EWJ August 62 2025 web - Journal - Page 64
AA v Persons Unknown
and Others, Re Bitcoin
by Expert Evidence - www.expert-evidence.com
property as falling into two classes- either a “choses in
possession” ie capable of tangible possession, or a
“choses in action” ie a right capable of being enforced
by a legal action. Cryptocurrencies are virtual and intangible assets which cannot be possessed, nor do they
carry any rights capable of enforcement by legal action. Mr. Justice Bryan, hearing the application in the
High Court, reviewed all previous case law in this area
and noted that even though there had been two previous decisions in the English courts in 2018 and 2019
where cryptocurrency had been defined as property
in order to obtain a worldwide freezing order and an
asset preservation order, the court had not considered
the issue in depth. He referred to the UK Jurisdictional Task Force (UKJT) Legal Statement on Cryptoassets and Smart Contracts, published in November
2019. This discussed the definition of property in detail including its evolution over time. Although not
binding on the court, the Judge considered it to be
“an accurate statement as to the position under English law”
and “compelling”. He referred to two other previous
cases “where the courts found no difficulty in treating
novel kinds of intangible assets as property“. These
were a finding that a milk quota could be the subject
of a trust and an EU carbon emissions allowance be
the subject of a tracing claim. These were neither a
“thing in possession” nor a “thing in action“. He concluded
that “the fact that a cryptoasset might not be a thing in action
on a narrower definition of that term does not in itself mean
that it cannot be treated as property.” They met the four
criteria set out in Lord Wilberforce’s definition of
property in NPB v Ainsworth 1965 in that they were
definable identifiable by third parties, capable in their
nature of assumption by third parties, and having
some degree of permanence. Bryan J said it would be
“fallacious to proceed on the basis that the English law of
property recognises no forms of property other than choses in
possession or choses in action”.
When is property not property? This case is
interesting as it confirms and moves the definition of
what can be considered “property” (and thereby be
made subject to a proprietary court injunction), into
the 21st century.
The case concerns a Canadian insurance company
whose computer systems were hacked and encrypted
with malware meaning that the company could not
access any of its own or clients’ data. The company was
sent notes by the first defendant (person or persons
unknown) in October 2019 demanding a ransom:
“Hello, to get your data back you have to pay $1,200,000
(one million two hundred thousand). You have to make the
payment in Bitcoin.“
The company was itself insured against cybercrime
with an English insurance company (‘AA’). AA
subrogated the claim and proceeded to carry out
negotiations with the hackers.
Subrogation is a legal term which means that a party
(often an insurance company) can be substituted to assume their insured’s right to an insurance or debt. A
sum of $950,000 was agreed to be paid in Bitcoin in
return for the decryption tool. The sum (109.25 Bitcoin) was paid despite AA being unable to identify the
recipient (the second defendant). The decryption tool
was put to work and it took 5 days for the insured
company to decrypt and reinstate its 20 servers and a
further 10 business days to decrypt its 1000 desktop
computers.
AA hired a specialist company Chainalysis Inc. to track
the ransom payment. This they did successfully and
confirmed that 96 Bitcoin had been traced to a specific
address linked to the cryptoasset exchange Bitfinex.
Bitfinex was operated by iFinex and BFXWW Inc.,
the third and fourth defendants. The remainder had
been transferred into fiat currency and dissipated. AA
sought a proprietary injunction over the Bitcoin as a
first step in recovering the ransom. AA commenced
proceedings against four defendants based on claims
of restitution and/or constructive trust. Two of the defendants operated the Bitfinex exchange on which the
Bitcoins were being held, whilst the other defendants
had made the ransom demand and now held some of
the Bitcoin at the Bitfinex exchange address.
In granting the interim injunction, Mr. Justice Bryan
also consented to ancillary orders to support the effectiveness and speed of the injunction. The court
gave anonymity to the parties, heard the case in private and allowed service to be by email. All these concessions ensured that the risk of copycat crimes was
reduced and that the defendants were not tipped off
enabling them to dispose of the remaining Bitcoin.
Soon after the judgement, HMRC updated its guide
“Cryptoassets: tax for individuals”. It includes a new
section on the legal status of cryptocurrency exchange
tokens and how they will be treated in relation to
Inheritance and Capital Gains tax. Anyone holding
these assets should ensure that their wills are drafted
to reflect this new guidance.
Nothing ever becomes real till it is experienced.”
John Keats
The fundamental issue facing the court was whether
Cryptoassets could be defined as “property” and
therefore capable of being the subject of a proprietary
injunction. The English law has traditionally treated
EXPERT WITNESS JOURNAL
62
AUGUST/SEPT 2025
