Author: Dr. Angelika Hellweger
10 September 2022
2 min read
There is little doubt that cryptocurrency-related fraud has been on the increase in recent years. Now, it seems, those who are left out of pocket by it could be set to receive some much-needed assistance. A new lawful process is set to help gain access to details that can help reveal the identity of wrong-doers.
While many who have lost assets to crypto fraud have had to decide whether to bring civil claims to recover what is theirs, this route can prove far from straightforward in England and Wales. The very nature of crypto can make it difficult to identify and locate those who planned and conducted the fraud. It can also be a huge challenge to find the location (or locations) that stolen assets have been moved to and those people who would hold information that would enable those assets to be recovered. In short, the task of seeking freezing orders against fraudsters who look to operate anonymously and without being traced is a daunting one.
From a technical point of view, there has, until now, been no formal procedural gateway that enables a Norwich Pharmacal order - where an applicant seeks an order to require a third-party exchange to disclose information as to the identity of the wrongdoer - to be served outside of the UK. And a bankers trust order – which is usually sought against banks holding misappropriated funds - can only be served outside England and Wales if the person can make an arguable proprietary claim against those accused of the fraud.
For all these reasons, cross-border crypto fraud cases can feel like a very steep uphill battle for those looking to regain their assets. Yet the circumstances in which the English courts can grant permission to serve civil claims out of the jurisdiction will be expanded from 1 October 2022. A new gateway - Practice Direction 6B of the Civil Procedure Rules 1998 - for serving Norwich Pharmacal orders and bankers trust orders out of the jurisdiction will be available where the main proceedings have been, or will be, brought in England and Wales.
In its simplest terms, this will enable fraud victims to serve a claim for information about an individual suspected of crypto fraud and / or about what has happened to the assets that were taken in the fraud. In practical terms, this will substantially reduce the cost of at least the information gathering stage of the process, as there will not be the need to commence proceedings against persons unknown under Part 7 of the Civil Procedure Rules. Taking a broader view, this is a clear example of how English law is developing creative solutions to the complex and evolving nature of crypto fraud. The change can be seen as being in line with the UK’s aim of becoming a global cryptoasset technology hub.
The area of crypto fraud has never stood still. There is little likelihood that it will in the future. The introduction of the gateway is a response to this - and a welcome improvement in the law for those who have lost assets to crypto fraud. But many more steps are still needed, including a bolstering of the resources available to the enforcement bodies who have the task of tackling crypto fraud.
Angelika is a specialist in international, high-level economic crime investigations and large-scale commercial disputes. She has widely-recognised expertise in representing corporates and conglomerates in Europe, the Middle East, Africa and United States.