In what is believed to be the first decision of its kind relating to Bitcoin, the High Court recently granted and maintained an asset preservation order over identifiable Bitcoin in a UK wallet.
Bitcoin is a form of “cryptocurrency”, that is, an electronic asset treated by its users as akin to money for some purposes. Bitcoin is not issued or backed by any government, as are traditional “fiat” currencies. All electronic transactions with Bitcoin are recorded in the Bitcoin “blockchain”, that is, a distributed electronic ledger of all transactions with Bitcoin or fractions of them.
In the claim in question, the Claimant says they were fraudulently induced by an email “spear-phishing” attack to send 100 Bitcoin to the First Defendant, who then sent 80 of the Bitcoin to the Second Defendant. The Second Defendant held the 80 Bitcoin in a named account in the wallet of the Third and Fourth Defendants, who are a UK-based Bitcoin transfer and exchange platform (the “Bitcoin Exchange”). It was possible to identify the 80 Bitcoin by analysis of the blockchain.
Shortly after the fraudulently induced transfer, the Claimant sought an asset preservation order in the Commercial Court in relation to the 80 Bitcoin. The Claimant argued that Bitcoin are personal property, relying in part on the decision of Simon Thorley IJ of the Singapore International Commercial Court in B2C2 Ltd v Quoine Pte Ltd  SGHC(I) 03, which had held that Bitcoin were personal property that can be the subject of a trust. The Claimant also argued (amongst other things) that the initial transfer of the 100 Bitcoin did not create any title to them in the First Defendant, so the First Defendant could not confer any title on the Second Defendant (leaving aside any possibility of good faith purchase for value, of which there was no evidence at that stage), and the Claimant retained good title as against all Defendants.
At a hearing in mid-July 2019, Mrs Justice Moulder accepted the Claimant's argument that there was a serious issue to be tried as to whether in those circumstances the Claimant could claim and retain title to the Bitcoin as personal property. She made an asset preservation order that froze the 80 Bitcoin, preventing any dealings with them or any instructions being given to the Bitcoin Exchange to transact with them. Mrs Justice Moulder also made Bankers Trust orders requiring the Bitcoin Exchange to disclose information relating to the Second Defendant.
By the time of the return date of the asset preservation order, the Claimant had ascertained that the Second Defendant appeared to be resident in Nigeria. Information the Second Defendant had provided suggested that he had not given any consideration for the 80 Bitcoin. The Second Defendant was not actively participating in the proceedings. Mr Justice Jacobs held that the asset preservation order should in the circumstances be maintained. He also gave permission to the Claimant to serve the claim on the Second Defendant out of the jurisdiction.
David Heaton appeared for the Claimant, instructed by Stewarts.