You've been served (by NFT)! - Boodle Hatfield

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22 Jul 2022

You’ve been served (by NFT)!

Written by

Alexander Martinelli View profile
Emilie Bladon View profile
3 min read

The High Court of England and Wales recently granted an Order giving rise to two significant developments in the digital asset space. Firstly, the Court granted an Order permitting service of Court proceedings via the transfer of a non-fungible token (or 'NFT'). Secondly, the Court held that cryptocurrency exchanges were deemed to hold identifiable cryptocurrency as constructive trustees.

The case itself concerned a claim brought by Fabrizio D'Aloia, founder of Microgame, an online gambling joint-stock company. Mr D'Aloia filed a claim against five cryptocurrency exchanges (Binance, Poloniex,, OKX (formerly OKEx) and Bitkub) following the misappropriation of cryptocurrency by unidentifiable fraudsters (referred to as 'persons unknown') who were operating a fraudulent clone online brokerage.

Mr Justice Trower, sitting in the Chancery Division of the High Court, granted an Order permitting Mr D'Aloia to serve court proceedings on the defendants by NFT airdrop via the transfer of a token on the blockchain into the two wallets in which he had initially deposited his cryptocurrency as well as by email.

This ruling has the potential to transform the service of documents and proceedings through the blockchain, preventing parties blaming unforeseeable circumstances like lost post for their failure to engage with proceedings. It is of even greater significance in the cryptocurrency sphere, enabling victims of fraud to serve proceedings on 'persons unknown', whose identities are often hidden.

In addition, the Court also recognised that Mr D'Aloia's identifiable cryptocurrency was being held on constructive trust by the five defendant cryptocurrency exchanges. An interpretation of cryptocurrency exchanges as constructive trustees creates a duty of care to the exchange users and makes these exchanges responsible for ensuring cryptocurrencies are ringfenced and not inappropriately moved or withdrawn. Failure to do so may render the exchanges liable for breach of trust, for which victims of cryptocurrency fraud could seek recompense through the Courts.

This significant development shows the Court's willingness to recognise and adopt new technologies and demonstrates how England and Wales is one of the leading jurisdictions when it comes to protecting victims of cryptoasset fraud. An increasingly long list of cases highlights that the Courts are keen to assist victims in recovering their digital assets at a time when regulators around the world are falling behind in attempts to legislate for cryptoassets and protect consumers.

NFT and cryptoasset holders would be wise to seek advice as soon as they discover their NFTs/cryptoassets may have been misappropriated. This welcome ruling gives NFT holders clearer legal recourse in such trying circumstances.

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