The case (LMN v Bitflyer Holdings Inc. and others  EWHC 2954 (Comm)) was brought by a cryptocurrency exchange incorporated in England (LMN), which alleged that some two years ago, hackers obtained access to its systems and transferred millions of dollars-worth of cryptocurrency from it. Most of these assets were traced to a number of exchange addresses.
To continue pursuing the trail, LMN needed information from the exchanges about the individuals behind the transactions and what had become of the crypto-assets. LMN therefore sought orders for disclosure of the following information from the exchanges (in various parts of the world):
- the name of the holders of the accounts which the stolen cryptocurrencies had been allocated to/received by;
- the KYC/AML information provided in respect of the accounts;
- any information held that might identify the holder of the account;
- an explanation as to what had happened to the relevant cryptocurrency; and
- details of any accounts to which the relevant cryptocurrency had been transferred.
However, before it could obtain the information orders sought, LMN also needed permission from the court (i) to serve the defendants out of the jurisdiction, and (ii) to serve the defendants by alternative means to enable the orders to become effective more quickly than if traditional routes for serve were used.
Two hearings took place, both in private so as to avoid the risk of tipping off the putative fraudsters. Following the hearings, the court held as follows:
- LMN was permitted to add ‘persons unknown’ as defendants where it was not clear which precise entity should be named in the proceedings, and/or may be the subject of the information order.
- LMN was permitted to serve the defendants out of the jurisdiction. This was simplified using the new Gateway 25 for service out that was introduced in October 2022. Please click here for further details of this Gateway
- LMN was granted permission to serve the defendants by email.
- The information orders being sought by LMN were granted on the basis of the Banker’s Trust jurisdiction. The judge also noted that, given that there seemed to be no question of any fraud or wrongdoing on the part of the exchanges, there was also a good arguable case that relief should be granted under the Norwich Pharmacal jurisdiction. This could be another material shift in the procedural route that could be adopted in these sort of applications in the future.
The judgment in LMN is another example of the pace of development in the jurisprudence and approach of the English courts in the fight against crypto fraud:
- The case demonstrates that the English courts remain willing to assist victims of crypto fraud.
- The court found that there clearly was a good arguable case that the dispute fell within the scope of the newly created Gateway 25, meaning that the defendants could be served out of the jurisdiction. The use of this new Gateway 25 by victims of crypto fraud is expected to increase, and this judgment sets good foundations.
- In this case, LMN was not able to determine, for some of the crypto exchanges in its application, the precise entity and/or group entities which should be named in the proceedings and/or subject to the information orders or the related confidentiality provisions. As a means of trying to overcome those issues, the court gave permission for the addition of a number of ‘persons unknown’ as defendants, which gave broader scope to the orders and enabled them to apply to any companies or entities who own and/or operate one of the named exchanges.
Although the practical difficulties associated with recovering stolen crypto assets remain, the decision in the LMN case demonstrates the English courts’ continued readiness to use the tools at their disposal, and where necessary, offer solutions to assist victims of fraud.