Using a non-fungible token (NFT) to serve an order on persons unknown

For the first time ever outside of the United States, a court has allowed service by way of an Non-Fungible Token'>NFT on the blockchain against a defendant who was persons unknown.

The case of D’Aloia V Persons Unknown, Binance Holdings Limited and others is significant because the order being served by transferring it as a NFT on the blockchain avoided some of the problems associated with service in crypto matters.

The case was brought by Mr D’Aloia, an Italian engineer and founder of online gambling joint stock company Microgame. He had cryptocurrency misappropriated by persons unknown, who operated a fraudulent clone online brokerage encouraging would-be investors to deposit cryptocurrency into two wallets. A Part 8 claim was issued on 24 June against five cryptocurrency exchanges – Binance, Poloniex, gate.io, OKX (formerly OKEx) and Bitkub.

Civil Procedure Rule 6.3 allows for service in person, via first-class post, by leaving it at a certain address or by using a fax or other means of electronic communication. But service by electronic means is only permitted where the defendant has indicated a willingness to be served in this way. In cases where the defendant is persons unknown, it is extremely unlikely such a willingness will be obtained by a claimant.

Under CPR 6.15, an application for alternative service can be made. But there must be good reason to grant permission for such service. The service that has been allowed in the D’Aloia case indicates a shift in the court’s position regarding service by alternative means and a recognition of the nature of cryptoasset claims against persons unknown.

As crypto matters will almost always involve an international element because cryptocurrency exchanges are rarely registered within England and Wales, electronic service is more efficient, and often necessary. And while service via email can provide no guarantee of receipt, the approach taken in D’Aloia enables there to be confirmation that the NFT has been received and viewed, thus confirming service of the order.

Another benefit of this approach is that it removes the need to wait for the cryptocurrency exchange to provide extensive contact details of the defendant. Once the wallet has been identified, it provides the claimant with a direct mode of contact with the persons unknown and, in turn, makes the exercise of service much more streamlined.

This case was also notable because the court determined that the exchanges hold cryptocurrencies as constructive trustees. This means that if they fail to robustly ringfence the misappropriated assets, they may be held in breach of their duties under the trust. This could have the effect of forcing cooperation from an exchange that may have been reluctant to cooperate otherwise .

This is a case that once again shows that the courts of England and Wales are willing to adopt innovative and creative solutions to deal with the new set of difficulties that have developed from crypto-related claims. The courts do not seem content with relying on principles of yesteryear. They are keen to tackle such difficulties head on and provide support to those who have been subject to wrongdoing.