Legal Update: Legal Precedent on Injunction against Cryptocurrency

2023/01/18

In 2022 there has been a legal precedent in Hong Kong, in which an assignor of cryptocurrency managed to obtain an Order in his favor. The Court decided that the cryptocurrency he assigned to the Defendant was held on trust for the assignor’s benefit. To a certain extent we can note that the Court may treat cryptocurrency as a kind of asset and the law on properties may be applicable.

In the case of Nico Constantijn Antonius Samara v Stive Jean Paul Dan [2022] HKCFI 1254, the Plaintiff is a foreigner and at once he established an oral agency agreement with the Defendant bitcoin trader that for every sale of the Plaintiff’s 1,000 bitcoin by the Defendant, the Defendant shall be entitled to a commission. The remaining proceeds shall be deposited in the Defendant’s bank account in Hong Kong which the Plaintiff had access, so that the Plaintiff could transfer the proceeds to his own accounts. Upon failure to obtain such proceeds the Plaintiff commenced legal proceedings against the Defendant.

After consideration of the Plaintiff’s evidence, the Judge declared that the remaining bitcoins held by the Defendant and the proceeds of sale of such bitcoins were held on trust for the Plaintiff. The Court also granted an injunction over the sale proceeds and the Defendant’s bitcoins. It is noteworthy in this case that the Court looked at the historical transaction sequence of the bitcoin to identify whether the Defendant’s bitcoins were from the Plaintiff.

From this case it appears that the Court may regard cryptocurrencies as properties and the law of properties may apply. In practice, it is suggested that the businesses dealing with crypto-assets shall attempt to better protection in doing so, such as adopting a well-written contracts, maintenance of transaction records and keeping a close eye on the relevant deals.

The extract of this Article has been published in our firm’s 12^th issue of Newsletter