’s request to strike out the legal action; saying it was time barred and that there were no reasonable grounds for bringing the claim and no realistic prospect of it succeeding at a full trial.
Mr Howells said he was very upset that his case was struck out at the earliest hearing, which felt like “a kick in the teeth’’ as he had been trying to engage with the council “in every way which is humanly possible for the past 12 years".
He added: “This ruling has taken everything from me and left me with nothing.’’
Forgot
The court had heard that Mr Howells had been an early supporter of Bitcoin and had successfully mined the cryptocurrency in 2009 for almost nothing. He then forgot about it.
But when the value of the Bitcoin in his discarded wallet rose, he organised a team of experts to try and trace and recover the hard drive. He repeatedly asked the council for permission to access the landfill site where he believes the hard drive is located and even offered it a share of the Bitcoin if it was recovered.
The landfill site holds more than 1.4 million tonnes of waste. But Mr Howells said he had narrowed the hard drive's location to an area of 100,000 tonnes.
James Goudie KC, representing the council, told the court that existing laws meant the hard drive had become council property when it entered the landfill site. He added that the council’s environmental permits would prevent the site being excavated to search for it.
While the judge found in favour of the council, Mr Howells’ action has been noteworthy. The judge ruled that the “tangible” hard drive was now owned by the council, just like any other item handed over to it for waste disposal. But the judge also ruled that Mr Howells was the owner of the “intangible” Bitcoin stored on the hard drive.
This is an important reminder of the issues surrounding the accessibility and storage of cryptocurrencies. And it gives Mr Howells, in theory at least, proof of Bitcoin ownership and the possibility of gaining from this.
Tokenisation
Mr Howells could at least benefit from the value of his Bitcoin through the process known as tokenisation. This is where a chosen token mimics the value of the Bitcoin which serves as an underlying asset.
When an investor invests in a tokenised asset, they buy a small percentage of the ownership of the asset. The owner of the tokenised asset benefits from the liquidity of their asset and a reduction in management cost as the tokenisation process requires less “paperwork” than a traditional transfer. From the investor’s point of view, the benefit lies in the increased access to a limited asset class. The investment process is also very transparent, and investors also benefit from the ease of buying and selling the token at a rapid pace.
Tokenisation allows the streamlining of transactions as well as the strengthening of the safety of transactions, which helps make cryptocurrency a more desirable investment opportunity. Mr Howells’ best and most realistic option is to tokenise the assets now that the ownership situation has been clarified. Pursuing legal action any further is only likely to lead to more frustration for him.
Time Barred
It should be noted that the judge held that Mr Howells claim was time-barred. This means that it was brought outside the limitation period, which in this instance is six years. When a claim is time-barred, the defendant can raise this as a complete defence; regardless of the merits of the case that has been brought.
The limitation period can only be extended in very limited circumstances. In Mr Howells’ case he would, for example, have to prove that the defendant had deliberately concealed relevant facts or that fraud occurred. None of these are likely, and the argument of concealment had already been rejected by the judge.
