This decision (from January this year but only recently published) predates Piroozzadeh v Persons Unknown and Others [2023] EWHC 1024 (Ch) (which we have commented on here), in which the
Conversely, in this case, the claimant did not seek an injunction against the exchange, but rather an order seeking the transfer of the cryptocurrency it held, in an overseas account, into the jurisdiction and the court's control. It is significant that in this case, unlike in Piroozzadeh, the claimant already had the benefit of a judgment against the fraudsters, albeit by default. While the court in this case adopted a highly claimant friendly approach, ultimately the effectiveness of such an approach against a cryptocurrency exchange located outside the court's jurisdiction will rely on the exchange's willingness to cooperate.
Background
The claimant had obtained a worldwide freezing injunction against the first three defendants in relation to cryptoassets contained in two accounts maintained by the fourth defendant,
The claimant sought an order transferring the cryptoassets into
In respect of the second account, the claimant's counsel acknowledged that there were difficulties in maintaining a strictly proprietary claim to the funds in that account, but the claimant had obtained judgment in default for his personal causes of action in relation to the losses. The account was plainly controlled by the defendants responsible for the fraud and the claimant would be able to enforce a monetary order if the accounts were maintained in
While the other defendants did not participate in the litigation,
Decision
Governing principles
The court acknowledged that the circumstances in which a court will order funds subject to a worldwide freezing order to be transferred into the jurisdiction are generally limited, as it is assumed defendants will comply with the order. In this instance, while
The court referred to a number of principles identified in Gee on Commercial Injunctions as applicable when considering whether to make an order involving the transfer of assets which are subject to a worldwide freezing order into more direct control by the court.
First, in relation to the claimant having to "...show by clear evidence that the defendant is likely, unless restrained by order, to dispose or deal with the assets so as to deprive the claimant of the fruits of any judgment that may be obtained", the judge noted that this rang true in the context of a pre- rather than post-judgment freezing order. A judgment had been entered in this case and English courts are strongly inclined to enforce judgments entered by the court. Further, the claimant had already obtained a worldwide freezing order, presumably after satisfying this test.
Second, given the judgments entered in this case, the judge did not consider it to be in dispute that there was "....some evidence or inference that the property was acquired by the defendant as the result of alleged wrongdoing". Again, this was more apt to a pre- rather than post-judgment order.
Third, Gee suggests that the order needs to clearly specify what is being transferred, and the court was satisfied in respect of this limb.
Fourth, "...an order for delivery up should generally not be made to anyone other than the claimant's solicitor or a receiver appointed by the
Finally, Gee suggests that the court may order delivery up of cash to be paid into either a blocked account or into court. The judge was satisfied that paying sums into court rather than a blocked account was appropriate, given the objective was to seek to enforce the personal judgments made in favour of the claimant against the sums sought to be transferred. The procedure of payment into court was likely to be more straightforward.
Conversion of the cryptocurrency into fiat currency
The court suggested two possible routes for conversion of the cryptocurrency. The first was by
Potential failure of the CPR 72.10 application
Given that the order involved the transfer of assets which belonged, on the face of it, to the defendants, the judge considered the possibility of an application under CPR 72.10 failing. In such a case, it would be necessary for the funds to be transferred back to the defendants. The costs of converting the cryptocurrency to fiat currency and converting back to crypto, as well as "other additional and incidental costs", would need to be met. The court also required the claimant to provide a cross-undertaking in damages if any part of the court's order came to be set aside.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Mr
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