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Three Crypto firsts for the English courts

22 November 2022. Published by Dan Wyatt, Partner and George Fahey , Associate

The recent judgment handed down in Jones v Persons Unknown [2022] EWHC 2543 (Comm) contained three firsts in the English Court: the imposition of a constructive trust between a crypto exchange and a victim of crypto fraud, an order for delivery up of Bitcoin, and summary judgment served by NFT airdrop. It shows the English courts' continued willingness to push the boundaries of English law in relation to the recovery of misappropriated cryptoassets. The innovative application of English law procedures and remedies to the growing problem of crypto theft and fraud is of considerable assistance to the victims of this pernicious and widespread fraudulent activity.

In Jones, the court, in the absence of argument from the defendants, entered summary judgment in favour of the claimant victim of fraud. In so doing, the court held that the relevant misappropriated cryptocurrency was held on a constructive trust, from which flowed the court's order for the defendants (including an exchange) to deliver up the relevant cryptocurrency or otherwise restore it to the victim. The case is also the first reported example of a cryptocurrency fraud claim being determined by way of summary judgment with the court permitting the order to be served by NFT airdrop.

Facts of the case

The Claimant, Mr Jones, was the victim of a so-called 'Pig butchering' scam. Fraudsters persuaded him to transfer a total of 89.61616088 Bitcoin (worth approximately £1.54m as at the date of judgment) to a fake crypto investment platform promising high returns. Representatives of the fraudulent investment platform used remote desktop software to place non-existent 'trades' on Mr Jones's behalf. However, whenever Mr Jones asked to withdraw his crypto he was unable to do so, and instead received various excuses as to why his requested withdrawals were delayed.

Mr Jones instructed an investigations firm to trace his Bitcoin to a wallet associated with Huobi Global Limited (Huobi), a Seychelles company operating a crypto exchange. To seek to secure the misappropriated Bitcoin and prevent further dissipation, Mr Jones sought and obtained a worldwide freezing injunction against the unknown fraudsters, and a proprietary injunction against the fraudsters and Huobi. He also issued claims against the fraudsters for deceit and unjust enrichment, and against Huobi as constructive trustee of his Bitcoin. 

Neither the fraudsters nor Huobi responded to, or otherwise engaged in, the proceedings.  As such Mr Jones sought summary judgment on his claims.  Mr Jones's application for summary judgment succeeded. The decision is novel in that it is the first reported summary judgment in respect of a substantive claim arising from a cryptocurrency fraud, and because in reaching its decision the English court also, for the first time:

  1. found on the facts of the case that an exchange (Huobi) held the relevant Bitcoin on constructive trust for the victim of the fraud (Mr Jones); and
  2. ordered that the stolen Bitcoin be delivered up to the victim.

The English High Court also ordered an extension post-judgment of the freezing and proprietary injunctions already obtained until such time as the Bitcoin had been delivered up.

The legal principles considered and established in previous crypto-related cases (and in particular AA v Persons Unknown [2019] EWHC 3556 (Comm) and D'Aloia v Persons Unknown [2022] EWHC 1723) were key to Mr Jones achieving a successful outcome.

The existence of a constructive trust

A trust can be created – or might otherwise arise – when the legal ownership ('title') of property is held by one person (the trustee) but the right to receive or enjoy the benefit of that property belongs to another (the beneficiary). In Jones the court found that equity should intervene to impose a constructive trust between Huobi (as trustee of the Bitcoin transferred to the Huobi wallet by the fraudsters) and Mr Jones (as the beneficiary of his stolen Bitcoin) on the basis that (i) Huobi controlled the wallet into which the stolen Bitcoin was paid, and (ii) neither Huobi nor any other party had a legal interest in the Bitcoin that overrode Mr Jones's own interest as the rightful owner.

The question of whether it is possible for cryptoassets to be held on constructive trust previously arose in the case of D'Aloia. However, D'Aloia concerned an application for interim injunctive relief, and the threshold for the court granting that relief was only the existence of a 'good arguable case' that cryptoassets could be held on constructive trust. As such, the court in D'Aloia needed only to be (and ultimately was) satisfied that there was a good arguable case on that point, rather than needing to make a finding to the (higher) balance of probabilities standard that the exchange was in fact a constructive trustee. 

Jones is the first case in which the English court has held that an exchange held stolen crypto as constructive trustee and entered summary judgment on that basis albeit in circumstances where the exchange did not contest the proceedings. Accordingly, arguments as to whether an exchange could have a viable defence to such claims (for example, as a bona fide purchaser for value without notice) remain to be determined in future cases. Likewise, the court was informed that the Bitcoin held in that wallet could only be Bitcoin which had been transferred to the wallet by individuals connected with the fraud on the claimant. As such, the court was not required to grapple with issues of mixing of cryptoassets.  

Order to deliver up Bitcoin to Mr Jones

The Order giving effect to the judgment held the fraudsters and Huobi were liable on a joint and several basis. It also required the fraudsters and Huobi to deliver up or otherwise restore Mr Jones's property, namely the 89.61616088 Bitcoin. 

A key building block for these orders and the proprietary injunction was the now well-known decision in AA v Persons Unknown, which held (for the first time) that cryptoassets are a form of property. Accordingly, Mr Jones sought a proprietary remedy so as to impose a constructive trust over the misappropriated property, thereby allowing the English court to direct that the misappropriated property be transferred back to the rightful beneficiary (Mr Jones).  This is the first reported instance of such an order being made by the English courts in respect of a cryptoasset.

Service by NFT airdrop

The court stated that "no traditional means of service are likely to be effective in relation to the [fraudsters]" and "this is an exceptional case". The court therefore granted permission for service by various alternative means including via an NFT airdrop into the Huobi wallet. The court was satisfied that service by NFT airdrop was appropriate because it was important that the order came to the attention of the defendants quickly, given that 89.61616088 Bitcoin "could be dissipated at any moment simply at the flick of a mouse".  It considered that service via NFT was one of the means "most likely to bring the proceedings and this order to attention of" the fraudsters.

This decision follows D'Aloia which was the first case in which the English court permitted service by NFT airdrop. 


The court's finding that Mr Jones's Bitcoin was held on constructive trust by Huobi has significant implications for all crypto exchanges and platforms, insofar as their wallets might be used by fraudsters to hold stolen cryptoassets. The circumstances in which crypto exchanges will be held to hold cryptoassets on trust will undoubtedly be developed in future cases. In Jones, the court, having determined the relevant cryptoassets were held on constructive trust, was prepared to order the return of those cryptoassets to their rightful owner.

In the world of crypto fraud where the relevant fraudsters are often hard to identify, it seems likely that exchanges will increasingly find themselves subject to claims that they hold misappropriated cryptoassets as constructive trustees for the victims of fraud. In this case, the imposition of the trust was reasonably straightforward, being as Mr Jones contended a "stark and simple case of deceit and unjust enrichment" with no evidence to the contrary adduced by the fraudsters or submissions made by Huobi. There will, however, be other cases in which the imposition of such a trust will not be straightforward such as where the misappropriated cryptoassets have been mixed, transferred or otherwise dissipated. 

Ultimately, future court decisions are likely to provide great particularity as to the circumstances in which an exchange will be held liable as a constructive trustee but for the moment the decision in Jones provides a helpful precedent for those seeking to recover misappropriated cryptoassets. 

Additional author: Darragh Connell of Maitland Chambers