In one of the first cases in Hong Kong in which the court has granted freezing injunctions over bitcoins, the Court of First Instance has now handed down judgment in the trial of Nico Constantijn v Stive Jean-Paul Dan  HKCFI 1254.
The court held that the defendant acted as the plaintiff's sales agent in respect of the plaintiff's bitcoins. The court found the defendant had breached his fiduciary duties in failing to account to the plaintiff for the bitcoins and the relevant sales proceeds. Consequently, the court held that the defendant held on trust for the plaintiff the unsold bitcoins, the proceeds from the sale of the bitcoins and the fruits thereof.
Given the recent drop in prices of cryptocurrency, it is important for businesses to safeguard investments in cryptocurrency and to understand the available legal remedies in case of dispute.
Businesses should put in place adequate safeguards when engaging in cryptocurrency trading and other related activities to minimize the risk of financial losses. These include recording the terms of the transaction in a written agreement, keeping comprehensive records of transfers and putting in place contingency plans for dealing with financial fraud/crime.
Nico Constantijn v Stive Jean-Paul Dan confirms that the familiar legal principles of trusts and injunctions apply equally to cryptocurrency as a novel asset class. Such legal remedies remain important tools to victims of cryptocurrency fraud and recovery. Businesses may now more confidently rely on the court to grant relief to protect and recover their digital assets.
The practical implications of this case can be summarized as follows:
Given the fast-changing developments in digital assets, it is all the more important that businesses and victims of cryptocurrency fraud act promptly in seeking legal advice and taking the necessary legal steps.
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