As part of our series examining the potential impact of recent lawsuits on future decisions of the Cayman Islands, BVI and Bermuda courts related to crypto assets, we examine the UK ruling. LMN v Bitflyer Holdings Inc etc. [2022] EWHC 2954 (Telecommunications)specifically whether it is available to victims of cryptocurrency fraud Bankers Trust An order compelling cryptocurrency exchanges to disclose sensitive information to assist in the recovery of misappropriated cryptocurrencies.
Applicants in LMN v Bitflyer, etc. is a virtual currency exchange (“Applicant) was the victim of a hack in which millions of dollars worth of cryptocurrency was stolen. Experts were able to trace the first dissipation from the currency, as such transactions originated from “hot wallets” (i.e., internet-connected wallets). , the applicant states that the transfer was recorded on the blockchain of the relevant cryptocurrency. However, this is complicated when the cryptocurrency is transferred to an address/wallet maintained by a cryptocurrency exchange maintained by an exchange. A tracking exercise occurs because deposits of cryptocurrencies into the accounts of customers who have been exposed are made “off-chain” (i.e. such cryptocurrencies are used to service many customers). Via an internal accounting exercise that is mixed into an “omnibus wallet”). Thus, cryptocurrencies processed by exchanges became untraceable and required for Ap. Applicants are requested to seek information from the relevant exchanges in order to continue the follow-up investigation and identify who was behind the relevant transactions.
In this case, the court will Bankers Trust The order has been fulfilled. In other words:
- The stolen cryptocurrency for which information was sought belonged to the applicant. Because the court determined that there are ample arguable cases that whoever held the cryptocurrency or traceable substitute did so as a constructive trustee of the applicant.
- The information sought pertained to the identity of the account holder and the destination of the transfer in connection with the transfer of the fraudulently misappropriated cryptocurrency, thus the possibility that the information sought could actually lead to the location or storage of the assets. was.When
- Applicant’s interest in obtaining an order is limited to the exchange’s compliance with the order, given that the applicant has provided a promise of costs and damages and has imposed restrictions on incidental use of the disclosed information. It outweighed the possible disadvantages.
The Cayman Islands, BVI and Bermuda courts have made bankers trust orders pursuant to the English courts to protect victims of theft and fraud in cryptographic contexts seeking information to assist victims in their recovery. It is likely that they are equally willing to help. Diversion of crypto assets. Additionally, the decision confirms previous decisions to classify cryptocurrencies as property and is therefore subject to title remedies, and importantly requires cryptocurrency exchanges to comply with applicable KYC requirements. serves as a timely reminder to review Assist in recovery of compromised crypto assets. If they are unable to comply with such an order, they will need very good reasons to avoid contempt of the court.
