Landmark Crypto Judgment: Service by NFTs, Disclosure Orders Against Crypto Exchanges, and Potential Constructive Trustee Liability

cryptonews.com:

Kate Gee is Counsel at Signature Litigation LLP, specialising in crypto disputes, civil fraud, and asset tracing.__________

The recent, and highly-publicised, volatility of the crypto markets has been accompanied by an increased level of fraudulent activity in the crypto space. Victims too often have little recourse to recover digital assets that have been stolen from them – for various reasons. One of those reasons is the anonymity of the owner of the wallet where the assets are now held – and so an intended claimant will need to bring an action against unknown individuals, or “persons unknown”. 

In June this year, Mr Justice Trowers delivered a landmark judgment in the English High Court that permitted service of proceedings on persons unknown via non-fungible tokens (NFTs). He also found that there is a good arguable case against the defendant cryptoasset exchanges for liability as constructive trustee, which finding brings with it wide potential implications for this and future claims. To support such case, he ordered disclosure from the crypto exchanges. It’s a landmark judgment which deserves to be unpacked.

The claimant: The case was brought in London by Fabrizio D’Aloia, an Italian engineer and founder of the online gambling company Microgame, in an effort to recover nearly GBP 2m (USD 2.42m) of stolen cryptocurrency from ‘persons unknown’ in relation to a fraud allegedly undertaken against him between December 2021 and May 2022. 

The respondents: The “persons unknown” are individuals behind a website with the name “tda-finan”. These individuals allegedly imitated an online brokerage, TD Ameritrade, by setting up a fraudulent clone online brokerage: the website tda-finan.com (“tda-finan”).

The scam: The fraudulent