Cryptocurrency trust High Court judgment

17 November, 2021

On Wednesday 17 November, Stephen Houseman QC, sitting as a Deputy Judge of the High Court, handed down judgment in Zi Wang v. Graham Darby [2021] EWHC 3054 (Comm). This is the first judgment to address the question, following a contested hearing, of whether or not cryptocurrency was held on trust.

The Claimant asserted that Tezos he had transferred to the Defendant were held by the Defendant on express trust, Quistclose trust, or constructive trust. However, (1) in return for the Tezos, the Claimant had received Bitcoin from the Defendant; (2) at the end of the agreed period he had to re-transfer Bitcoin in return for the re-transfer of Tezos; and (3) in the intervening period, he claimed that the Bitcoin were at his free disposal.

Whether or not the Tezos were held on trust was considered in the context of (1) the Defendant’s application for summary judgment on the proprietary claims; and (2) the Claimant’s application to continue a proprietary injunction (as well as a WFO). The question of principle – i.e. whether cryptocurrency could be held on trust – did not need to be determined, as the Defendant accepted both (1) that cryptocurrency was property; and (2) that it could be held on trust. The argument was focused on whether or not any trust arose on the facts of this particular case. As all relevant communications were made or evidenced by writing, the Defendant argued that this was an issue that could be determined summarily.

The Defendant argued that the arrangement was, in effect, a form of repo (a sale and repurchase agreement) but the Court held that it did not need to determine whether this characterisation was correct. The essential economic reciprocity in the arrangement was sufficient to preclude any trust. Summary judgment was granted to the Defendant on the proprietary claims and the proprietary injunction was discharged. (The WFO – in support of personal claims – was continued).

Read the full judgment here.

The Defendant was represented by James Collins QC of Essex Court Chambers and Philip Jones, both instructed by James Atton of Mackrell Solicitors.