10/02/20 – In AA v Persons Unknown , the Commercial Court confirmed that cryptoassets such as Bitcoin can constitute property under English law, and are therefore capable of being subject to a proprietary injunction (i.e. a court order which prevents the defendant from dealing with the relevant property).
The judgment refers extensively, and gives considerable weight, to the UK Jurisdiction Taskforce’s recent Legal Statement on the Status of Cryptoassets and Smart Contracts – see my article on the UKJT Statement here.
In October 2019, one or more hackers encrypted the IT systems of a Canadian insurance company with malware. In order to regain control of its IT systems, the insurance company paid the hacker(s) a ransom of 109.25 Bitcoins (approx. $950,000).
The insurance company’s cybercrime insurer traced the ransom payment to a Bitcoin wallet linked to and controlled by Bitfinex, a cryptoexchange operated by two British Virgin Island entities, and applied for a proprietary injunction to recover the 96 Bitcoins that remained in the wallet.
Because proprietary injunctions can only be granted over property, the Commercial Court first had to consider whether Bitcoin constitutes a form of property. Although Bitcoin do not fit into either of the conventional categories of property – ‘choses in possession’ or ‘choses in action’ – the Court reviewed the analysis of the proprietary status of cryptoassets in the UKJT Statement, and in particular the UKJT’s conclusion that, despite their “novel or distinctive features“, cryptoassets may be objects of property rights, and “[i]f it is necessary to classify it at all, then a cryptoasset is best treated as being another, third, kind of property” (UKJT Statement, para. 86(a)). The Court agreed with this approach, adding that “it is fallacious to proceed on the basis that the English law of property recognises no forms of property other than choses in possession and choses in action“.
Having confirmed that Bitcoin constitutes property, the Court granted the proprietary injunction.