English High Court Permits Service By NFT In Stolen Cryptocurrency Case

In D’Aloia v (1) Persons Unknown (2) Binance Holdings Limited and others, the Court gave permission to an Italian engineer to serve High Court proceedings via a non-fungible token (NFT) on the blockchain.   

What are NFTS?  

NFT stands for ‘non-fungible token’ which are digital assets like cryptocurrencies that are recorded in a blockchain. An NFT usually represents objects in the real-world such as music, artwork, and videos. They are unique and cannot be exchanged for one another.  

D’Aloia v Person Unknown & Ors [2022] EWHC 1723 (Ch) (24 June 2022)

Case background  

The claimant in the High Court proceedings is Mr Fabrizio D’Aloia, the founder of the online gambling company Microgame. Mr D’Aloia is suing ‘persons unknown’.  

Between December 2021 and the end of May 2022, ‘persons unknown’ were said to have misappropriated around £1.8 million worth of Tether (i.e. ‘stablecoin’, which is when digital currencies are tied to real-world assets) and about £190,000 of USD Coin.  

These individuals ‘conned’ Mr D’Aloia by imitating online brokerage TD Ameritrade with the website tda-finan.com and then induced him to transfer funds from his crypto wallets to trade on the platform. Mr D’Aloia realised in May that he had been a victim of fraudulent activity.

Investigators working for the claimant found that almost all of the assets had been transferred to a ‘number of private addresses’ and 5 cryptocurrency exchanges had taken place.  

During an interim relief hearing that took place in June 2022, Mr Justice Trower ruled that there was a serious issue to be tried in respect of D’Aloia’s claims of fraudulent misrepresentation and deceit, unlawful means conspiracy, and unjust enrichment against the ‘persons unknown’.  

Key considerations  

The key issue in the claim was whether the claimant could benefit from the digital world and use the same channels where the fraud took place to serve proceedings against the individuals.  

Under Part 7 of the Civil Procedure Rules (CPR), a Claimant serving a claim form within the jurisdiction must complete the steps required in relation to the method of service chosen. The methods of service in place are first class Post, delivery of the document, leaving it at the relevant place, personal service, or electronic method (sending the e-mail or other electronic transmission).  

The Court’s decision  

The judge granted the claimant permission to serve proceedings on persons unknown via an NFT, which was described as ‘a form of airdrop into the tda-finan’ wallets in respect of which [D’Aloia] first made his transfer to those behind the tda-finan website’.  

Mr Justice Trower stated, ‘there can be no objection to it’. ‘Rather it is likely to lead to a greater prospect of those who are behind the tda-finan website being put on notice of the making of this order, and the commencement of these proceedings’. 

The firm Giambrone & Partners, who represented D’Aloia, stated that the ruling is ‘a welcome example of a Court embracing new technology’. ‘It is also a significant judgment as it demonstrates how England and Wales is one of the best jurisdictions in the world, if not the best, when it comes to protecting victims of crypto asset fraud’.  

Comment

This is the first order of its kind in Europe (and second only to an order of the State of New York in June this year).  

The development of the digital world and advancements in technology are resulting in changes to the legal landscape and the methods of service going forward. It is an interesting welcome of a Court embracing the changes as well as allowing victims of crypto asset fraud to pursue claims which would have been difficult otherwise.