Jun 14, 2023

Court of appeal allows trial to determine bitcoin developer fiduciary duties

London, 3 February 2023. Three judges sitting in the Court of Appeal (Lord Justice Lewison, Lord Justice Popplewell and Lord Justice Birss), today granted Ontier UK client, Tulip Trading Ltd (Tulip) permission to pursue its claim for breach of fiduciary duties and/or a duty of care against the developers of various blockchain-linked digital assets, including Bitcoin.  

Tulip is a Seychelles registered company whose primary beneficial owner is Dr Craig Wright.  Tulip owns Bitcoin and other digital assets on four blockchain networks: (1) the Bitcoin Satoshi Vision network (“BSV”); (2) the Bitcoin Core network (“BTC”); (3) the Bitcoin Cash network (“BCH”); and (4) the Bitcoin Cash ABC network (“BCH ABC”) but is unable to access its coins following the theft of its private keys from computers at Dr Wright’s home in 2020.  Tulip says the defendant developers control those networks but have thus far failed to assist it in regaining access to its Bitcoin, despite having a duty to do so.  

Of the original 16 defendants, the 1st defendant (the Bitcoin Association on behalf of BSV), settled with Tulip; the 13th failed to respond (on behalf of BTC); and the remaining 14 (on behalf of BTC, BCH and BCH ABC) challenged the jurisdiction of the court to hear the claim.  Their challenge led to Mrs Justice Falk’s judgment in March 2022 that Tulip had no real prospect of establishing at trial that the claimed fiduciary duties and duty of care exist, which has been overturned by the Court of Appeal today.  

The Court of Appeal held that “[t]he time to decide on the duty in this case is once the facts are established” but that there is a “realistic argument” that the defendant developers are fiduciaries, and “to rule out Tulip’s case as unarguable would require one to assume facts in the defendant developers’ favour which are disputed and which cannot be resolved this way. If the decentralised governance of bitcoin really is a myth, then in my judgment there is much to be said for the submission that bitcoin developers, while acting as developers, owe fiduciary duties to the true owners of that property.”  

As a result of today’s judgment, Tulip is now able to continue proceedings to seek to recover control over its very valuable assets. The English High Court will be given the opportunity to consider the extent of the duties owed by the defendant bitcoin developers to Bitcoin and other digital asset owners against the background of the Court of Appeal’s comments in relation to the existence of fiduciary duties.

Felicity Potter, Partner at Ontier UK comments:

'This is a much-welcomed judgment from the Court of Appeal.  We asserted that it is inappropriate to summarily dismiss Tulip’s claims at an early jurisdiction hearing where the disputed underlying facts have not been assessed by the court, and the Court of Appeal agreed.  The scope of developers’ duties must now be explored in detail at trial.The responsibilities owed by developers of digital assets to end users is of significant importance to all coin holders as the concept of digital assets becomes more mainstream. The consequences are particularly acutely felt by Tulip’s beneficiaries, given the amounts at stake.The outcome at trial will set the precedent for others to follow should they lose or be deprived of access to their digital assets.  This is a step towards a properly regulated and well-governed digital asset ecosystem which should be welcomed by potential and current coin-holders alike. We look forward to successfully presenting Tulip’s case at trial in due course.'

Dr. Craig Wright says:

'We are delighted that the judges have granted permission for Tulip to pursue its claim for breach of fiduciary duties and/or duty of care against the developers of blockchain linked digital assets including Bitcoin. The court has clearly understood that the interests and actions of individuals using a cloak of decentralisation can control a global financial system. This will ensure that Bitcoin owners and that holders of Bitcoin can properly safeguard and recover control over their digital assets.'

The remaining defendants in this unprecedented action are the developers of BTC, BCH, and BCH ABC residing in various jurisdictions across the world including: Netherlands, Switzerland, St Kitts and Nevis, France, Japan, numerous different states in the USA, New Zealand and Australia.

In the Court of Appeal: Lord Justice Lewison, Lord Justice Popplewell and Lord Justice Birss; Lady Justice Andrews DBE (permission to appeal).

Legal Advisors: Tulip Trading Ltd was represented by Oliver Cain, Felicity Potter, Nicholas Dawson and Nicola Scarparo of Ontier UK.

Notes to editors:

Tulip’s beneficial owner is Dr Craig Wright.  Dr Wright is the inventor of Bitcoin who set out his vision for the digital currency in his famous White Paper under the pseudonym Satoshi Nakamoto. In February 2020, Dr Wright’s personal computer was hacked by persons unknown and encrypted private keys to two addresses (which hold substantial quantities of Bitcoin belonging to Tulip) were stolen. These assets were, and continue to be, owned by Tulip. Ontier, on Tulip’s behalf, was originally granted permission to serve all the developers out of the jurisdiction by the Business and Property Courts of the High Court in London, following a 173 page application submission detailing the claim.Following the jurisdiction hearing, the Bitcoin Association, developers of BSV, entered into a settlement agreement with Tulip and so forms no part of the forthcoming trial.The litigation seeks to examine, for the first time, the nature and extent of legal duties conferred upon and owed by developers of blockchain-linked digital assets resulting from the control they exercise over their respective blockchains.   As detailed in the Particulars of Claim, Tulip requested that the individual developers enable Tulip to regain access to and control of its Bitcoin on the grounds that they, the developers, owe Bitcoin owners both fiduciary duties and a duty of care under English law.

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