Crypto claims are increasing, helped by crypto transactions, which have grown by 550% in 2021.
Alongside this, the scale of crypto crime reached $14 billion, according to a report by Chainanalysis. Unsurprisingly, the Financial Conduct Authority has labeled cryptoassets as “very risky, speculative investments.”
This is no doubt due to the fact that regulation in this area is still in its infancy. The need for robust legal protection is paramount and the courts’ recent initiative is proof of this.
In fact, recent developments underscore the important advancement for victims of crypto crime.
A turning point – crypto assets as a form of ownership in the UK
In 2018, Mr. Justice Birss issued the world’s first crypto asset freeze order. However, two recent cases demonstrate the courts’ likely line of attack and highlight other legal remedies available to victims of cryptocurrency fraud: Fetch.ai Ltd and others vs. Persons Unknown and others [2021] EWHC 2254 (Comm) and Ion Science Limited and others against (1) Unidentified Persons, (2) Binance Holdings Limited and (3) Payment Ventures Inc (not reported) December 21, 2020 (Commercial Court).
Their judgments reveal three important insights. First, the judicial recognition of crypto assets as a form of property under English law following the decision in AA v persons unknown [2019] EWHC 3556. Second, the demonstrable willingness of the courts to grant remedies against “unknowns”. Third, the willingness of courts to issue disclosures against cryptocurrency exchanges. International cryptocurrency exchanges are required to disclose certain confidential information related to the crypto assets concerned.
Practical implications and anonymity
The use of injunctions against “unknown persons” has brought relief to victims pursuing a suspect whose anonymity is being maintained; This is a common problem with stolen cryptoassets, so it’s a huge development.
in the Fetch.ai Ltdthe court’s narrow definition of “unknown persons” emphasized its cautious and conscientious approach.
They divided the people involved into three categories:
- Individuals directly involved in the fraud
- Individuals who have received assets but have not paid their full market value and innocent recipients.
- Individuals who did not know or could not reasonably have known that the assets belonged to the applicants.
in the ion science, an injunction has been sought to prevent scammers from handling the assets pending a court resolution. In addition, given the significant risk of loss, a global freezing order was issued.
The court also issued an order from the Bankers Trust against the crypto exchanges. This disclosure order forced exchanges to disclose confidential information to help identify the suspected scammers.
It is therefore clear that the English courts are becoming more knowledgeable about crypto claims and are effective in applying the current legal frameworks to help victims recover crypto assets.
The way forward for Crypto Claims
This area is evolving rapidly and it is likely that aspects of these common law developments will influence legislation in many jurisdictions. It is clear that when it comes to crypto claims, victims will have a property right to pursue their stolen property, and thus compensation will almost certainly not be limited to damages.
