Blockchain Optimization SA & Anor v LFE Market Ltd & Ors

In applications concerning a freezing injunction and fraud pleadings, the court held that material non-disclosure normally starts with immediate discharge, but the court retains a discretion to continue the injunction where the interests of justice require it. The assessment considers the importance of the undisclosed fact, culpability, the need to encourage full and frank disclosure, and possible injustice to the claimant.

A good arguable case requires more than a barely arguable claim and a plausible evidential basis. Fraud must be specifically and sufficiently particularised. Primary facts must make dishonesty more likely than innocence or negligence, but the pleading must be assessed as a whole. Individually equivocal facts may cumulatively support an inference of fraud.

The claimants sought relief arising from investments and services provided to a cryptocurrency project. They alleged fraudulent misrepresentations, breach of contract and unlawful means conspiracy against the defendants.

The applications concerned discharge of a worldwide freezing injunction for material non-disclosure, continuation of that injunction, strike out of parts of the fraud and conspiracy claims, and summary judgment. The court also considered proposed amendments to the Particulars of Claim. The central issues were whether the non-disclosure justified discharge, whether there was a good arguable case, and whether the fraud allegations were adequately particularised.

1. Freezing injunction. The claimants’ solicitor should have disclosed that he and his firm had previously acted for the project, including substantial work relating to the proposed platform and unpaid fees. The materiality of that fact was for the court, not the solicitor, to decide. The starting point for substantial non-disclosure was immediate discharge.
2. The court nevertheless retained a discretion to continue the injunction. The non-disclosure was innocent rather than deliberate. The court already knew that another law firm had carried out substantial work for the project, and it was difficult to see how disclosure of the solicitor’s retainer would have altered the injunction decision. The injunction was therefore continued, with the breach capable of being marked by costs or another consequential order.
3. Good arguable case. The applicable threshold was more than a claim barely capable of serious argument, but did not require a better than 50 per cent prospect of success. The claim required a plausible evidential basis. That threshold was met.
4. Fraud pleadings. Fraud or dishonesty had to be specifically alleged and sufficiently particularised. On the primary facts pleaded, dishonesty had to be more likely than innocence or negligence. The court considered the pleading as a whole. The absence of commercial success did not itself establish fraudulent intention, but cumulative allegations of factually untrue representations could support an inference of dishonesty even where individual allegations might also be consistent with innocence.
5. Most challenged representations were adequately pleaded in context. The allegation that funds raised by token sales had not been used for represented purposes lacked sufficient factual support and could not stand in its present form, although an opportunity to amend was given. Reliance was adequately pleaded. Summary judgment was inappropriate because of factual disputes, and the conspiracy claim was not struck out.
6. The injunction was continued. The strike-out and summary-judgment applications were dismissed except to the extent relating to the unsupported allegation identified above. The parties were directed to seek agreement on amendments and consequential matters.