• LinkedIn
  • Facebook
  • X
  • Threads

The tulip trading case: English courts play a leading role in cryptocurrency and digital assets

7 June 2023

James McKenzie & Romy Descours-Karmitz examine the controversial Tulip Trading Case and how it has thrust novel issues regarding cryptocurrency into the English courts and the media spotlight. The case awaits full trial.

The regulation of digital assets is set for another interesting and fast-moving period – not least for the upcoming hearing in the next stage of Tulip Trading Ltd v Wladimir Jasper van der Laan & ors [2023] EWCA Civ 83 (3 February 2023) (Tulip Trading Case).

The Bitcoin Legal Defence Fund – backed by web entrepreneur and ex Twitter CEO Jack Dorsey – recently funded the filing of the defence of eleven of the developers involved in the case. This has shone an even greater spotlight on the matter.

The UK courts are increasingly scrutinising cryptocurrency and willing to use the tools they have at their disposal under English law to assist victims of crypto scams and thefts to track their stolen assets, identify the wrongdoers, and obtain appropriate remedies.

This is happening in tandem with policy efforts. In recent years, the UK Government has moved towards increased crypto regulation. With its consultation on what it calls a “world first” new regime of cryptocurrency regulations, the Government promises to bring the regulation of digital assets closer to that of traditional financial instruments.

Background of the case

Tulip Trading Ltd (TTL), the claimant in the action, is a Seychelles registered company whose main beneficial owner is Dr Craig Wright.

Dr Wright is an Australian citizen who has been living in England since 2015. He claims to be Satoshi Nakamoto, the purported creator of the Bitcoin system, and the author of the Bitcoin White Paper and the Bitcoin software code. Earlier this year, the High Court of England and Wales ruled that no copyright subsisted in the Bitcoin file format.

Due to disagreements between the Bitcoin developers about the management of the digital asset, in 2017, 2018 and 2020, three “forks” occurred, which resulted in the creation of three Bitcoin blockchains. Since then, four Bitcoin blockchains have been co-existing.

TTL claims to own a considerable sum of digital assets (approximatively £3 billion in Bitcoin) on four Bitcoin blockchain networks (Bitcoin SV (Satoshi Version) (BSV), Bitcoin Core (BTC), Bitcoin Cash (BCH), Bitcoin Cash ABC (BCHA)), but is unable to access them as the keys to these assets have been locked / stolen in a hack. As a result, TTL started proceedings in the High Court, arguing that the sixteen defendant developers owe fiduciary and tortious duties to crypto assets owners and that accordingly, the developers should assist TTL in regaining control and use of its assets.

As all the Defendants were based outside England, TTL applied to the High Court to obtain permission to serve out of the jurisdiction. Whilst fourteen out of sixteen defendants filed an objection to the jurisdiction of the English courts, the thirteenth defendant (on behalf of BTC) did not participate, and the Bitcoin Association for BSV (first defendant) reached a settlement agreement with TTL, in which the Bitcoin Association has agreed to release the software patch allowing miners to freeze stolen/lost coins on the blockchain and return them to their rightful owners.

The initial decision: dismissal for lack of jurisdiction

In a judgment in early 2022, English High Court Justice Sarah Falk denied jurisdiction over TTL’s claim against the sixteen Bitcoin developers alleged to be in charge of the four Bitcoin blockchains.

TTL had commenced proceedings in the High Court, arguing that the sixteen developers owe fiduciary and tortious duties to crypto owners and should assist TTL in regaining control of its assets. The defendants challenged the jurisdiction of the courts and in its 25 March 2022 judgment, the High Court accepted the defendants’ objection and set aside the order granting permission to serve the defendants out of jurisdiction, finding that it lacked jurisdiction to hear the dispute because TTL did not satisfy the first limb of the test for service out. That is, there was no serious issue to be tried.

The Court of Appeal’s decision: sensationally overturning the earlier decision

The Court of Appeal’s recent decision sensationally overturned the lower court’s judgment, finding that the High Court had jurisdiction to hear the claim because:

  • TTL had a real prospect of establishing that the developers owed fiduciary duties to crypto owners, and therefore there was a serious issue to be tried; and
  • Dismissing TTL’s case as unarguable without a full trial on the merits would mean assuming facts in the developers’ favour, and ruling against TTL based on findings impermissibly assumed against TTL.

Ramifications for crypto companies

Although the Court of Appeal did not make a finding on the merits of the case (as this will be resolved after a further hearing), by considering that there was a serious issue to be tried, it indicated that it was open to hearing arguments on the potential duties owed to Bitcoin owners.

A finding that the developers owed fiduciary duties to crypto owners would have significant ramifications for the crypto sector and the basic principles on which it is based: decentralization and anonymity.  However, the Court of Appeal’s recent decision is a long way from establishing the existence of fiduciary duties as alleged, as it would involve a significant development of the common law of fiduciary duty.  We will report further once the High Court decides on the merits of this key dispute.

Is crypto ‘property’? A possible new category of property

Although the Court of Appeal did not rule on this point, by holding in obiter that digital assets such as Bitcoin are property, its judgment appeared to endorse the Law Commission’s recommendations that none of the categories of personal property are adapted to crypto assets and that a third category of personal property known as “data objects” might be properly created to cover digital assets.  This appears to be followed by later decisions in other jurisdictions, see for example our post on a recent Hong Kong case confirming this stance here.

Key takeaways

The Tulip Trading case is significant not necessarily because it is likely to create new fiduciary relationships but because it portends greater regulation, scrutiny of and potential responsibility for actors in the blockchain.

In addition, this case, shows that, independent of current pending legislation, the common law will step in where the facts require. As do other cases we have reported on:

These cases also indicate a potential, incremental development of legal concepts to deal with this novel asset class.

Given recent market turbulence, there will be strong views about these developments, and they are set to make 2023 another interesting and fast-moving year for digital assets.



  • LinkedIn
  • Facebook
  • X
  • Threads