Author: Syedur Rahman
28 March 2022
2 min read
The High Court determined in Tulip Trading Ltd (“TTL”) v Bitcoin Association for BSV that TTL had not established a serious issue to be tried on the merits of its claim. Further it held that as a result, the order from the lower court order granting permission to serve a claim form out of the jurisdiction and service of the claim form were to be set aside. The High Court also assessed the lex situs (location) of crypto assets when a corporate entity is concerned.
The claimant, a Seychelles company, alleged that it had suffered a hack causing a significant loss of digital assets. As a result of the hack, “private keys” and information that would allow access to the keys were removed from the computer systems of Dr Wright (who asserts that he is Satoshi Nakamoto who developed bitcoin). The private keys would allow dealings in the crypto assets.
It claimed $4.5bn from 16 developers alleging that they owed fiduciary and common law duties under English Law. Further it was argued that the developers should be required to write and apply a “patch” to the blockchain network in order that it can be transferred to a new Bitcoin address for the benefit of the claimant.
The Defendants in this action are the core developers and/or otherwise control the software in respect of four relevant digital asset networks, namely:
None of the Defendants are in the jurisdiction.
TTL claimed that the Defendants owe TTL fiduciary and/or tortious duties which effectively means that they should assist TTL in regaining control and use of its assets. Specifically, TTL requested a declaration that:
In relation to point 2 above, TTL indicated that it would not be technically difficult for the Defendant to write and implement a software “patch” enabling TTL to regain control of the assets. The effect of the “patch” to the blockchain network would be of transferring it to a new Bitcoin address that TTL claimed had been lost due to the hack.
There was also a question as to the location of the assets and TTL. TTL claimed that the assets were in the jurisdiction, namely England. Whereas the Defendants argued that the assets were in the jurisdiction that the Company was domiciled in, namely the Seychelles.
The Court determined that there was no good or arguable case that open source Bitcoin developers (the defendants) whose code is widely adopted and used, does not owe fiduciary duties or a common law duty of care to those who use that code to trade or store their crypto assets.
Further, the Court also considered that there was sufficient evidence to amount to a good arguable case that (a) TTL is resident in the jurisdiction; and (b) that the property is located here. The Court determined the lex situs (location) of the bitcoin held by corporate entities. Mrs Justice Falk stated the “a company is resident where its central management and control is located, that being where its real business is carried on”.
Please see link to the full judgment https://www.bailii.org/ew/cases/EWHC/Ch/2022/667.html
Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.