High Court Affirms Cryptoassets as Property in Fraud Case, Grants Injunctions against Unknown Defendants

Introduction

In the recent High Court decision of Tippawan Boonyaem v Persons Unknown Category (A) & Ors, the court navigated the complexities of alleged fraud involving cryptocurrencies and the legal remedies available to the victim. The case touches upon several pivotal legal principles pertinent to property law, tracing of assets, injunctions, and service on unknown defendants, all within the evolving domain of digital assets litigation. This article analyses the salient topics addressed in the judgment, outlining the key legal principles applied and their implications.

Key Facts

Tippawan Boonyaem, a real estate agent from Thailand, was enticed into a purported investment scheme involving Tether Tokens (USDT), a form of cryptocurrency. Boonyaem transferred a total of USDT 425,836.62 to various wallet addresses under the assurance that these amounts were investments managed by the defendants. Subsequent attempts to withdraw her investments led to further transfers disguised as tax, withdrawal fees, and insurance, all of which resulted in no return of funds. Investigation reports linked the fraud to certain identifiable wallets across various cryptocurrency exchanges. The claimant pursued a Worldwide Freezing Order and a proprietary injunction against the anonymous individuals behind the scheme and a UK registered company, INGFX Ltd, allegedly central to the scam.

Legal Principles

Property Law and Cryptoassets

The case reaffirms the judicial stance that cryptoassets are considered “property” within English law, aligning with previous case law and the UK Jurisdiction Taskforce’s statement. The court noted that the specific nature of Tether Tokens, governed by redeemable promises, may potentially classify them as “things in action.”

Tracing of Assets

Applying traditional principles, the court acknowledged the potential for tracing and recovering cryptoassets, contingent on establishing a connection between the asset’s depletion and the acquisition of traceable proceeds.

Injunctions

Proprietary and worldwide freezing injunctions were key remedial measures discussed. The court upheld the proprietary injunction to protect the claimant’s property and the freezing injunction based on a good arguable case and a significant risk of dissipation due to the fraudulent nature of the defendants’ conduct. However, the court declined to continue any injunction against “Persons Unknown Category A” due to the impossibility of sufficiently identifying them, thereby rendering such an order unenforceable.

Service on Unknown Defendants

A notable discussion was whether legal action could be taken against unknown defendants. The judgment differentiated between unidentified and identified unknown defendants, clarifying that the latter could be served if proceedings could be effectively brought to their attention.

Outcomes

The court granted summary judgment in favor of the claimant, declaring that the USDT found in certain wallet addresses are her property and ordering the delivery up of those tokens. This summary judgment is against the second defendants, identifiable as the operators of the known wallet addresses, and the third defendant, INGFX Ltd.

The claim for equitable compensation and damages was adjourned, with the court pinpointing the need for the claimant to establish identifiable defendants and particularize her loss. The proprietary injunction will continue against the second and third defendants, and the non-proprietary freezing injunction is maintained against these defendants due to the fraudulent nature of the case.

New orders for disclosure were made in hopes that the defendants would comply, and permission to amend Bryan J’s Order to include omitted gateways for service out of the jurisdiction was granted. Service via alternative methods, such as non-fungible tokens to wallet addresses, was authorized to reach the second category of defendants.

Costs were awarded to the claimant on an indemnity basis due to the defendant’s dishonesty, amounting to a summary assessment of £70,000 to be paid by the second and third defendants.

Conclusion

The judgment in Tippawan Boonyaem v Persons Unknown demonstrates the judiciary’s evolving response to fraudulent schemes within the digital assets space. By recognizing cryptoassets as property, the court enabled the application of existing legal principles, such as asset tracing, that afford protection and remedies to fraud victims. The case also provides critical insight into the treatment of anonymous defendants in the digital context, elucidating the permissible scope of serving unknown parties in a manner that balances legal efficacy with the realities of technological anonymity. This judgment, therefore, represents a significant development in digital asset jurisprudence, reflecting an adaptive legal system capable of addressing the challenges posed by emerging technologies.