Perhaps inevitably given the exponential growth in the value of the crypto market in recent years, courts all over the world are now tasked with resolving an increasing number of crypto-related disputes. Within the context of crypto recovery claims, this has invariably required the court to grapple with the underlying blockchain technologies.

The decisions we have seen to date have varied enormously in terms of the nature of the disputes, the stakeholders involved, the causes of action alleged and the blockchain technologies and cryptocurrencies forming their subject matter. Often, they involve allegations of fraud.

So, for example:

Tippawan Boonyaem v Persons Unknown Category (A) & Ors[1] a decision of the English High Court, concerned a real estate agent residing in Thailand who became a victim of a cryptocurrency investment scam. Ms Boonyaem obtained an interim worldwide proprietary and non-proprietary freezing order against all defendants, as well as a disclosure order in an attempt to identify the perpetrators. Final injunctive relief was obtained against some of the defendants.

In

ChainSwap v Persons Unknown[2], a decision of the BVI Commercial Court, a blockchain-services provider, which was the victim of two crypto hacking attacks directed at smart contracts through which it operated a cross-chain bridge, obtained a freezing injunction against unknown hackers in addition to other relief that enabled the victim to make a recovery.

In

Piroozzadeh v Persons Unknown Category A & Ors

[3]

, misappropriated assets (870,818 USDT) had been traced into deposit addresses held by two crypto exchanges, including Binance. The claimant subsequently obtained, on ex parte without notice basis, interim proprietary injunctive relief against the exchanges requiring them to preserve the USDT or its traceable proceeds.

In a subsequent decision, the English High Court discharged that interim injunction on the basis that the claimant's legal representatives had failed to comply with their duty of fair presentation (in particular, having failed to explain the defences that were likely to be available to Binance in respect of its alleged liability as constructive trustee).

In

In the Matter of Atom Holdings[4], which was the first liquidation involving a cryptocurrency exchange incorporated in the Cayman Islands, the Cayman Grand Court ordered the winding up of Atom Holdings, the holding company for the Atom group of entities operating the now defunct centralised cryptocurrency exchange, Atom Asset Exchange.

Fabrizio D'Aloia v Persons Unknown,[5] a decision of the English High Court, involved a crypto scam whereby the claimant, Mr D'Aloia, was induced by persons unknown to transfer cryptocurrency (Circle and Tether) totalling approximately £5m. The cryptocurrency was subsequently passed through a number of different wallets before being withdrawn as fiat currency ("off-ramped") through various crypto exchanges.

Notwithstanding the wide-ranging and fact-specific nature of the disputes that have arisen in the crypto space, certain trends are beginning to emerge. What we are seeing is that although blockchain technology and digital assets may be technologically and conceptually complex[6] and unfamiliar to the court[7], that does not mean that disputes concerning this asset class are unnavigable.

In fact, the contrary is the case. It is now tolerably clear, for example, that (in the common law world at least) courts are likely to treat crypto assets as a form of property[8].

In those circumstances, traditional asset tracing tools - applied in accordance with long established legal principles - will in principle be available to victims of crypto-related wrongdoing or misappropriation in the same way as they would be in respect of wrongdoing concerning any other more traditional asset type.

Moreover, the fact that specific crypto expertise may be required on the given facts of a particular dispute - to take one obvious example, to "follow" or "tra...

Perhaps inevitably given the exponential growth in the value of the crypto market in recent years, courts all over the world are now tasked with resolving an increasing number of crypto-related disputes. Within the context of crypto recovery claims, this has invariably required the court to grapple with the underlying blockchain technologies.

The decisions we have seen to date have varied enormously in terms of the nature of the disputes, the stakeholders involved, the causes of action alleged and the blockchain technologies and cryptocurrencies forming their subject matter. Often, they involve allegations of fraud.

So, for example:

Tippawan Boonyaem v Persons Unknown Category (A) & Ors[1] a decision of the English High Court, concerned a real estate agent residing in Thailand who became a victim of a cryptocurrency investment scam. Ms Boonyaem obtained an interim worldwide proprietary and non-proprietary freezing order against all defendants, as well as a disclosure order in an attempt to identify the perpetrators. Final injunctive relief was obtained against some of the defendants.

In

ChainSwap v Persons Unknown[2], a decision of the BVI Commercial Court, a blockchain-services provider, which was the victim of two crypto hacking attacks directed at smart contracts through which it operated a cross-chain bridge, obtained a freezing injunction against unknown hackers in addition to other relief that enabled the victim to make a recovery.

In

Piroozzadeh v Persons Unknown Category A & Ors[3], misappropriated assets (870,818 USDT) had been traced into deposit addresses held by two crypto exchanges, including Binance. The claimant subsequently obtained, on ex parte without notice basis, interim proprietary injunctive relief against the exchanges requiring them to preserve the USDT or its traceable proceeds. In a subsequent decision, the English High Court discharged that interim injunction on the basis that the claimant's legal representatives had failed to comply with their duty of fair presentation (in particular, having failed to explain the defences that were likely to be available to Binance in respect of its alleged liability as constructive trustee).

In

In the Matter of Atom Holdings[4], which was the first liquidation involving a cryptocurrency exchange incorporated in the Cayman Islands, the Cayman Grand Court ordered the winding up of Atom Holdings, the holding company for the Atom group of entities operating the now defunct centralised cryptocurrency exchange, Atom Asset Exchange.

Fabrizio D'Aloia v Persons Unknown[5], a decision of the English High Court, involved a crypto scam whereby the claimant, Mr D'Aloia, was induced by persons unknown to transfer cryptocurrency (Circle and Tether) totalling approximately £5m. The cryptocurrency was subsequently passed through a number of different wallets before being withdrawn as fiat currency ("off-ramped") through various crypto exchanges.

Notwithstanding the wide-ranging and fact-specific nature of the disputes that have arisen in the crypto space, certain trends are beginning to emerge. What we are seeing is that although blockchain technology and digital assets may be technologically and conceptually complex[6] and unfamiliar to the court[7], that does not mean that disputes concerning this asset class are unnavigable.

In fact, the contrary is the case. It is now tolerably clear, for example, that (in the common law world at least) courts are likely to treat crypto assets as a form of property[8]. In those circumstances, traditional asset tracing tools - applied in accordance with long established legal principles - will in principle be available to victims of crypto-related wrongdoing or misappropriation in the same way as they would be in respect of wrongdoing concerning any other more traditional asset type.

Moreover, the fact that specific crypto expertise may be required on the given facts of a particular dispute - to take one obvious example, to "follow" or "trace...

Q3: Tell us about the most unforgettable beer you have tried.

The most memorable beer for me was Cha Chaan Teng Sour, a gose brewed by Young Master, a local Hong Kong craft beer brewery. It was the first craft beer I have ever tasted and it opened my eyes to the world of craft beer. It was inspired by salted lime that is commonly found in local Cha Chaan Tengs in Hong Kong. It gives a slightly sour taste but it is also very refreshing and crisp which will increase your appetite and make you crave more.

The far-reaching effect of Section 147 fraudulent trading claims in the Bilta v Tradition Financial Services ruling

Recent guidance on Section 147 fraudulent trading claims in Conway v Air Arabia

Recognition and Assistance of Foreign Insolvency Proceedings: A Comparison of Singapore's Model Law Regime with the Approaches of the BVI, Cayman and Bermuda Courts

In Mornington, the Claimants sought a declaration that an audit report commissioned by the Defendant during without prejudice (WP) negotiations was not subject to WP privilege. The Defendant independently commissioned the relevant report and the Claimants agreed that they were prepared to receive the report (before proceedings had commenced) in the course of WP negotiations and reserved their right to challenge the assertion to privilege which they did when the Defendant asserted it at the disclosure stage.

The Court found that the report was not subject to WP privilege. It did not fall within the public policy rationale for WP privilege (ie. that parties should not be concerned that anything said in negotiations could prejudice them later, in order to encourage settlement) because it was not a statement or offer made in the course of negotiations, it was not a record of negotiations between the parties and it had nothing to do with admissions. The rule did not extend to cover anything the parties did to further discussions at a WP meeting. Nor was the report covered by WP privilege by agreement. While the scope of the rule could be extended by express or implied agreement, no such agreement was found in this case - there was simply no proposal which was accepted that the report would be WP.

In Moir, the Defendants filed an affidavit that had raised a number of issues with respect to their previous lawyers, including that their former counsel did not represent them in a timely and competent manner. Such evidence was filed in support of application for an extension of time. The Claimants argued that they had a right to test such evidence and that the Defendants had waived their legal professional privilege. Reliance was placed on a Bermudian authority - Thyssen-Bornemisza v Thyssen-Bornemisza [1998] Bda LR 11 - which stated that a party who puts a privileged relationship in issue is taken to have waived any privilege that could arise from such a relationship.

Mussenden CJ agreed with the Claimants, quoting the reasoning from Thyssen: "a party who puts a confidential or privileged relationship in issue is taken to have waived any privilege that he might have arising from that relationship. I do not think that this is based upon some vague notion of fairness… It is rather an example of the Court protecting its own process, by declining to adjudicate an issue directly concerning a party's relationship with his lawyer, without a frank disclosure of all that passed between them on the matter… The waiver arises from the invitation to the Court, by the party possessing the right to enforce confidentiality, to adjudicate on the matters to which the privilege relates."

1. the Defendants had raised issues about their relationship with their lawyers;

2. it would not be fair to allow the Defendants to rely on such statements without the Claimants having the opportunity to test such evidence; and

3. the Defendants chose to rely on such evidence.

Both decisions evidence that a party must carefully consider before taking steps that may not be protected by privilege including (1) creating documents which are not privileged; and (2) running arguments which waive privilege. In Mornington, the Defendant could not rely on WP privilege to prevent disclosure of a report that it independently procured purely because it was commissioned whilst WP negotiations were taking place and in Moir, the Defendant could not put forward arguments in support of its application and prevent the Claimant from interrogating the evidence in support of those arguments on the basis of privilege.

Please note that we are not authorised to advise on the law of England and Wales.

The far-reaching effect of Section 147 fraudulent trading claims in the Bilta v Tradition Financial Services ruling

Recent guidance on Section 147 fraudulent trading claims in Conway v Air Arabia

Recognition and Assistance of Foreign Insolvency Proceedings: A Comparison of Singapore's Model Law Regime with the Approaches of the BVI, Cayman and Bermuda Courts

The Claimants brought proceedings against the Defendants for trademark infringement and passing off. In support of the proceedings, the Claimants successfully obtained an ex parte worldwide freezing injunction (for £20 million) and an access and imaging order against the Defendants. The Defendants subsequently applied for the orders to be discharged for failure of fair representation by the Claimants' solicitor at the ex parte hearing.

After considering the parties' arguments, Mr Justice Fancourt was satisfied that the freezing injunction and the access and imaging order should be discharged, and that there would be no re-granting of any freezing injunction.

In coming to his decision, the Judge was critical of the manner in which the Claimants' solicitor had presented the case at the ex parte hearing, in particular, the solicitor's failure to fully address key aspects of the case to the Judge.

These included inter alia:

not properly explaining the appropriateness of an ex parte hearing in the circumstances;

failure to distinguish the appropriate test to establish liability and differentiate the quantum for the different phases of the alleged infringement;

not providing a complete and fair presentation in relation to the risks of the dissipation of assets and destruction of evidence; and

omitting to bring to the judge's attention relevant information arising from related proceedings in Ohio.

While the Judge did not view the foregoing failures as deliberate, he indicated that there was a lack of understanding by the Claimant's solicitor as to what "full and frank" disclosure meant. In that regard, he noted that the Claimants' submissions only contained discreet procedural points that might be raised by either Defendant, and these were not "arguments that the Defendants could reasonably be anticipated to make against the cogency of key building blocks of the Claimants' case, whether on liability or quantum".

The scope and nature of the duty was explained as such:

"Anyone applying without notice for a freezing injunction or an access and imaging order, and especially if applying for both together, must understand that there is a very high duty on them to ensure that relief of that nature is not granted without the Defendant's case, so far as it can be anticipated, being put squarely before the Court, and any weaknesses in the applicant's case being identified. However much a judge may indicate that they see things the applicant's way, the absent respondent's likely case still needs to be articulated and understood before a decision is made."

This judgment is a timely reminder to all potential applicants in ex parte applications to make proper enquiries beforehand to ensure that the Court is apprised of all relevant information and arguments, including any substantive points that the respondent would wish to make were they present. Obtaining without-notice relief demands meticulous preparation and a commitment to transparency. The consequences of failing to meet the high standard of full and frank disclosure can be severe, even if the underlying claim appears strong. Full compliance must therefore be ensured.

While Harneys does not advise on the law of England and Wales, this judgment may be considered in other common law jurisdictions such as the BVI, Cayman Islands, and Bermuda, where freezing injunctions are regularly sought.

The Plaintiff, a director of a Company incorporated in the Cayman Islands and listed in the main board of the Stock Exchange of Hong Kong, commenced proceedings by way of writ of summons (the Writ) against 6 directors and the company secretary of the Company. The only cause of action pleaded was that the resolutions passed at a board of directors meeting on 17 December 2024, in removing him as chairman of the Company and from the nomination committee (the Resolutions), were passed in breach of the articles of the Company. The relief sought only pertained to the same Resolutions.

The Plaintiff also issued a summons seeking, inter alia, an interim injunction to restrain the Defendants from acting upon the Resolution, allotting new shares and changing the composition of the board (the Summons).

The Court struck out the Writ on the ground that they are plainly demurrable and unsustainable.

In doing so, the Court confirmed the principle that the articles of association is a statutory contract between the company and its members and it regulates the rights between the company and its members and the members inter se. The rights and liabilities of the members under the articles can only be enforced by or against the company or its members, citing English authority London Sack & Bag Co Ltd v Dixon & Lugton Ltd [1943] 2 All ER 763 and the Hong Kong case of Newmark Capital Corp Ltd v Coffee Partners Ltd [2007] 1 HKLRD 718.

The Court also confirmed that, under the laws of the Cayman Islands, a company's articles of association constitute a multi-party, statutory contract between the company and its members and the members inter se. And that while directors are obliged to act in accordance with a company's articles of association, it does not render the directors parties to the articles or provide them with the requisite standing or right to complain about any breach of the articles against fellow directors.

The Plaintiff argued that his standing arose by virtue of being a director removed by the Resolution. This argument was rejected by the Court.

The Plaintiff also contended that the Resolutions were invalid as they were made in breach of the directors' fiduciary duties. The Court found that such contention was wholly misconceived - it is long recognised in common law that save in exceptional circumstances, directors owe their fiduciary duties to the company alone (and not to fellow director). Where the company suffers any loss as a result of an actionable wrong, the cause of action vests in the company and the company alone can sue. The Court further commented that even for a member to bring a claim for breach of fiduciary duties against the directors, the member must do so by way of a common law or statutory derivative action in the name of the company.

It was held that, as the Plaintiff was not a shareholder of the company, he had no cause of action against the Defendants for any breach of the articles (to which none of them were parties). Further, he had no right to commence any derivative action on behalf of the Company against other directors.

The Court also dismissed the Summons - there is no basis to grant any "interim-interim" relief sought by the Plaintiff even if, contrary to the Court's view, the Plaintiff does have any cause of action against the Defendants. The Court highlighted that no relief is sought in respect of the allotment of shares or the change of the board in the Writ.

The well-established Ralli Bros principle is an exception to the general rule that the enforceability of a contract governed by English law is determined without reference to illegality under foreign law. Under this principle, a contract shall not be enforced if the performance of it is unlawful in the place of performance. In the recent judgment of Litasco SA v Banque El Amana SA, the High Court of England clarified that 'unlawful' does not cover breaches of foreign court orders.

In the Litasco case, the Defendant issued a standby letter of credit as security for certain loan agreements. The Claimant claimed against the Defendant under the standby letter of credit, and applied for summary judgment, based on the Defendant's failure to pay.

The Defendant's case was that, in the two sets of relevant legal proceedings in Mauritania, the courts made orders prohibiting the Defendant under Mauritanian law from paying the sum due under the standby letter of credit. For this reason, the Defendant argued that it had a real prospect of success in defending the claim by relying on the Ralli Bros principle, hence summary judgment should not be granted.

Upon considering the authorities, the High Court of England refused to extend the Ralli Bros principle to acts unlawful by reason of breaches of foreign court orders, as opposed to acts unlawful by reason of legislation of the foreign jurisdiction in which acts of performance are supposed to be done. The High Court therefore ruled that the Defendant had no real prospect of success on this defence, especially as the payment fell due at least two years before the Mauritanian court orders were made.

Harneys does not advise on the law of England and Wales, but this judgment will be of interest to other common law jurisdictions such as the BVI, Cayman and Bermuda. For example, in the BVI High Court, the Ralli Bros principle was relied upon by the parties in Credorax Inc v Israeli VC Partners LP.

The British Virgin Islands and the Cayman Islands also play an important role in the success of arbitration in Asia. Both jurisdictions have been among the top five geographical originators or nationalities of the parties to arbitration administered by the HKIAC for many years. In the statistics recently published by the HKIAC for 2024, the BVI and the Cayman Islands once again are ranked at number 3 and 4, respectively. With the Hong Kong-Mainland China arrangement on interim measures being in place, the HKIAC have also processed applications to the Mainland Chinese courts under the arrangement to preserve evidence and assets. According to the HKIAC statistics, over 40% of the applications in 2024 involved assets or evidence owned by parties out of the Mainland China, including the BVI and the Cayman Islands.

Families and businesses in Hong Kong, China and across Asia have long used BVI or Cayman Island corporate vehicles as the holding entities for their businesses and assets. Naturally, any subsequent disputes between the stakeholders of these entities will most likely have to be resolved by the BVI and the Cayman Islands courts. That said, as arbitration clauses become an increasingly common feature in the governing contracts between parties (be it shareholders agreements, joint venture agreements or limited partnership agreements), it is foreseeable that arbitrations will only become more and more prevalent as a means for parties, including offshore entities, to resolve their disputes.

Apart from the increased confidentiality and privacy afforded by arbitration, the ability to choose your own arbitrator is an important consideration for parties as it can ensure the tribunal understands all parties' cultural differences and represents their interests. Further, the flexible arbitration regime in Hong Kong allows Asian-based clients to arbitrate BVI or Cayman governed law disputes in Hong Kong, with BVI and Cayman law experts acting as the chair or co-counsel in the arbitration.

If you are involved in an arbitration that involves a BVI or Cayman entity, it is highly likely that issues will arise during the arbitration that require BVI or Cayman law input, as the case may be.

Harneys' team of highly experienced litigation lawyers based in Hong Kong, are complemented by our dispute resolution teams in BVI, Cayman and Bermuda. This presents Harneys with a unique opportunity to act in arbitrations, taking our practice beyond the usual interim remedies or enforcement steps during or following the completion of an arbitration. Harneys is currently acting in several Hong Kong seated arbitrations, working as co-counsel alongside onshore legal advisers. Get in contact if you are interested in learning more about our arbitration practice.