Vorotyntseva v MONEY-4 Ltd (t/a nebeus.com) & Ors

On an urgent ex parte application, a freezing order may be granted where the evidence establishes a real risk of dissipation. The court must make appropriate allowances for the respondent’s limited opportunity to respond, but serious unexplained or apparently altered evidence may justify the order. Individuals closely involved in the relevant company’s management and conduct may properly be included. Cryptocurrency is capable of being property and may be protected by a proprietary injunction. Such an injunction should prohibit disposal of the identified cryptocurrency itself, rather than its sterling equivalent. A cross-undertaking in damages may require fortification by payment into court or an escrow account.

The claimant transferred substantial quantities of Bitcoin and Ether to the first respondent, a cryptocurrency trading company, to test its platform. She became concerned that the assets had been dissipated and applied urgently, without notice, for freezing and proprietary relief against the company and its two directors.

The respondents offered an undertaking to preserve the cryptocurrency and produced electronic material said to demonstrate that it remained in their possession or control. The claimant submitted that one document did not establish that proposition and that another appeared to have been altered. The central issues were whether there was a real risk of dissipation, whether the directors should be included, whether cryptocurrency could be protected as property, how the proprietary relief should be framed, and whether the claimant’s cross-undertaking should be fortified.

1. Application granted. The evidence established a real risk of dissipation. The court made all allowances reasonably available for the respondents’ inability to prepare fully because of the very short notice, but the documents nevertheless raised serious questions. The apparent alteration of one document and insufficiency of another supported the claimant’s concern.
2. The freezing order should extend beyond the company to the two directors. They were closely involved in the company’s operation and appeared to have been involved in producing the documents. Their inclusion was therefore appropriate on the evidence.
3. There was no suggestion that the cryptocurrency transferred to the respondents did not belong to the claimant. Nor was there any suggestion that cryptocurrency could not constitute property or that a person within the jurisdiction could not be restrained from dealing with or disposing of it. A proprietary injunction could therefore be granted in principle.
4. The proprietary injunction should prohibit disposal of the relevant quantities of Bitcoin and Ether. It should not alternatively prohibit disposal of their combined sterling value at the specified valuation date, since that would be inconsistent with the proprietary character of the injunction. That issue was distinct from the drafting of a non-proprietary freezing order.
5. The claimant accepted that her cross-undertaking in damages should be fortified because she was a Russian national, not domiciled in the jurisdiction, and had no assets there. Fortification should be provided by payment into court or, if preferred, by placing an appropriate sum in an escrow account held by her solicitors.
6. The order was expressly preliminary and subject to a return hearing on short notice.