- Home
- News & insights
- Insights
- Bitcoin developers do not have a duty to assist owners in recovering lost cryptocurrency
- On this page
4 April 2022
Disputes Quick Read – 51 of 99 Insights
Don't lose your keys: Bitcoin developers do not have a duty to assist owners in recovering lost cryptocurrency
- Briefing
In the latest chapter in the high profile Tulip litigation (Tulip Trading Limited v Bitcoin Association for BSV and others [2022] EWHC 667 (Ch)), the High Court found that the Defendant software developers did not owe any fiduciary or tortious duties to the claimant, Tulip Trading Limited ("Tulip"), to help it in regaining control and use of its Bitcoin.
The Bitcoin in question was said to be worth U$4.5 billion and had allegedly been subject to a hack that resulted in the deletion of the private keys. Tulip alleged it would be relatively straightforward for the Defendants to write and implement a software "patch" to enable the Claimant to regain control of its assets – a point which the Defendants challenged as being inconsistent with the concept of a decentralised system, and which they claimed would in any event likely be ineffective and simply result in a "fork" in the network.
Background to the claim
Tulip is a Seychelles incorporated company whose ultimate beneficial owners are Dr Craig Wright and his family, who are residents in England. The litigation has been the subject of a high degree of publicity, partly due to Dr Wright's (disputed) claim that he is Satoshi Nakamoto – the author of the Bitcoin white paper. The Defendants were said to be the core developers and/or otherwise in control of four relevant digital asset networks. None of the Defendants are based in England and Wales, although in May 2021, the Court granted Tulip permission to serve out of the jurisdiction. A number of Defendants issued a jurisdictional challenge concerning the order for permission to serve out, and the latest decision arises as a result of the Court's determination of that application. It is therefore relevant to note that, like many cases in the crypto arena, this was an interim application rather than a full trial.
To be successful in their jurisdictional challenge, the Defendants had to show that the claim did not meet at least one of the following criteria:
- (i) there was a serious issue to be tried
- (ii) there was a good arguable case that the claim fell within one or more of the jurisdictional gateways
- (iii) in all the circumstances English was the appropriate forum and the Court should exercise its discretion to permit service out of the jurisdiction.
While the Court considered each of these tests for completeness, it overturned the permission to serve out on the basis that the claim did not meet limb (i) of the test. The Defendants therefore overcame a high threshold with the Court finding itself unable to conclude that Tulip had a realistic prospect of establishing that the facts pleaded amount to a breach of fiduciary and/or tortious duty owed to it by the Defendants.
Reasons for the Court's decision
In reaching its decision that the Defendants did not owe any fiduciary or tortious duties as alleged, one of the factors on which the Court placed weight was that the developers of the network software were a fluctuating body of contributors without any organisation or structure. It held that:
- In relation to the alleged fiduciary duties, it could not realistically be argued that the Defendants owed continuing obligations to, for example, remain as developers and make future updates whenever it might be in the interests of owners of Bitcoin to do so.
- In relation to the alleged tortious duties, the required special relationship to found a duty of care could not be said to be an incremental extension of the existing law, and (particularly given its unlimited nature) could not realistically be argued to be fair, just and reasonable. The Court stated that it was hard to see how there was any basis for imposing an obligation which would require developers to continue to be involved and make changes when required by Bitcoin owners, when they have given no previous commitment or assurance that they would do so and their previous involvement may well have been intermittent.
Future trends
This is the first English Court decision considering the role and duties of cryptocurrency software developers, although we anticipate that this will become an emerging trend in the case law surrounding digital assets and smart contracts, with increased consideration of the intentions of contracting parties and programmers.
We think the decision in this case was unsurprising, but it is nonetheless reassuring for the cryptoasset and blockchain industry. No doubt we will continue to see claims being brought seeking help where eg private keys have been lost, or smart contracts have gone wrong, and the law will need to continue to adapt to respond – for now, the courts of England and Wales are continuing to showcase their ability to rise to the challenges that new and developing technology brings.
In this series
Changes to the privilege rules between companies and shareholders
6 December 2024
Victory for energy companies/defeat for the environment?
14 November 2024
Failure to prevent fraud offence to come into force in September 2025
14 November 2024
by Emma Allen
Essex Cricket Club charged by Cricket Regulator
30 October 2024
by Multiple authors
UK introduces mandatory reimbursement rules to combat APP fraud
15 October 2024
New SFO Director announces bold plans to tackle fraud
21 March 2024
by Emma Allen, Amy Cheng
First of its kind judicial guidance on the use of AI in the courts
14 December 2023
Witness familiarisation - does it affect the court's assessment of witness credibility?
13 December 2023
The use of AI in Trial Witness Statements post-PD 57AC
23 October 2023
by Multiple authors
CAT to hear the first application for a collective settlement approval order
17 October 2023
Pre-Action Protocols – what is different?
12 September 2023
by Tom Charnley
Failure to prevent fraud – a new offence?
14 August 2023
by Multiple authors
Supreme Court rules that APP fraud victims cannot rely on Quincecare Duty
4 August 2023
by Multiple authors
The Law Commission's Consultation Process on the Arbitration Act 1996 – taking stock
21 July 2023
What does the latest decision of the CAT in the Mastercard/Visa proceedings mean for class actions?
10 July 2023
Disputes Quick Read: ClientEarth refused permission to pursue directors of Shell
1 June 2023
by Multiple authors
Disputes Quick Read – developments in the fixed costs regime
3 May 2023
by James Bryden
Disputes Quick Read: Service by email – are the rules any clearer?
20 April 2023
by James Bryden
Disputes Quick Read - What do practitioners think about making alternative dispute resolution (ADR) compulsory?
8 March 2023
Disputes Quick Read: What are the litigation trends for 2023?
2 March 2023
Disputes Quick Read: further guidance on witness statement preparation rules
14 February 2023
Disputes Quick Read: A cautionary tale – settlement agreement (un)wittingly releases all claims for fraud
13 February 2023
Disputes Quick Read: Why the UK should join the Hague Judgments Convention 2019
8 February 2023
Disputes Quick Read: extensive information orders granted against crypto exchanges following hack
19 January 2023
Disputes Quick Read: A new approach to giving evidence? WhatsApp with that?
3 October 2022
Disputes Quick Read: Ethereum Merge - what legal issues arise?
22 September 2022
by Ben Jones, Emma Allen
Disputes Quick Read: New obligations on cryptobusinesses to report under the UK sanctions regime
9 August 2022
by Nick Maday
Disputes Quick Read: Disclosure - What information can be redacted?
25 July 2022
Disputes Quick Read: what claims exist when a smart contract is breached?
6 July 2022
by Emma Allen
Disputes Quick Read: New gateway for serving Norwich Pharmacal Orders and Bankers Trust orders out of the jurisdiction
Welcome news for those pursuing fraud claims in the English Courts
28 July 2022
Disputes Quick Read: Defining the duty - the limits of the responsibility assumed by professionals
27 July 2022
by Stuart Broom
Disputes Quick Read: Climate change litigation – successful challenge to government's Net Zero Strategy
29 July 2022
Disputes Quick Read: Judicial Review and Courts Act 2022 – now in force
17 June 2022
Disputes Quick Read: an important reminder of the duty to disclose electronic documents in native format
13 June 2022
Disputes Quick Read: ENRC prevails in claim against former solicitor
26 May 2022
Disputes Quick Read: Climate change litigation update – McGaughey v Universities Superannuation Scheme Limited
31 May 2022
by Multiple authors
Don't lose your keys: Bitcoin developers do not have a duty to assist owners in recovering lost cryptocurrency
4 April 2022
Disputes Quick Read: The new witness statement preparation rules – a year on
5 April 2022
Disputes Quick Read: ClientEarth v Shell – climate change litigation shifts focus to UK companies
31 March 2022
by Multiple authors
Disputes Quick Read: High Court rules that failure to provide adequate data security is not a positive act
21 September 2021
by Multiple authors
Disputes Quick Read: Key changes to the Disclosure Pilot Scheme
13 September 2021
Disputes Quick Read: Judicial Review and Courts Bill – unpacking the UK government's proposed amendments
6 September 2021
Disputes Quick Read: Will litigants be compelled to participate in alternative dispute resolution?
2 August 2021
Disputes Quick Read: Freezing injunctions – maximum custodial sentence imposed for breach
21 July 2021
Disputes Quick Read: The online future of civil justice – the end of the legal profession or the end of legal drudgery?
15 July 2021
by Jess Thomas
Disputes Quick Read: Will the courts change forever post-COVID?
26 May 2021
Disputes Quick Read: One Blackfriars administrators cleared of misfeasance
5 May 2021
Disputes Quick Read: Not your prerogative – the Independent Review of Administrative Law reports its recommendations on judicial review
21 April 2021
Disputes Quick Read: Amendments to the Disclosure Pilot Scheme – a step in the right direction
31 March 2021
Disputes Quick Read: UK Supreme Court rules on the territorial extent of the SFO's powers
26 February 2021
by Tim Strong
Disputes Quick Read: No dropping anchor – parent company liability for environmental claims
24 February 2021
Disputes Quick Read: What lawyers need to know about new witness statement preparation rules
20 January 2021
Disputes Quick Read: Should you still choose the English courts to have jurisdiction in your international contracts after Brexit?
12 January 2021
by Tim Strong
Disputes Quick Read: Privilege lost in the EU post-Brexit (with exceptions)
23 November 2020
Disputes Quick Read: Law on interest applicable to US dollar awards reaffirmed
16 October 2020
Disputes Quick Read: Care required when drafting SPA claim notices
23 September 2020
Disputes Quick Read: Why the modernised LCIA rules are a welcome update
7 October 2020
by Nick Storrs
Disputes Quick Read: COVID-19 and supply chain disruption – key issues
9 April 2020
by Multiple authors
Disputes Quick Read: High Court orders parties to explore options for 5-week remote trial
15 April 2020
Disputes Quick Read: Tomlin Orders – ensuring the confidentiality of settlement terms
27 April 2020
by Multiple authors
Disputes Quick Read: UK's OFSI fines Standard Chartered Bank £20 million for sanctions breaches
21 April 2020
Disputes Quick Read: A different approach to witness evidence
11 March 2020
by James Bryden
Disputes Quick Read: Coronavirus - a growth in virtual courts?
17 March 2020
by Stuart Broom
Disputes quick read: climate change activism by litigation
26 February 2020
Disputes Quick Read: Commercial Court's arbitral power shift
21 February 2020
Disputes Quick Read: Court stays evictions during COVID-19 – is this lawful?
2 June 2020
Disputes Quick Read: Will the civil justice system change forever post COVID-19?
16 June 2020
Disputes Quick Read: Retailers reign supreme in Visa and Mastercard proceedings
9 July 2020
Disputes Quick Read: The contra proferentem rule reconsidered?
21 July 2020
Disputes Quick Read: Scope of duty and the SAAMCo counterfactual following Manchester Building Society
3 December 2021
Disputes Quick Read: Facilitating transactions in cryptoassets - Lord Leggatt and the point of commercial law
24 November 2021
by Stuart Broom
Disputes Quick Read: Privy Council clarifies the law on freezing injunctions in aid of foreign proceedings
8 October 2021
Disputes Quick Read: Climate change litigation – what's the latest?
10 January 2022
Disputes Quick Read: Court decisions on the Disclosure Pilot Scheme – the 2021 roundup
20 January 2022
Disputes Quick Read: Assumption of responsibility - tax schemes and investors
22 March 2022
Disputes Quick Read: Dealing in crypto? Be careful what you call it
7 April 2022
Related Insights
Disputes Quick Read: Dealing in crypto? Be careful what you call it
by Emma Allen and Georgina Jones
Cryptoasset fraud: Squid coin rug-pull and tracing cryptoassets
by Emma Allen and Georgina Jones