The Law Commission’s new Consultation Paper on Digital Assets, published on 28 July 2022, gives victims of crypto-asset fraud a means of direct action against exchanges who are in possession of those fraudulently obtained assets. A High Court case granted a first order under the Law Commission’s guidance permitting service of proceedings via a nonfungible token (NFT). This paves the way for victims of crypto-asset fraud to use novel technology to bring damages claims against unknown persons and also to attempt to reclaim their stolen crypto from any constructive trustees.

In D’Aloia v Person Unknown & Ors [2022] EWHC 1723 (Ch) (24 June 2022), the claimant’s financial experts had demonstrated that the claimant had been victimised by “unknown persons” behind a fraudulent website with the name www.tda-finan.com. The site appeared to investors to be part of the TD Ameritrade brokerage system. The claimant also filed claims against the crypto exchanges where the fraudulently obtained assets were transferred as “constructive trustees.”

Most of the exchanges were located outside of the UK, but the High Court froze the assets, arguing that the misrepresentations were made in England and the rightful owner of the assets was located here.

While the English courts have previously granted permission to serve proceedings by digital methods (including e-mail, Instagram, and Facebook), this is the first time that permission has been granted for service by NFT.