The rise of cryptocurrency has created a wave of opportunities—and legal challenges. While digital currencies have been embraced by individuals and even investment portfolios, their recognition within the legal framework of England and Wales remains in flux. The case of D’Aloia v Persons Unknown Category A and Others has added an important chapter to this evolving area, testing the status of crypto assets in a defended environment for the first time.
What Are Crypto Assets?
At its core, cryptocurrency is a digital currency that operates on decentralized networks known as blockchains. Unlike traditional money, crypto assets bypass banks, relying on blockchain technology to record transactions securely. However, their speculative nature, combined with a lack of regulation, has left their legal recognition uncertain.
Despite this, the use of cryptocurrency has surged in recent years. Large investment firms now offer cryptocurrencies as part of diversified portfolios, and the courts have acknowledged their importance in protecting ownership rights. But with this rapid adoption comes vulnerabilities—particularly the risk of fraud, given the often-untraceable nature of cryptocurrency transfers between digital wallets.
The Case: D’Aloia v Persons Unknown
In this case, the claimant, Mr. D’Aloia, was deceived into transferring a significant amount of cryptocurrency to what he believed was a reputable brokerage firm. Upon discovering the fraud, he engaged a crypto expert to trace the funds. The expert identified that, after multiple transfers, the assets were likely held by a customer of Bitkub Online Co Ltd, a Thai crypto exchange.
The claimant brought claims of unjust enrichment and constructive trust against Bitkub, asserting that the exchange had notice of suspicious account activity and failed to act appropriately. Bitkub, however, denied the claims, arguing that it had acted in good faith and had no knowledge of the fraud.
Key Legal Challenges: Ownership and Tracing
Before addressing the claims, the court had to determine whether the crypto assets held by Bitkub’s customer were indeed those of the claimant. Expert evidence was scrutinised, but the court found it inconclusive due to the mixing of funds during subsequent transfers. As a result, ownership could not be established.
Moreover, the court ruled that even if the assets had been identified, any claim of constructive trust would apply to the unknown fraudsters—not Bitkub. Consequently, the claim was dismissed.
Why This Case Matters
While the claim ultimately failed, the case set an important precedent. The court recognised cryptocurrency as a proprietary asset, treating it as if it were any other asset under English and Welsh law. The decision provides a degree of reassurance to crypto holders that their ownership rights can be asserted in legal disputes.
However, the ruling also highlights the challenges of dealing with crypto assets, particularly in tracing and recovering them. The complexity of digital currency transactions and the limitations of current forensic methods make it difficult to present the robust evidence required for successful claims.
What This Means for Crypto Holders
For individuals dealing with disputes involving cryptocurrency, this case underscores the importance of expert evidence and legal guidance. As the legal recognition of crypto assets continues to evolve, navigating these waters can be challenging without specialist support.
How FJG’s Dispute Resolution Team Can Help
At FJG, our dispute resolution team is well-equipped to assist clients with complex cases involving cryptocurrency. Whether you’re dealing with fraud, ownership disputes, or tracing lost assets, our experienced solicitors offer tailored advice and practical solutions. We understand the nuances of this emerging area and are committed to protecting your interests.
Mario Mastantuono at Fisher Jones Greenwood LLP, is here to guide you and provide expert advice regarding how the jurisdiction of England and Wales deals with Crypto assets. For further information or to discuss your specific situation, please do not hesitate to contact Mario on 01206 835269 or complete our online enquiry form.