The UK High Court permits service of legal proceedings via an NFT

In a first-of-its-kind decision in England (and the EU), and for only the second time in the world, the UK High Court has granted an order permitting the service of court proceedings via an NFT.

In the case of D’Aloia v Binance Holdings & Others [2022] EWHC 1723 (Ch), Fabrizio D’Aloia – an Italian engineer and founder of Microgame, an Italian online gambling company – sought permission from the court to have a crypto wallet provider (as a form of intermediary service provider) assist them in serving proceedings by way of a transfer of an NFT on the blockchain. Mr D’Aloia is seeking to bring proceedings to recover circa £2million of cryptocurrency after having discovered that unknown persons had purportedly misappropriated it. Mr Justice Trower’s granted permission and his decision will therefore allow D’Aloia to serve documents on the unknown individual(s) who are associated with the digital wallets connected with the fraudulent activity.

It is reported that Trower J stated that “There can be no objection to it”. “Rather it is likely to lead to a greater prospect” of those behind the purported activity being “put on notice of the making of this order, and the commencement of these proceedings”.

Usual methods of service

Rule 6 of the Civil Procedure Rules provides that valid service of a claim form and other related documents in the UK can be done by way of personal service; first class post; leaving them at a certain address; or fax or other means of electronic communication. Service by fax or other electronic communication is permitted only where the party to be served (or its representatives) has agreed in writing to be served in that way. For any other form of service, permission must be sought from the court. The restrictions on such service are strict; for instance, the Supreme Court held in Barton v Wright Hassall [2018] UKSC 12, that service by email by a litigant in person without the accepting party’s authority was not valid.

As such, the current rules can create a barrier to bringing proceedings against unknown or evasive defendants, or those for whom the claimant has inaccurate information. Trower J’s decision is therefore significant – particularly within the realm of cryptoasset fraud where crimes can often only be linked to wallet addresses, rather than known individuals – and represents a pragmatic approach towards service.

It is worth noting that the English courts have previously permitted service of an injunction via Twitter (Blaney v Persons Unknown (October 2009)), as well as service by Instagram, Facebook, and via the ‘contact’ section of a defendant’s website, but this is the first known case where service by an NFT has been allowed.

The American example

In LCX AG, -v- John Does Nos. 1 – 25., the Supreme Court of the State of New York permitted the plaintiff to serve an order to show cause and a temporary restraining order as well as other documents on the person(s) in control of an Ethereum wallet address. This was done by airdropping a token to that wallet address, which contained a hyperlink to a purpose-built website created by the plaintiff’s counsel where the documentation could be accessed. The order specified that such service “shall constitute good and sufficient service for the purposes of jurisdiction under NY law on the person or persons controlling the [wallet] Address.”

Concluding remarks

The D’Aloia decision falls in the wake of another milestone judgment regarding NFTs in the UK: Osbourne v (1) Persons Unknown and (2) Ozone Networks Inc trading as Opensea [2022] EWHC 1021 (Comm). Osbourne allegedly had two NFTs transferred from her digital wallet to an NFT marketplace without her consent, but she could not identify the persons responsible. The judge, in a landmark ruling, established that NFTs could in fact constitute ‘property’ under English law and therefore a proprietary freezing injunction could be granted over them.

It is therefore pleasing to see Mr Justice Trower continuing the trend of English courts being forward thinking, embracing technology, and paving the way for victims of cryptoasset fraud to seek redress against unknown fraudsters.

It is of particular note that both the Osbourne and D’Aloia decisions were made by way of without notice applications to the court. This further demonstrates that so long as a claimant has made efforts to identify a defendant, these do not need to be exhaustive and claimants should consider alternative service at an early stage in order to progress proceedings and put the true defendant(s) on notice of the claim as soon as possible.

Whether or not (i) courts elsewhere will adopt service by way of NFT or (ii) such means of service will become commonplace in the UK, remains to be seen. It may be that the characteristics of blockchain – immutable, verified, decentralised – will be viewed as preferable to the usual methods of service. However, whilst this may be a victory for Mr D’Aloia, it is likely that for the moment, traditional methods of service will continue to be the starting point unless there are exceptional circumstances.

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