Parties in the latest round of litigation involving a controversial claim to have originated the Bitcoin digital currency have been warned by a judge against using the courts as a vehicle for their animosity. Ruling in an application over the choice of London as a jurisdiction, Mrs Justice Falk also set out what was hailed as a landmark statement of the law relating to blockchain encryption technology.

In particular she found that developers of open source Bitcoin software do not owe fiduciary duties or a common law duty of care to those who use that code to store or trade their cryptoassets.

In Tulip Trading Ltd v Bitcoin Association for BSV & others a Seychelles company owned by Dr Craig Wright, an Australian computer scientist resident in the UK, sought to order overseas Bitcoin developers to write a software 'patch' to enable the recovery of bitcoins worth several billion pounds stolen in a hack by unknown parties. Wright claims to be 'Satoshi Nakamoto' the pseudonymous author of the 2008 white paper which created Bitcoin. 

This claim is 'heavily contested', Falk ruled, noting that 'a significant level of animosity exists which is much broader than, and the origins of which pre-date, the particular dispute before this court'. As a result, there is 'very little common ground between the parties'. 

She reminded the parties: 'The court is and will remain concerned to ensure that these proceedings are not used as a vehicle to air those broader issues, as opposed to ensuring that the issues actually before it are properly determined.' She also criticised the 'volumnious' evidence produced at the three-day hearing' which she described as an unhelpful distraction.'

'The apparent lack of co-operation between the parties to ensure that the case was presented in a manageable way in the time available, preferably with an agreed list of issues to address, did not assist the court.'

Falk's ruling is one of the first in the High Court to cite the UK Jurisdiction Taskforce’s 2019 legal statement on the position of cryptoassets. It also considers the rights and duties that emerge from the distinctive nature of blockchain technology, including whether a party is in breach of a duty of care by failing to assist those who have lost their private encryption keys or had them stolen.

She concluded that Wright had failed to demonstrate that his relationship with the defendants involved a duty to change their software to remedy the actions of the unknown hacker. 'The failures alleged are failures to make changes to how the networks work, and were intended to work, rather than to address a known defect.' [Tulip Trading] 'has not established a serious issue to be tried on the merits of the claim'. As a result she set aside an order granting permission to serve the claim form out of the jurisdiction.

However she added that, had there been an issue to be tried 'I would have been satisfied that England is the appropriate forum'. 

James Ramsden QC of Astraea Group, which acted for successful defendants, said: 'The judgment is the most important so far in the cryptocurrency and blockchain space as its consequences are fundamental to how the underlying technology works within the law. The court found that open source Bitcoin software developers whose code is widely adopted and used to trade or store cryptocurrencies owe neither fiduciary duties nor a common law duty of care to those who use that code to store or trade their crypto assets.'

A contrary result, Ramsden said, would have had a chilling effect on the crypto space and on the blockchain more widely. 

Oliver Cain, partner at Ontier LLP which acted for Wright's company, said he would seek leave to appeal. 

John Wardell QC, Bobby Friedman and Sri Carmichael, instructed by Ontier LLP, appeared for Tulip Trading Limited; James Ramsden QC, instructed by Bird & Bird LLP appeared for 12 defendants; Matthew Thorne, instructed by O'Melveny & Myers LLP for two defendants. 


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