Crypto - What does the court say?

Transcript

good day everyone my name is michal apostol i am a uk lawyer and a romanian lawyer and i appear today on behalf of arf tech which is a discussion forum formed of legal tech people who are interested in the future of justice on arptech we try to encourage a dialogue between tech people and legal people because sometimes we feel like we speak different languages unfortunately and we try to enhance access to justice and this is the purpose of the presentation that i'm gonna have today um i'm gonna have a short overview of the core decisions so far

on crypto issues and here's the overview of my of the point i'm going to cover firstly i would need to mention that this does not represent legal advice by any far is just an informative presentation so do not take everything for granted because this is just something very very general and all the points i'm going to discuss need to meet further conditions to be actually applicable in practice so i'm going to try to make it as simple as possible and hopefully as accessible as possible um first i'm going to talk shop on what are the most common crypto disputes

then secondly what can a court do then we're going to talk about how you can serve your cre your claim um and after you serve a claim where the court has the power to do something about your claim and eventually once you serve your claim you need to prove it and i'm i'm going to touch up on how you can prove it and the last point will be a bit brief in terms of what are the legal issues i need to underline here that the court decision that i'm cited there are very general court decisions the the court did not go into detail to see if the parties actually have a right with something done very very general because

this were emergency application okay so most of common type of disputes are fraud disputes um and this you have the classical of someone sending you a link and you click on it and then you realize that your your wallet is empty or you're uh you're the victim of a fraud attack or a ramsom attack and so on um and i'm going to give an example here and this is actually taken from a core decision where an insurance company has been subject to a hacking attack uh they received this message on their monitor saying look we have encrypted all your

files if you want to take it back you need to pay us this amount of money and the court actually granted the application for for the insurance company and they were able to recover their money so this is just a classical example of fraud the next example is the breach of contract and i'm not referring here in general to a contract that is stamped signed between the parties but it can also involve a contract that has been formed via exchanging emails or even a telegram conversation and here you have an example from a court decision where the court decided that a simple exchange of of messages via telegram

um qualify as a contract as long as it's very clear what are the parties and what they are supposed to do and you have here the the quotation of of the case in case you're interested and i'm going to move forward with what can a court do right we go there and what do you ask the court what are their powers and and i highlighted there mostly the most common applications made so far and one of them is property injunction meaning that you claim uh ownership a property over your crypto against another person um and the court can give awarded saying it's your crypto the other person cannot

use it cannot do anything about it um and a bit further which is probably the most sought order in the uk court is the worldwide freezing order and this means that you go to the court and you say look i had krypto in this wallet i'd been hacked they took my crypto i want you to seize the crypto on whose ever whose ever hands they are anywhere in the world not necessarily in the uk anywhere in the world um and we're gonna see further that this type of application can be made against a person unknown so even if you don't know who is the person who took your assets you can still ask the court to order the decision against an unknown person as

long as you have some definable criteria like oh i have their wallet number i want i want the court to give this decision against the owner of this wallet number and the third one is in connection with the with the other two it's a disclosure order against third parties and this one is a is when you go to to the court and ask them the court to force the trading platform or the platform that that hosts the crypto to give information up on the wallet that took your crypto or the ip of the person or any traceable link to the person who took over your your assets

um the other one is a summary judgment that basically you want the court to give a quick decision on your case and you don't want to spend a lot of time going to witnesses and hearing uh having a lot of hearings you just want a quick solution the the next one is a straight application it's sort of a reverse um remedy in terms of if someone is claiming ownership over your crypto and you're you're just drawing into cold say someone saying that they have they have property rights of your crypto you can ask the court to strike out their application and dismiss it quickly without going into the details of the

dispute and the last two are basically for the purpose of keeping the anonymity of the proceedings and this is to protect the crypto owners uh for example if you've been the victim of our ransom attack as we've seen previously and you don't want that exposure if you are an insurance company and you have been hacked you don't want the people to know so you can ask the court to remain anonymous or ask the court to have all these hearings in private i'm gonna move a bit further um how do you serve your plane so we all know all this american movies with someone handing you the documents you've

been served um and apart from the classical way of serving a claim there are some new ways of serving a claim and the courts became very receptive and becoming a bit more tech oriented and you have here a couple of examples of court cases where the court accepted the service of claim on less classical means and we have a service of claim via email we have a service of claim via whatsapp so the court decided those two thick blue lines are enough for you to to prove that the other person had knowledge of the claim uh and the the third one which i think is the most innovative and this is quite recent uh the example there is from the new york ward but we also have an

example from the uk courts last i think last week where a person has lost access to their wallet um and could not identify who who took the wallet and what what they do exactly what they do eventually they went to the court and said please serve this application via nft to this wallet even if they didn't know the name of the person or the address or anything so the course served the application via an nft i'm having a bit of trouble okay the next threshold that you that you

need to prove when you're at the court you need to establish if the court has the power to intervene i mean you cannot go to every court in the world and say oh i want you to enforce this decision or do that you need to have a connection with that state and this is called in the league award does the court have jurisdiction well the simply put does the court have the power to do anything about your claim and firstly as a claimant you need to establish that you are either born in that country you resided there for a couple of years there's a sort of connection um and as i said you can remain anonymous it's not necessary you're not anonymous to the court you have to disclose your name to the court but your name will not

appear in the file um and the second one is you need to establish who's the other person who are you arguing with you can just argue in thin air and here as i said the court can grant application against people on low unless you have some definable criteria how to identify it this you don't need necessarily a name and an address in a classical way and of course if also you need to have any other sort of connection with the jurisdiction for example that you have a bank account there or maybe the loss happened there where the tokens were someone stored physically in a in a place in that country

and now the most fun part you need to prove what you what you want to from the court um and the question that arises is blockchain data of any relevance for a court does the court recognize it does it have any value and here we have two examples um one is based on new regulation so at least at european union level there's a regulation and you have there the quotation where it says that electronic data stamps in specific conditions can be recognized in court as admissible and under certain circumstances it can be

enjoy a presumption of authenticity as no one can contest it is taken as it is and as you will see here in this quotation the european union does not use the word blockchain at all it's something more vague but there's something that might be helpful um so i came across this paper from the european blockchain observatory and i look it up and european blockchain observatory is actually an initiative of the european commission so they have a voice of the european union and i think you can make an argument based on this and of course for the interpretation

that data store and blockchain is admissible in court and has value um you have here the the citation and the link in case you're interested oops okay now under which condition so previously we talked what's happening in european union and that will cover only 20 something countries but what happens in other countries so we have here an example from the chinese courts and this is a bit older i think it's from yeah it's from 2018 uh things might change a bit after but what the court basically says here when you where you have the underlying uh sort of the bolded text is that

data store and blockchain should not be um put to a higher standard of proof or a lower standard of proof should be taken in a neutral manner and as long as it complies with certain conditions you have it here in terms of certainty trustability and so on it is admissible in court okay hero it's it's a bit uh tricky because it's legally heavily but i'll try just to pinpoint the basics um and whenever you have a claim in court the court will ask do you have any rights over their asset you can't just

go the court i want that okay but you need to after you prove you need to prove that that asset is yours and it simplifies something from a legal perspective um and the first question that a court had to answer is this a property can a crypto be considered a property as a house as a share in a company um and so far luckily i will say at least the uk uk courts have been very um open to this idea and i've quoted here a case that refers to ethereum and in bitcoin where the court said that it has enough evidence to to conclude that a crypto can be a um can be a

property in from a legal point of view um and this was just at the beginning when the the court started to give decisions on on crypto uh but afterwards they started to develop a bit of mortgage topic and the parallel they made between a crypto between a couple another property they draw parallel between crypto and a share in a company because they are both they don't have a material way you you cannot touch a share uh but you know it's valuable so that was the parallel to arrive to the conclusion that a crypto can qualify as a property and the other

important issue that appears whenever there is a dispute between a crypto owner and the platform sometimes the platforms take more rights than the crypto owner think um and they started to claim ownership of their of though that crypto and they started to trade that in their behalf and make money um and the question is how from a legal point of view can the relationship between a crypto platform and a crypto owner uh qualify um and most of the courts have decided that this is a trust relationship i will not go into detail but it's a it's a legal um

it's a legal uh concept but the idea is that you do not transfer ownership to the platform if it if you can prove it's a trust you remain the proper the the property of your crypto um and here is on the slides the criteria that the court had in mind when deciding whether or not the account holder lost property of their uh their crypto when they hand it to the platform and one of the reason why the court decided it's your property it's not transferred it's because the the um the assets were held separately from all the other assets of the

platform and it could be easy to identify which one was um was the property of the of the claimant okay um i've reached the final of my presentation and i want to highlight that what i presented was a very very simplified manner um and even if you have a similar scenario as the one i described the court might reach a different decision because the facts might be different because there will be a different law applicable so this is just to give you another doubt it's possible but it will very much depend on the circumstances of your case um

and also the second point is that the position of the court might shift in time so i've i mentioned quite a few times that the uk courts have been very open but that not guaranteed that will be the same in the future um for example if you have a jurisdiction where the courts are encouraging this type of serving the application via nft recognize a cryptos property but then you have in a couple of i know years you have a decision from the government saying trading crypto is illegal then if you go to the court and try to enforce your any sort of rights of your crypto the court will say sorry we cannot do anything because now it became illegal even before everything was accepted so

this might change in time um and the last point i want to highlight is don't wait until you go to the court that might be a very painful and long time process so try to take precautionary measures read those boring terms and conditions if you're trading a lot of money take insurance against cyber attacks speak with a lawyer of course but first of all be cautious before doing something especially if it involves a lot a lot of money um i will just say thank you to everyone here's a link to our linkedin page where you can find what type of content we we publish what we discuss about in our

slack and you'll find information about how to join the forum and continue the conversation there if you have any questions i welcome them thank you very much for the presentation my question is that like you mentioned that the ownership between the platform and the crypto um owner or lender yeah user basically um have you seen any different in interpretation or any comment or any decision in regards to non-custodial wallets and the castle wallets no i haven't seen i think at the moment the decisions that appear before quartz

are very few and you have some general you have just the taste of what's happening out there they're not that granular and that's specific so it's just the courts are just getting accustomed to deal with these issues okay please the future of arbitration the question is about arbitration because our forum is mostly form of dispute resolution lawyers focusing on arbitration which is a specific time of a type of solving disputes outside court the future between arbitration and tech i think arbitration will provide

specialized knowledge for solving this type of disputes because whenever you go to court the judge that you have is a judge who has general knowledge about everything whereas when it comes to arbitration you can choose the person who decides your dispute based on their background and you can have a look at the beginning and see does this person know about crypto does a person know what a distributed ledger is does this person know what's an nft and that increases you the chances to have your decision decided by someone who has the technical knowledge please yeah thank you for the presentation

one question more on like the precedence like these like cases might set um is it like likely that like the cases that are like being like um like judged um now like will like take precedence like in the future like is it we just don't know and there's a lot of interesting um it very much depends on the jurisdiction um and the cases that aside and um are mostly from the uk courts uk courts follow up what is called a common law practice meaning that precedents are binding so whatever was decided before should be follow of course under different conditions so when we talk about common jurisdiction as uk is then it's very likely that the court

will follow what was the previously said and even in other jurisdictions like france francis called a civil law jurisdiction where the president does not have value even if the president is not binding as it means that the court is not obligated to follow it it will have a good persuasive value as in the court will be inclined to follow the same pattern just because in general they have the obligation to ensure a continuity and uniformity of of result but it's not mandatory they will do it just because it's important to to show that just is the same for everyone any other questions if not you'll find us on linkedin

and you can see the type of content we have there thank you so much