Crypto fraud victim wins information order against overseas exchanges

A victim of a $10.7m cryptocurrency fraud can obtain information about the alleged perpetrators from exchanges located in at least six jurisdictions around the world, the High Court has ruled.

In LMN v Bitflyer and Others, The Honourable Mr Justice Butcher found that UK-based cryptocurrency exchange LMN was entitled to an order requiring the provision of information and documentation from six businesses based abroad: Bitflyer, Binance, Payward, Luno PTE, Coinbase Global and Huobi Global. The first of two hearings was held in private without notice to the defendants. 

The court heard that LMN lost cryptoassets with a total value of $10.7m in a 2020 hack. Crypto experts traced $1.7m of the assets to 26 accounts, all of which were owned or operated by one of the six exchanges. LMN applied for so-called Bankers Trust orders to be made against the six exchanges, requiring them to disclose information that could help trace and identify those holding the allegedly misappropriated assets.  

The court ruled that a further hearing would be necessary, at which all relevant parties should be given notice to attend. In the event, two did so. 

The judge found that the Bankers Trust jurisdiction applied. The judge rejected an argument on behalf of Coinbase that the movement of assets on the bitcoin network may create a new asset rather than a transfer. Meanwhile, the court was persuaded that it could grant such an order even though the exchanges were not UK-based. This was because the circumstances in which the English courts can grant permission to serve civil claims out of the jurisdiction were expanded from October, when paragraph 3.1(25) of Practice Direction 6B of the Civil Procedure Rules came into effect.  

The High Court ordered the exchanges to provide the names of the account holders, all 'know your customer’ information and other documents and information relating to the accounts. Corporate crime specialist Rahman Ravelli, which acted for LMN, said it was first successful application based on the new 'disclosure gateway'. 

Syed Rahman, partner, described the result as 'a huge step forward' for parties trying to recover assets that have been moved across borders. 'This ruling is concrete proof of the value of the change to Practice Direction 6B and the possibilities that it offers to anyone facing the task of tracing and recovering what is theirs,' he said. 

'The number of cross-border fraud claims continues to increase. Yet the judgment in this case is a sign that the courts continue to respond to the challenges posed by the rapidly-evolving crypto sector.'  

Josephine Davies and Sam Goodman, instructed by Rahman Ravelli appeared for LMN; Nik Yeo, instructed by DLA Piper for Coinbase at the second hearing. 

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