Syed Rahman explains a cryptoasset recovery success that may help others.
The High Court’s default judgment last month relating to the delivery up of stolen digital assets traced to Binance is notable in a number of ways.
The judgement, in Sutton v Persons Unknown, is certainly an important victory for a victim of cryptocurrency fraud. But it also indicates the strategies that can be used by those seeking to recover what is theirs and the courts’ inclination to use them – and, to a degree, what can be achieved when crypto exchanges are cooperative.
In December 2022, Ms Sutton was targeted on the online game Scrabble Go by a fraudster using the name Michael Moore. He persuaded her to invest in a fraudulent cryptocurrency platform called Cloudstaff. She opened an account with a cryptocurrency exchange, converted her money to digital assets and transferred them to the fraudulent platform.
Freeze
Ms Sutton paid out almost £80,000 in total after the fraudster said she needed to invest more to avoid losing her initial payments. After realising she had been defrauded, she contacted the police early in 2023. The police traced the stolen funds to Binance and the exchange applied a voluntary freeze on the relevant account.
The suspected fraudster and owner of the account was a Nigerian national who refused to have any involvement with the police or Binance. His location in Nigeria made it difficult for the police to take any further action and pursuing civil action to recover £80,000 may not have been cost-effective. But the situation led to an innovative and risky course of litigation being conducted.
In April 2024, proceedings were issued in the High Court against persons unknown, pleading typical causes of action in deceit and fraudulent misrepresentation, a range off remedies and the usual orders for service by alternative means. The defendant failed to acknowledge service and the claimant then sought a default judgment and, crucially, an order for the delivery up of the stolen assets, pursuant to CPR 12.12(12).
In June 2024, the High Court granted the default judgment and order for delivery up, which was served on the fraudster and Binance. Binance complied with the order and returned Ms Sutton’s stolen life savings.
Relevance
The outcome is one that may be of relevance to many who lose their funds to crypto fraudsters. If the amount lost is not massive, it is often not worth the cost of bringing civil proceedings to try and recover the losses. Yet with the ongoing increase in crypto-related frauds – and the authorities often being reluctant to take up a case – there is a need for those who have lost all-important but not huge amounts to be able to pursue the fraudsters.
The approach in this case may be the approach that is needed. There are risks and costs associated with it. But it may prove the way forward for many who find themselves in a situation similar to Ms Sutton’s.
A striking difference in the approach adopted here is not only the seemingly voluntary cooperation of Binance, but also the extent to which the police engaged. Whilst new powers have been afforded to the police recently under the Economic Crime and Corporate Transparency Act 2023, this appears to be a case whereby the police acted of their own volition, for the most part.
It again highlights the impact that law enforcement can have when it comes to persuading innocent third parties to cooperate in order to combat crypto-related fraud. Of course, this approach will not be effective in every case. But it can be seen as a glimmer of hope for those who have lost significant parts = if not all - of their life savings and who simply do not have the finances to pursue civil remedies in the High Court.
