Do software developers owe fiduciary duties to bitcoin owners? Court of Appeal considers there is a serious issue to be tried

Tulip Trading Limited v van der Laan and ors [03.02.2023]

In a judgment handed down in February 2023, the Court of Appeal upheld an appeal made by Tulip Trading Limited (Tulip), against a first instance decision of the High Court, where the Defendants successfully brought an application challenging the court’s jurisdiction. In doing so, the Court of Appeal held that there is a serious issue to be tried as to whether developers owe fiduciary duties to bitcoin owners.

If the matter proceeds to trial, and the court finds that fiduciary duties are owed to bitcoin owners, this would represent a significant expansion to the common law on fiduciary relationships. For this reason, bitcoin market participants, as well as those more generally involved with cryptoassets, should keep a close eye on this case.


Tulip claims to be the owner of bitcoin worth around $4 billion, held at two addresses on a blockchain, “1Feex” and “12ib7” (the Addresses). According to Tulip, as a result of a computer hack at its CEO’s home office, the private keys required to access or move its bitcoin were removed, and likely stolen.

Tulip’s case is that the Defendants are the developers of the four relevant bitcoin networks (the Networks) and, pursuant to alleged fiduciary and/or tortious duties, must take all reasonable steps to provide Tulip with access to, and control of, its bitcoin at the Addresses. According to Tulip, this includes the Defendants writing and implementing a software “patch”, which Tulip argues is not technically difficult and would enable it to regain control of its bitcoin and move it to a new address.

Tulip’s case on fiduciary duties is based upon an alleged imbalance of powers between the Defendants and bitcoin owners, whereby the Defendants control the Networks, whilst the bitcoin owners have no control other than the ability to use their private keys, and entrust their property (i.e. the bitcoin) to the Defendants.

The Defendants deny being in control of the Networks, arguing that a decentralised model is seen by the market as key to blockchain technology, and that they are merely part of a large and shifting group of contributors to the Networks. The Defendants deny owing Tulip any fiduciary or tortious duties, as the consequence of policing the blockchain and providing remedies to those who have lost their keys (irrespective of fault) would be costly and difficult.

As none of the Defendants were in the jurisdiction, Tulip applied for and were granted permission to serve its claim outside of the jurisdiction. The Defendants proceeded to challenge the court’s jurisdiction.

In order to decide whether permission should be granted to serve proceedings outside of the jurisdiction, the court will apply the test on merits. The claimant must satisfy the court that there is a serious issue to be tried, meaning there must be a real, as opposed to fanciful, prospect of success.

High Court decision

Falk J held that Tulip had failed to establish that there was a serious issue to be tried on the merits of the claim, because there was no realistic prospect of establishing that there was a breach of fiduciary or tortious duties owed by the Defendants to Tulip.

In particular, the Court considered Tulip’s argument that there was an imbalance of powers and it had entrusted its bitcoin to the Defendants, was not sufficient to establish that the Defendants owed it a fiduciary duty. The Court also held that it could not realistically be said that bitcoin owners entrust their property to a fluctuating and unidentified body of developers, at least not in the sense and to the extent claimed by Tulip.

The Court therefore set aside the order which granted Tulip permission to serve its claim outside of the jurisdiction.

Court of Appeal decision

On Tulip’s appeal, and taking into consideration the classic definition of a fiduciary in Bristol and West Building Society v Mothew [1998], the Court of Appeal overturned the High Court’s decision, finding that it was arguable that the Defendants owed Tulip fiduciary duties as follows:

  • The developers of a bitcoin network are a sufficiently well-defined group to be capable of being subject to fiduciary duties;
  • Developers make discretionary decisions and exercise power for, and on behalf of, other people in relation to their property. (Notably, it was not disputed in the case that bitcoin constitutes property);
  • As the property is entrusted into the care of the developers, they are fiduciaries; and
  • The fiduciary duty owed by the developers involves a duty to act positively in certain circumstances, which may include a duty to introduce code so that the bitcoin owner can regain access to and control of their bitcoin.

As the Court held that there is a serious issue to be tried as to whether developers owe fiduciary duties to bitcoin owners in the circumstances alleged by Tulip, the Court ruled that the right course of action would be to allow the appeal on the tortious duties as well, and for the case as to whole to proceed.


The Court of Appeal recognised, cryptocurrency remains a relatively new asset class. As such, a significant library of precedent does not yet exist for disputes arising out of that asset class. The facts of the case are therefore, unsurprisingly significantly different from those which the courts of England and Wales have previously considered when determining the law on fiduciary duties.

It is unclear whether Tulip’s claim will progress to trial, however what is certain is that the Court of Appeal was correct in its observation that:

For Tulip’s case to succeed, it would involve a significant development of the common law on fiduciary duties.

Should the courts impose fiduciary duties on developers, the consequences and ramifications for developers, and indeed for providers of cryptocurrency platforms, would be significant and wide reaching.

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