ION Science Limited & Anor v Persons Unknown & Ors

Cryptoassets such as bitcoin are capable of being property at common law, at least where there is a serious issue to be tried. The court may grant proprietary injunctions and worldwide freezing orders against sufficiently identified persons unknown, even where no assets are yet shown to be within the order’s reach. A Bankers Trust disclosure order may support service out against an exchange outside the jurisdiction where the exchange is a necessary or proper party to the anchor claim and the disclosure claim can conveniently be disposed of in the same proceedings. The court must weigh the applicant’s need for information against confidentiality, privacy and compliance burdens. Urgent cryptocurrency fraud claims may also justify alternative service where dissipation can occur immediately.

The claimants sought urgent ex parte relief after alleging that persons connected with Neo Capital induced them to transfer approximately £577,000, converted into bitcoin, for purported cryptocurrency investments and commission payments. The alleged fraudsters were unidentified. The claimants sought proprietary injunctions, a worldwide freezing order and disclosure against the persons unknown, together with Bankers Trust disclosure orders against Binance Holdings Limited and Payment Ventures Inc, believed to be connected with cryptocurrency exchanges. They also sought permission for service out of the jurisdiction and alternative service. The central issues were whether the claims disclosed a serious issue to be tried, whether jurisdiction existed over the defendants and whether the requested interim and disclosure relief was appropriate.

1. The court was satisfied that there was a serious issue to be tried that bitcoin and other cryptoassets are property within the common law definition. The description of the persons unknown was sufficiently certain to identify those included and excluded.

2. Permission to serve out against the persons unknown was justified. There was a serious issue to be tried in deceit, unlawful means conspiracy and equitable proprietary claims; a good arguable case under the relevant CPR Practice Direction 6B gateways; and England was the proper forum. The court accepted, as an arguable case, that English law applied under Article 4.1 of Rome II and that the situs of a cryptoasset might be where its owner was domiciled.

3. A proprietary injunction was appropriate because there was a serious issue to be tried, the balance of convenience favoured protection of the assets, damages were not shown to be an adequate remedy, and it was just and convenient to grant relief.

4. A worldwide freezing order and ancillary disclosure order were also justified. There was a good arguable case and a real risk of dissipation, demonstrated by the alleged use of aliases, false documents and an apparently unregistered entity. The absence of identified assets capable of being caught by the order was not a bar in a persons unknown case.

5. For the exchange respondents, service out of a Bankers Trust claim was arguably available under the necessary or proper party gateway. Applying Massey v Haynes [1888] 21 QBD 330 and CPR 7.3, the disclosure claim could conveniently and justly be determined with the anchor claim. AB Bank Ltd v Abu Dhabi Commercial Bank PJSC [2016] EWHC 2082 was distinguishable because it concerned Norwich Pharmacal relief. The court did not decide whether that case was correctly decided. The exceptional circumstances contemplated in MacKinnon v Donaldson, Lufkin and Jenrette Securities Corporation [1986] Ch 482 included hot pursuit of property, as in this case.

6. The Bankers Trust test required good grounds for believing that the property belonged to the applicants, a real prospect that disclosure would locate or preserve it, an order no wider than necessary, a balance favouring disclosure, and appropriate undertakings concerning use, costs and compensation. Those requirements were met.

7. Alternative service was permitted under CPR 6.15 and CPR 6.27. The urgency of the injunctions, the ability to transfer bitcoin instantly and the proprietary nature of the claim constituted exceptional circumstances.

First instance decision. The judgment records no prior appellate decision.