In AA v Persons Unknown  EWHC 3556 (Comm) the English High Court has granted a proprietary injunction over bitcoins used as a ransom payment in cyber extortion. This decision, in addition to those discussed in our previous legal update, further supports that cryptocurrencies can legally constitute “property” for the purposes of proprietary injunctions and freezing orders.
An English insurer brought an application under a request for anonymity in response to one of its customers being the victim of cyber extortion. The application identified four defendants: an unknown party that demanded the ransom in bitcoin, an unknown party that controls this bitcoin, and two parties that operate the bittrex.com cryptocurrency exchange where the ransom was held.
The computer system of the insurer’s customer had been hacked and encrypted by the defendant extortionists. The insurer negotiated with the extortionists, agreeing to send 109.25 bitcoins (equal to $950,000 USD) in exchange for the decryption software. After the transaction, the insurer hired consultants that were able to track the bitcoin payments to a specific bitfinex.com address. Some of the ransom had been dissipated, but 96 of the bitcoins paid by the insurer remained in this account. The insurer brought an application for a proprietary injunction relating to those bitcoins.
The High Court held that the requirements for granting a proprietary injunction were satisfied in these circumstances. Critically, the court held that cryptocurrencies such as bitcoin constituted “property” under English law, therefore allowing the 96 bitcoins to be subject to a proprietary injunction. The High Court cited the reasoning in Vorotyntseva v Money-4 Limited and B2C2 Limited v Quoine PTC Limited, where the respective courts reached similar decisions regarding cryptocurrencies constituting “property” in certain circumstances. (For more information on these decisions, see our previous legal update.)
This decision, in addition to those mentioned above, indicates courts are increasingly willing to consider cryptocurrencies as “property” in order to provide interim relief to victims of fraud. Victims of cyber extortion who have paid ransoms in cryptocurrency may be able to obtain injunctive relief in situations when the currency can be traced.