MR DOLLAR BILL LTD V PERSONS UNKNOWN AND OTHERS [2021] EWHC 2718 (Ch)

A claimant who fell victim to an alleged cryptocurrency fraud has been granted a Norwich Pharmacal order and a Bankers Trust disclosure order against two Bitcoin exchanges to assist in tracing the missing Bitcoin. The claimant was also granted a proprietary injunction against the unknown fraudsters, to prevent them dealing in the original Bitcoin which is capable of being traced, as well as permission to serve proceedings out of the jurisdiction and by alternative means.

FACTUAL BACKGROUND

The claimant (MB) invested £150,000 in a cryptocurrency trading platform called "BitTrust". The account appeared to show substantial profits, at which point MB tried to withdraw money from the account, which was refused. Tracing reports have identified that the Bitcoin had been transferred between multiple wallets, some of which are now empty, the contents having been withdrawn as fiat currency and dissipated. However, a wallet operated by Huobi contained Bitcoin which can be traced back to the original Bitcoin purchased by MB.

MB sought interim relief by way of (i) a proprietary injunction preventing the defendants from further dissipating the remaining original Bitcoin, (ii) a Bankers Trust disclosure order and a Norwich Pharmacal order to compel Huobi and Binance to disclose payment-related information regarding the account holders of the end wallet to assist MB to identify them, and potentially to recover the Bitcoin; and (iii) permission to serve proceedings out of the jurisdiction and by alternative means. 

KEY LEGAL POINTS

• Proprietary injunction: Trower J held that this was not a case where the claimant only has personal rights against the fraudsters, as would be the case if this was an "equivalent of a normal banking relationship". There was evidence that the Bitcoin in the end wallet was the original property of MB and that they had been a victim of fraud. Bitcoin was a form of property capable of forming the basis of a proprietary injunction. Further, damages would not be an adequate remedy given the likely difficulties with recovery and the unknown identities of the defendants.
• Bankers Trust and Norwich Pharmacal orders: MB was also granted a Bankers Trust order and a Norwich Pharmacal order against two cryptocurrency exchanges: Huobi and Binance to assist in further tracing the Bitcoin. 
• Permission to serve out of the jurisdiction and by alternative means: The email addresses of the BitTrust representatives were the only means of contacting them given that their true identities were unknown and no physical addresses could be found. Huobi and Binance Holdings Limited were based outside of the jurisdiction.
  
  Trower J granted permission for service out the jurisdiction and by alternative means as:
  • he was satisfied that the "damage sustained within the jurisdiction is the loss of the original investment that was made within the jurisdiction by way of the Bitcoin invested by [MB]" and therefore service out of the jurisdiction is appropriate; and
  • there was good reason to use alternative means as the application was "inherently urgent", the "very nature of Bitcoin is that they can moved at the click of a mouse" and that it was important that the proprietary injunction be put into place as soon as possible as the remaining Bitcoin remains the property of MB.

COMMENTARY

This decision shows the courts' inclination to allow service out the jurisdiction and by alternative means for Bankers Trust orders and proprietary injunctions in cases of cryptocurrency fraud where there is an extreme urgency in tracing assets which can be easily dissipated. However, the efficacy of any such orders remains to be seen.

Although not considered in this judgment, the decision to grant Norwich Pharmacal relief against  respondents based outside the jurisdiction is surprising, as it is not consistent with the judgments of HHJ Pelling QC in Fetch.ai Limited v Persons Unknown [2021] EWHC 2254 (Comm) and Mr Justice Butcher in Ion Science v Persons Unknown (unreported), 21 December 2020 (Commercial Court), both following the decision in AB Bank Limited, Off-shore Banking Unit v Abu Dhabi Commercial Bank PJSC [2016] EWHC 2082 (Comm). These decisions held that Norwich Pharmacal relief could not be obtained against a respondent based outside the jurisdiction. But they were not discussed or apparently cited in this case.