As the popularity of cryptocurrency as an investment asset balloons, the number and types of lawsuits involving crypto assets has also increased. Issues such as traceability and effective methods of service are now at the forefront of courts’ attention.
In a landmark decision handed down on 24 June 2022, the English High Court granted an order allowing service of proceedings on persons unknown via non-fungible tokens ("NFT") on a blockchain.
Novel methods of service
In D’Aloia v (1) Persons Unknown (2) Binance Holdings Limited and others,1 Mr D’Aloia (the "Claimant") commenced proceedings for the alleged fraudulent misappropriation of cryptocurrency assets worth approximately 2.1 million USD Tether and 230,000 USD Coins.2 In doing so, the Claimant applied for permission to serve proceedings outside the jurisdiction via both (i) email and (ii) NFT in the form of airdrop into the digital wallets where the Claimant made his first transfer to the persons unknown behind the fraudulent website tda-finan.
The Court granted the Claimant’s application, displaying flexibility and a willingness to "embrace the Blockchain technology".3 The Court accepted that permitting service via NFT airdrop in this case would lead to a greater prospect that the unknown persons behind the fraudulent website tda-finan would be put on notice of the proceedings, finding that "the difficulties that would otherwise arise and the complexities in relation to service on the first defendant mean that good reason has been shown". 4
A growing trend
The English Court has already permitted other novel forms of service in recent years – including via WhatsApp5 and by Facebook Messenger.6 This latest decision reflects the fact that the English Court is, in appropriate cases, willing to approve service via alternative means to ensure that proceedings can be effectively commenced against defendants. By granting service via NFT airdrop, the Court solved the problem of the anonymous identities of the fraudulent "persons unknown" – by utilising the very blockchain technology by which the crypto misappropriation was perpetrated.
This decision to permit service via NFT airdrop follows the June 2022 decision by the Supreme Court of the State of New York in LCX AG v. John Doe Nos. 1-25, which also allowed the claimant's lawyers to serve documents via NFT airdrop. It is noteworthy that both English and US courts have shown openness to granting service via NFT, and it is a potential indicator of growing international alignment on what constitutes permissible methods of service in crypto disputes. This international alignment is desirable, given the borderless nature of cryptocurrency and its global reach.
1 24 June 2022, [2022] EWHC 1723 (Ch).
2 USD Coins, also known as one of the "stablecoins", is pegged to the US Dollar.
3 Above n.1 [39].
4 Above n.1 [40].
5 Gray v Hurley [2019] EWHC 1636 (QB); wherein the Court upheld an order for alternative service of the claim form via WhatsApp on the defendant in New Zealand.
6 CMOC Sales & Marketing Ltd v Persons Unknown [2018] EWHC 2230 (Comm); wherein the Court permitted alternative service of the claim form via Facebook Messenger and WhatsApp.
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