High Court orders delivery up of stolen Bitcoin against crypto exchange

The High Court held, on an uncontested summary judgment application, that the crypto exchange controlling the wallet into which the claimant’s stolen bitcoin was transferred sat in a position of constructive trustee as against the claimant. It ordered delivery up of the bitcoin as against the fraudsters as well as the exchange: Jones v Persons Unknown [2022] EWHC 2543 (Comm).

The court’s finding that the defendant crypto exchange should be treated as a constructive trustee in relation to the wallet containing stolen bitcoin is of interest not only for those investing in cryptoassets, but also for crypto exchanges and custodians that may control wallets operated by fraudsters.

The court also gave permission to serve the orders on the defendants out of the jurisdiction, and for alternative service including by means of a non-fungible token (NFT) air drop to bring the order to the defendants’ attention expeditiously. It is worth noting that, as a result of rule changes that came into force at the beginning of October, the court’s permission is no longer needed to serve an order (or other court document) out of the jurisdiction where the claim form was served on the defendant out of the jurisdiction with permission, or the court’s permission was not required for service. Continue reading

Supreme Court: Bribes received by an agent are held on trust for the principal

Who is the rightful owner of a bribe? Is a bribe or secret commission received by an agent “held on trust” for his principal? Or is the principal’s claim against the agent a personal one for equitable compensation equal to the value of the bribe or commission?

The issue is of critical importance. It affects everything in litigation against dishonest agents, from the nature of the injunctive relief available at the outset to the rights in his insolvency. Perhaps most importantly of all, it affects whether the bribe can be “traced” into the hands of third parties and recovered as “trust” property.

After over 100 years of judicial wrangling and academic debate, the Supreme Court decided last week that bribes and secret commissions are held on trust by an agent for his principal: FHR European Ventures LLP and others (Respondents) v Cedar Capital Partners LLC (Appellant) [2014] UKSC 45. In doing so, the Supreme Court overturned various well-known authorities (including Lister v Stubbs and Sinclair v Versailles – see post) and aligned English law with several jurisdictions which long ago broadened the availability of proprietary remedies.

The implications are significant. Most importantly, the principal can claim a proprietary remedy against the bribe/secret commission itself, rather than a personal one against the defaulting agent. Robert Hunter and Tom Wood consider the decision below. Continue reading