David McIlroy of Forum Chambers was recently instructed by Steven Murray and Emma Clarkson of HCR Law and appeared on behalf of Mr Jones in Jones v Persons Unknown. It is a case which highlights the importance of understanding both the legal and practical realities of how cryptocurrency exchanges hold digital assets. Mr Jones was defrauded of nearly 90 Bitcoin by scammers and had expert evidence which traced the stolen funds to a wallet at the Huobi exchange. He obtained judgment against Huobi, which satisfied the judgment by returning 98 Bitcoin to him.
Two years later, Kyrrex Ltd asserted that it was the owner of Bitcoin which Huobi had deducted to satisfy the judgment. Crucially, although Huobi’s terms said that the wallet was a custodial wallet, Huobi in fact held Kyrrex’s Bitcoin in a wallet address which also held Bitcoin belonging to other parties. Kyrrex therefore could not show that the deduction of the Bitcoin was a direct effect of the judgment as opposed to a unilateral decision by Huobi. This, and the delay, were fatal to Kyrrex’s application. The case underlines the need for those choosing to hold their cryptocurrencies at exchanges to consider both what exchange’s terms say and how those exchanges operate in practice.
You can read our full breakdown of the case here.
