D’ALOIA v PERSON UNKNOWN & Ors

For interim relief concerning misappropriated cryptocurrency, the court may treat the situs of the asset as the place where its owner is domiciled, at least where there is a good arguable case. English jurisdiction may therefore be established where the claimant, the fraud and the asset were connected with England. A freezing injunction is appropriate where damages would be worthless because the asset may be dissipated, subject to the balance of convenience and a cross-undertaking in damages.

Bankers Trust disclosure may be granted where there are good grounds to conclude that the cryptocurrency belongs to the applicant, the information may preserve or trace it, the order is proportionate, and the balance favours disclosure despite confidentiality obligations. Service out and alternative service, including by non-fungible token, may be authorised where good reason is shown.

The claimant sought interim injunctive relief, permission to serve out of the jurisdiction, disclosure and ancillary orders after allegedly being induced to transfer approximately 2.1 million USDT and 230,000 USDC to persons operating a fraudulent investment website.

The first defendant comprised persons unknown behind the website. The second to seventh defendants were companies said to control or operate cryptocurrency exchanges into which the assets had been traced. The court considered whether there were serious issues to be tried, whether service out was justified, whether freezing and constructive-trust relief should be granted, whether Bankers Trust disclosure was appropriate, and whether service could be effected by email and NFT.

1. Serious issues and governing law. There was a serious issue to be tried in deceit, fraudulent misrepresentation, unlawful means conspiracy, unjust enrichment and constructive trust. At the good arguable case standard, the situs of the cryptocurrency was where its owner was domiciled. The claimant was domiciled in England, so the assets were treated as English assets and English law was likely to govern the claim under Article 4.1 of the Rome II Convention.
2. Service out. The court applied the three-stage inquiry: a serious issue to be tried; an applicable gateway under Practice Direction 6B; and England being the proper forum. Gateway 9 applied to the claim against the persons unknown because the damage was sustained in England. Gateway 15 and, arguably, gateway 11 were also available. As against the exchange defendants, the constructive-trust gateway applied because the transfer of the cryptocurrency in England was an event underpinning the alleged constructive trust. Permission to serve out was granted.
3. Freezing relief. Damages were not an adequate remedy because dissipation would leave the claimant with a worthless remedy. The balance of convenience favoured freezing relief. The claimant was required to give a cross-undertaking in damages. Substantive and freezing relief was refused against Binance Markets Limited because the evidence did not show sufficient control over the relevant wallets, but was granted against the other relevant defendants.
4. Bankers Trust disclosure. The cryptocurrency belonged to the claimant; there was a real prospect that the information sought would preserve the asset by identifying the persons unknown; the relief was proportionate and no wider than necessary; the claimant would pay the exchanges’ reasonable costs; and the balance favoured disclosure notwithstanding possible confidentiality duties.
5. Service and final orders. Following Ion Science and Fetch.Ai, the court treated Bankers Trust relief as capable of being served out in a case involving hot pursuit, while recognising that jurisdiction could be revisited inter partes. Service on the persons unknown by email and NFT was authorised, as was alternative service on the exchange defendants. The relief sought was granted subject to the exception concerning Binance Markets Limited.