December 11, 2019

December 11, 2019

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December 10, 2019

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December 09, 2019

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Freezing Order Can Cover Cryptocurrency

The recently reported High Court decision in Vorotyntseva v Money-4 Ltd (T/A Nebus.com) shows that freezing orders can cover Bitcoin and ethereum cryptocurrency. It is another example of the Courts finding that a cryptoasset is a form of property capable of being the subject of a Court order.  The case was heard in 2018, but the judgment was only published last week.

Facts

The claimant, Elena Vorotyntseva, had given what equated to about £1.5m of bitcoin and ethereum cryptocurrency to Nebeus to test its trading platform. Ms Vorotyntseva then started to become concerned that the funds had been dissipated. She raised these concerns with Nebeus and asked for confirmation that Nebeus still held the funds. When she was not readily provided with that confirmation, Ms Vorotyntseva applied on short notice to Court for a freezing order against Nebeus and its Directors.

Despite the short notice, the Defendants attended the hearing with emails and screenshots supposedly showing that the money was still with Nebeus. Ms Vorotyntseva argued this was insufficient evidence and also pointed out that some screenshots appeared to be doctored.

The judge agreed that the evidence raised some very serious questions, supporting Ms Vorotyntseva’s case of there being a risk regarding dissipation of the assets. He granted the freezing order against all of the Defendants, finding that the directors were closely enough involved with the running of Nebeus to justify them being subject to the Order as well.

Comment

This judgment clearly gives credence to cryptoassets being regarded as a form of property, given that the cryptocurrencies in this case could be the subject of an injunction. Nevertheless, there are numerous different types of cryptoasset, each with different characteristics.

Further, the issue was not actually raised at the hearing and the Court stated the freezing order was a “very preliminary order”, with a return date for a further hearing. At that return hearing, an argument may have been put forward that cryptoassets (or at least these cryptoassets) are not personal property capable of being the subject of an injunction.

Nevertheless, on 18 November 2019 the UK Jurisdiction Taskforce (of the Law Society’s LawTech Delivery Panel) published a statement that cryptoassets have all the legal characteristics of property and should, as a matter of English law, be treated as property.

This is likely to be persuasive authority for the Courts to find that cryptoassets are property. In the meantime, the classification does remain slightly uncertain until the question is substantially argued and considered by the Court or suitable legislation is brought into force.

 

© Copyright 2019 Squire Patton Boggs (US) LLP

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About this Author

Garon Anthony, Squire Patton Boggs, litigation attorney
Partner

Garon Anthony is a partner in the Litigation Practice Group. He has specialised in dispute resolution work since he qualified as a solicitor and has considerable experience in general corporate and commercial litigation work, acting for both private and public sector clients.

Garon regularly resolves disputes for clients in the financial services/insurance sector. That encompasses professional negligence, fraud issues/recovery processes, dealing with claims and complaints by customers of the mis-selling of retail products, handling insurance policy coverage disputes for corporate...

44 121 222 3507
Rose Chaudry, Squire Patton, Commercial Litigation Lawyer, Tortious Contracts Attorney
Associate

Rose Chaudry is an associate in the Litigation team with expertise in general commercial litigation. Rose qualified in September 2015 after completing her training contract with the firm.

Rose regularly acts for a diverse client base, including individuals and companies, from SMEs to PLCs. Rose has experience advising on a wide-range of matters of both a contractual and tortious nature, including breach of contract, breach of warranty, debt recovery, professional negligence and insurance.

44 121 222 3146