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Court grants service by blockchain

15 July 2022
Issue: 7987 / Categories: Legal News , Cyber
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Mr Justice Trower in the High Court has granted permission to serve court documents on unknown fraudsters via the transfer of a token on blockchain, in a legal first

D’Aloia v Binance Holdings & Others [2022] EWHC 1723 (Ch), is the first reported court order of its kind in Europe, and second only to a case in the Supreme Court of the State of New York in June (LCX AG v John Does Nos 1-25).

D’Aloia concerned an application for an urgent injunction made by Mr D’Aloia, the Italian founder of an online gambling company. He had discovered unknown persons had cloned his online brokerage and were misappropriating his cryptocurrency to encourage investors to place trades into two wallets.

According to Giambrone solicitors, acting for Mr D’Aloia, the court order is significant for two reasons. First, it allowed service by way of NFT (non-fungible token) airdrop to the two wallets and opens the way to use blockchain technology to serve proceedings in international crypto disputes thus overcoming a practical hurdle. Second, it recognised the five cryptocurrency exchange defendants held Mr D’Aloia’s cryptocurrency as constructive trustees. This means the exchanges are responsible for making sure the crypto is ringfenced and not moved on or withdrawn.

Giambrone associate Joanna Bailey said: ‘The importance of the court’s finding of a good arguable case of constructive trustee liability cannot be overstated.

‘Should cryptocurrency exchanges act contrary to such orders and fail to ringfence the identifiable cryptocurrency, they risk being held liable for breach of trust.’

Alternative service via various online methods has previously been authorised by the English Courts under CPR 6.15, including Instagram, Facebook and via a ‘contact’ section of the defendant’s website, but never before by means of distributed ledger technology (like blockchain).

Kate Gee, counsel at Signature Litigation, said: ‘Crypto exchanges must now take seriously the risks of claims against them for breach of trust, and take robust steps to ringfence identifiable cryptocurrency that is the subject of a dispute.’

Zoe Wyatt, partner at Andersen in the UK, said: ‘This case gives hope to those who have fallen victim to cryptoasset scams.’

Issue: 7987 / Categories: Legal News , Cyber
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