The Singapore High Court in CLM v CLN and others [2022] SGHC 46 has decided on novel points of law relating to cryptocurrencies.  Significantly, the court granted in junctive relief against unidentified persons and recognised that cryptocurrencies were capable of giving rise to proprietary rights that can be protected by proprietary injunctions.

Background

Over US$7 million worth of Bitcoin and Ethereum (the Stolen Tokens) were allegedly misappropriated and withdrawn from the plaintiff’s digital wallet by unidentified persons.  A portion of the Stolen Tokens were traced to digital wallets controlled by certain cryptocurrency exchanges with operation sin Singapore.  The plaintiff then commenced proceedings against these unidentified persons and cryptocurrency exchanges (collectively, the Exchanges) to trace and recover the Stolen Tokens.

The Decision of the High Court

The court granted (a) a proprietary injunction and a worldwide freezing injunction against the unidentified thieves to prevent them from dealing with or dissipating the Stolen Tokens and (b) ancillary disclosure orders against the Exchanges for information and documents relating to accounts that were credited with part of the Stolen Tokens.  In reaching that decision, the court concluded on two key points of law.

First, a defendant does not need to be specifically named in proceedings provided the description of such unidentified defendants is sufficiently certain as to identify those who are included in and excluded from the description. In that regard, the court noted that the following description was considered sufficiently certain:

“[A]ny person or entity who carried out, participated in or assistant in the theft of the Plaintiff’s Cryptocurrency Assets on or around 8 January 2021, save for the provision of cryptocurrency hosting or trading facilities.”

Second, the court recognised that cryptocurrencies satisfied the traditional definition of a property right because cryptocurrencies:

(a)  are definable – they are sufficiently distinct and capable of being isolated from other assets;

(b)  are identifiable by third parties – they can have an owner who can exclude others from benefiting from them;

(c)  are capable in their nature of assumption by third parties – they are potentially desirable and third parties respect their owners’ rights in them; and

(d)  have some degree of permanence or stability – they exist and are stable in the blockchain.  

In other words, cryptocurrencies exhibited the characteristics of intangible property as being an identifiable thing of value.  Thus, the court concluded that cryptocurrencies are capable of giving rise to proprietary rights which could be protected by a proprietary injunction.

Key Takeaway

Considering the nature of cryptocurrencies, this decision is significant as it suggests that the courts are willing to afford a greater degree of protection for cryptocurrency owners.  Institutional FinTech players with operations in Singapore, should review its internal policies and procedures to ensure that they can comply with disclosure or freezing orders relating to cryptocurrencies if compelled to do so by Singapore courts.

For More Information

OrionW regularly advises clients on FinTech matters.  For more information about FinTech regulations, or if you have questions about this article, please contact us at fintech@orionw.com.

Disclaimer: This article is for general information only and does not constitute legal advice.

‍