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For the first time in Singapore, the High Court has recognized cryptocurrency as property and granted proprietary injunctions against unknown persons who were suspected of having stolen cryptocurrency. The Court also made disclosure orders against cryptocurrency exchanges with which the cryptocurrency was held, requiring them to provide materials to assist with asset tracing.

A. What happened between the parties?

The plaintiff held Bitcoins and Ethereum tokens (the Stolen Cryptocurrency Assets) in two digital, decentralized hot (i.e., online) wallets accessible by mobile phone applications and protected with passwords. Both wallets utilized the recovery seed methodology to recover passwords and allow access to the wallets in case the plaintiffs mobile phone was lost or destroyed.

In January 2021, while on vacation with friends in Mexico, the plaintiff gave an acquaintance the combination to his safe to retrieve cash. This safe also contained the recovery seeds to his digital wallets. The acquaintance repeated the safe combination aloud in a room with other people.

The next day, the plaintiff discovered that the Stolen Cryptocurrency Assets, worth approximately $7 million, were withdrawn from his digital wallets without his knowledge or consent. The plaintiff believed that the unknown persons who withdrew the Stolen Cryptocurrency Assets (the First Defendants) obtained the recovery seeds from the safe and used them to transfer the Stolen Cryptocurrency Assets.

The plaintiffs investigations and tracing efforts indicated that the Stolen Cryptocurrency Assets were transferred to digital wallets that were held at two cryptocurrency exchanges with operations in Singapore (the Second and Third Defendants).

The plaintiff then commenced proceedings in Singapore and requested the High Court to grant the following orders:

B. What did the Court decide?

The Court granted the proprietary injunction and the disclosure orders. The Court also granted a worldwide freezing injunction against the First Defendants, even though the identities of the First Defendants were unknown. A summary of the Courts decision and analysis is set out below.

The Court has jurisdiction over unknown persons

The Court held that it had jurisdiction to grant injunctions against unknown persons as Singapores Rules of Court do not require the identity of the defendant to be known. In reaching this decision, the Court referred to English and Malaysian cases decided on similarly worded procedural rules.

Nevertheless, the Court noted that the description of the unknown person(s) must be sufficiently certain as to identify those who do and do not fall within it. In this case, the First Defendants were described as any person or entity who carried out, participated in or assisted in the theft of the plaintiffs [Stolen] Cryptocurrency Assets on or around 8 January 2021, save for the provision of cryptocurrency hosting or trading facilities. The Court held that this description met the required standard of certainty.

Cryptocurrency can be protected by proprietary injunctions as cryptocurrency assets are capable of giving rise to proprietary rights

To obtain the proprietary injunction order, the plaintiff had to show that cryptocurrency assets are capable of giving rise to proprietary rights. This issue had been left open by the Singapore Court of Appeal inQuoine Pte Ltd v. B2C2 Ltd[2020] 2 SLR 20.

The Court held that the Stolen Cryptocurrency Assets are assets capable of giving rise to proprietary rights for the following reasons:

In reaching this decision, the Court also referred to other common law jurisdictions regarding cryptocurrency assets, in particular, the New Zealand High Court decision inRuscoe v. Cryptopia Ltd[2020] 2 NZLR 809, which recognized cryptocurrency as a form of property. Further, the decisions of the English High Court inElena Vorotyntseva v. Money-4 Ltd[2018] EWHC 2596 and the Supreme Court of British Columbia inCopytrack Pte Ltd v. Wall[2018] BCSC 1709 were also instructive as both cases implicitly accepted that cryptocurrency may be regarded as property.

Further and on the facts, the Court had little hesitation in holding that the balance of convenience clearly lay in favour of granting the proprietary injunction, as there was a real risk that the First Defendants would dissipate the Stolen Cryptocurrency Assets.

Disclosure orders

The plaintiff sought disclosure orders requiring the Second and Third Defendants to provide the following information:

The Court held that it was just and convenient to grant the disclosure orders as they were needed for the plaintiff to understand what remained of the Stolen Cryptocurrency Assets as well as the whereabouts of these assets. Further, the information sought would facilitate the identification of the First Defendants or any other persons that may have assisted or acted in concert with them.

C. What does this decision mean for you?

This is a welcome decision as it indicates that the Singapore Courts are prepared to recognize and protect cryptocurrencies as properties by granting proprietary injunctions against cryptocurrency theft, even where the identity of the perpetrators is unknown. This decision also demonstrates that Courts are prepared to make disclosure orders against cryptocurrency exchanges that are based or have operations in Singapore, so that victims of cryptocurrency theft or fraud are able to access critical information to assist them in freezing and tracing the stolen assets.

For cryptocurrency exchanges that are based or have operations in Singapore, this decision means that there is now a possibility of being served with disclosure orders issued by the Singapore Courts to disclose information relating to user accounts and freezing injunctions to freeze cryptocurrency held in user accounts. Such Court orders will override any contractual terms between an exchange and its users, for example, terms relating to the users ability to transact in the cryptocurrency and the exchanges duty of confidentiality in relation to user information.

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Singapore High Court issues injunctions against unknown individuals for cryptocurrency theft, and orders cryptocurrency exchanges to disclose...