UK Court Grants Asset Preservation Order over Bitcoin08/20/2019A U.K. court has granted an asset preservation order over Bitcoin stolen in a "spear phishing" attack on a major crypto-currency trader. The decision confirms that proprietary claims over Bitcoin constitute serious issues that should be tried in the courts. Although the presiding judges did not make a final ruling on the legal questions surrounding the nature of Bitcoin ownership, it is believed that this is the first time the English courts have considered the nature of crypto-currencies as property.
The claimant, CEO of Alphabit Fund (a crypto-asset investment company), fell victim to the attack while making a personal investment in a firm whose email account had been hacked by the alleged perpetrators of the fraud. The claimant's investment of 100 Bitcoin (then worth roughly £1.2m) was misdirected, with 80 Bitcoin ultimately transferred to a wallet held at Coinbase UK Ltd and the remainder to various local Bitcoin exchanges. The identity of the recipients of the Bitcoin remains unknown.
The High Court decided that the claimant had satisfied the requirements for an APO, namely that there was a serious issue to be tried concerning a proprietary claim. The nature of Bitcoin ownership remains an open question yet to be tried by the U.K. courts. In particular, there is currently no English law authority on whether a crypto-currency constitutes a "chose in action", i.e., intangible property over which rights can only be asserted through legal action, or a "chose in possession", i.e., physical property over which rights can be asserted through taking physical possession. A finding that crypto-currencies are choses in possession may make the legal test for granting an APO more difficult to satisfy. Any decision on the proprietary nature of cryptocurrencies will also have broader commercial implications, for instance on the tax status of crypto-currencies and how they should be dealt with in insolvency situations.
The decision comes in the midst of the UK Jurisdiction Taskforce's consultation on key issues of legal uncertainty regarding crypto-assets, distributed ledger technology and smart contracts. The UKJT intends to produce an authoritative legal statement on the status of crypto-assets under English private law.
View details of the UKJT's consultation.
View the FLMC's Paper on Issues of Legal Uncertainty Arising in the Context of Virtual Currencies.
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