Summary judgment against persons unknown – a tale of two crypto judgments

Two recent crypto judgements in the High Court, Mooij v Persons Unknown (February 2024) and Boonyaem v Persons Unknown (December 2023) reached different conclusions regarding whether a summary judgment could be granted against unidentified (and unidentifiable) fraudsters, with Mooji deciding 'yes' and Boonyaem deciding 'no'.

Both judgments are considered below.

Boonyaem

In Boonyaem the claimant was fraudulently induced over a four-month period to purchase and send Tether tokens to a number of wallet addresses controlled by alleged fraudsters. On realising that she had been defrauded, she obtained freezing order relief against two categories of "persons unknown".¹ The categories corresponded with the categories of unknown person identified in the Supreme Court case Cameron v Liverpool Victoria Insurance Co Ltd [2019] UKSC 6, [2019] 1 WLR 147, namely:

1. unidentifiable persons (in this case the alleged fraudsters); and
2. unknown but identifiable individuals or entities (in this case the controllers of the wallets to which the Tether tokens had been traced).

She was also given permission to serve the defendants by way of alternative service via Facebook messenger, text message, WhatsApp, and by transferring a non-fungible token to the wallet addresses believed to be controlled by the alleged fraudsters.

The defendants failed to file acknowledgements of service or defences, and the claimant accordingly applied for summary judgment against them. The judge granted the application against the second category of persons unknown but not the first category on the basis that the first category did not "describe any identifiable person against whom judgment can properly be given".

The basis for the decision was the Supreme Court judgment in Cameron v Liverpool Victoria Insurance Co Ltd, a case involving a 'hit and run' road traffic accident caused by an unidentified and unidentifiable driver. That judgment addressed the circumstances in which such a defendant could be sued, finding on the facts that it was not possible for the claimant to sue the driver as they could not be identified. In particular the judge in Boonyaem relied upon paragraph 18 of Cameron:

"[...] One does not […] identify an unknown person simply by referring to something that he has done in the past […] The impossibility of service in such a case is due not just to the fact that the defendant cannot be found but to the fact that it is not known who the defendant is. The problem is conceptual and not just practical […]". (Emphasis added)

Mooij

In Mooij the claimant was also the victim of a cryptoasset fraud, sending just over 20 bitcoin to alleged fraudsters perpetrating an investment scam.

Having discovered the fraud, the claimant initially obtained a freezing injunction against the same two categories of persons unknown² as in Boonyaem, in respect of which the permission to serve them by alternative means was also granted. As in Boonyaem, the defendants also failed to engage with the proceedings.

The claimant later applied for summary judgment for (a) non-proprietary relief against the two categories of persons unknown and (b) proprietary relief, i.e. an order for delivery up of the relevant bitcoin, against additional named defendants being entities related to the Huobi cryptocurrency exchange, which controlled the wallets to which the claimant's bitcoin had been traced.

The summary judgment application was successful and notably was granted against the first category of persons unknown (i.e. the fraudsters) (as well as the other defendants), unlike in Boonyaem.

The reason for the divergence between the cases

The judge in Mooij acknowledged the difference in approach to Boonyaem, disagreeing with the interpretation of Cameron in that case.

In the judge's view, Cameron dealt with a situation where the anonymous nature of the hit and run driver meant that there was no way in which they could be notified of the proceedings. Such notification is a prerequisite for the court to have jurisdiction over the relevant defendant or alternatively to have jurisdiction that could be exercised in accordance with fundamental principles of justice.

In contrast to the hit and run driver in Cameron, the judge in Mooij concluded that it was possible to effect service on the fraudsters in both Mooij and Boonyaem via alternative service methods, as had been done for the freezing orders obtained initially in both sets of proceedings. The judge was therefore able to distinguish Cameron.

Comment

Essentially the key issue in both Boonyaem and Mooij was one of service – could the unknown and unidentifiable fraudsters be served with the judgments sought?  In both cases the Court had previously concluded that freezing orders could be served via NFT at the wallets controlled by the fraudsters, and as such the decision is Boonyaem not to grant summary judgment due to identification and service issues came as somewhat of a surprise.

Accordingly Mooij is a positive development in cryptocurrency case law, re-opening the door to summary judgment applications against unknown and potentially unidentifiable fraudsters who have misappropriated cryptoassets.  Given that service via NFT is likely to be possible in most instances of cryptoasset theft where stolen assets have been traced to identifiable wallets,³ this is an important development.

Prior to Boonyaem and Mooij, summary judgment against persons unknown in a crypto fraud context had been granted in Jones v Persons Unknown [2022] EWHC 2543 (Comm).⁴ Since those decisions, the court has also now granted default judgment against persons unknown in Mannarino v Persons Unknown [2023] EWHC 3176 (Ch).  While neither of the judgments in Jones and Mannarino grappled with the issues raised by Cameron, the outcome of both is consistent with the analysis in Mooij.

Why does any of this matter? Obtaining summary judgment against unidentifiable fraudsters in cases of cryptoasset theft can be a very powerful tool where it is possible to trace a claimant's misappropriated cryptocurrency to wallets held at reputable cryptocurrency exchanges likely to comply with English Court orders. Those wallets can then be targeted for enforcement.  This may be done on a proprietary basis, where the tracing concludes that the claimant's stolen cryptoassets remain in the wallets in question. Or it may be done on a personal basis, where the tracing concludes that the wallets in question are controlled by the unknown fraudsters such that they ought to be susceptible to enforcement as their assets. In that regard, the order for delivery up of crypto held at the Huobi exchange in Mooij replicates a similar order that was also made against Huobi in Jones, which incidentally involved the same solicitor/barrister pairing, and which the authors understand was successfully enforced.