Syed Rahman of Rahman Ravelli considers a case where the judgement dealt with important points in relation to jurisdiction and cryptocurrency
In Tulip Trading Ltd (TTL) v Bitcoin Association for BSV, the High Court determined that TTL had not established a serious issue to be tried on the merits of its claim. Further, it held that, as a result, the order from the lower court granting permission to serve a claim form out of the jurisdiction and service of the claim form were to be set aside.
The High Court also assessed the lex situs (location) of crypto assets when a corporate entity is concerned.
TTL, a Seychelles company, alleged that it had suffered a hack that caused the loss of a significant amount of digital currency assets. As a result of the hack, private keys and information that would allow access to the keys were removed from the computer systems of Dr Wright (who asserts that he is Satoshi Nakamoto, who developed bitcoin). These private keys would allow dealings in the crypto assets.
TTL claimed $4.5 billion from 16 developers, alleging that they owed fiduciary and common law duties under English law. Furthermore, it was argued that the developers should be required to write and apply a “patch” to the blockchain network in order that it could be transferred to a new Bitcoin address for the benefit of the claimant.
The defendants in this action were the core developers and/or otherwise control the software in respect of four relevant digital asset networks, namely:
- The Bitcoin Satoshi Vision network (the BSV network) – the first defendant (the Bitcoin Association).
- The Bitcoin Core network (the BTC network) – the second to 13th defendants (the BTC Developers).
- The Bitcoin Cash network (the BCH network) – the 14th
- The Bitcoin Cash ABC network (the BCH ABC network) – the 15th and 16th
None of the defendants are in the jurisdiction.
TTL claimed that the defendants owed TTL fiduciary and/or tortious duties, effectively meaning that they should assist TTL in regaining control and use of its assets. Specifically, TTL requested:
- A declaration that TTL owns the relevant assets;
- An order requiring the defendants to take steps to ensure that TTL has access to and control of them (or to at least take reasonable steps to ensure that it does and to ensure that effect is not given to the fraud); or
- Equitable compensation or damages.
In relation to point 2 above, TTL indicated that it would not be technically difficult for the defendant to write and implement the software patch enabling TTL to regain control of the assets.
There was also a question as to the location of the assets and TTL. TTL claimed that the assets were in the jurisdiction, namely England. But the defendants argued that the assets were in the jurisdiction that the company was domiciled in, namely the Seychelles.
The court determined that there was no good or arguable case that open source Bitcoin developers (the defendants), whose code is widely adopted and used, do not owe fiduciary duties or a common law duty of care to those who use that code to trade or store their crypto assets.
Furthermore, the court also considered that there was sufficient information to amount to a good arguable case that (a) TTL is resident in the jurisdiction; and (b) that the property is located here.
The court determined the lex situs (location) of the bitcoin held by corporate entities, with Mrs Justice Falk stating that “a company is resident where its central management and control is located, that being where its real business is carried on”.
Please see link to the full judgment https://www.bailii.org/ew/cases/EWHC/Ch/2022/667.html