The High Court of England and Wales has embraced blockchain technology and held that a party can use a non-fungible token (NFT) to serve proceedings on an anonymous defendant in an action to recover stolen cryptocurrency. This decision opens up the possibility of using distributed ledger technology as a method of service of other legal proceedings.
D’Aloia was the founder of an online gambling platform, Microgame. He claimed to have been the victim of fraudulent activity and was scammed into transferring his digital assets in the sums of 2.1 million USDT (a stablecoin with a value of £1.74 million) and 230,000 USDC (a stablecoin with a value of £190,860) to a fraudulent company registered in Hong Kong masquerading as the US online trading platform TD Ameritrade.
D’Aloia sought to pursue persons unknown (among other parties) behind a website with the name ‘www.tda-finan.com’. This website represented that it was connected with a legitimate US-regulated business, TD Ameritrade, however it is not.
Expert evidence from Mitmark, D’Aloia’s intelligence investigator, concluded that it was highly likely that those behind the website had been using it as a way of imitating the well-known brokerage in order to ‘con’ unsuspecting investors, such as the claimant, out of the funds they intended to invest.
The only option for D’Aloia, domiciled in England, to serve the papers on persons unknown was by email or dropping them into their wallet via an NFT. A live issue surrounding the advent of blockchain and non-fungible tokens remains the method in which parties can pursue anonymous persons who have stolen cryptocurrency.
Having been satisfied on the evidence that there was a serious issue to be tried, Justice Trower granted D’Aloia permission to serve unknown scammers by way of both email and an NFT into an identifiable wallet at the other end of the transaction, causing a permanent mark on the ledger.
How this works in practice is that the NFT is airdropped into the tda-finan wallets behind the tda-finan website – the same process used when D’Aloia first made his transfer of digital assets. The effect of the service by NFT will be that the drop of documents into the system will embed the service in the blockchain and leave a permanent mark on the ledger.
When considering the jurisdictional issue, Justice Trower was persuaded by the fact that D’Aloia was at all material times domiciled in England and the digital assets (USDT and USDC) of which he was deprived by the fraudulent representation of the first defendant (i.e., persons unknown), were also located in England.
This was the first order of its kind outside of the United States granting permission to serve proceedings on persons unknown by way of NFT.
In the United Kingdom, legal notice is traditionally permitted by personal service, first class post, or leaving it at a certain address. However, service by fax or electronic means (i.e., email) is only permitted where the party to be served or their solicitor has indicated in writing a willingness to be served by such means. These methods are therefore generally not viable where claims are brought urgently, on a without notice basis, or when the identity or the contact details of the defendants are unknown. This is a major stumbling block for claims brought against persons unknown. Alternative methods have previously been allowed by the English courts including by Facebook, Instagram, and via a ‘contact’ section of the defendant’s website, however this is the first ruling in England for service by way of distributed ledger technology.
This judgment has ramifications not only for serving claims on anonymous persons, but also for parties in other types of proceedings outside of the realm of financial cybercrime. For example, in civil cases where one party’s whereabouts or personal details are unknown and a claimant wishes to effect service of documents by alternative methods, or where cryptocurrency is used for the purchase of goods and services. This will provide assistance for parties trying to overcome the legal hurdle of pursuing unknown persons, and is particularly helpful where contact details are unidentifiable or have been deactivated.
However, it may take some time for the civil procedure rules to accept this as a standard method of service without the need to specifically obtain permission. Justice Trower made it clear in his judgment that orders such as these are open to challenge, commenting that it “always remains open to any of the defendants to argue… that the Court does not have the jurisdiction which is sought to be exercised”.
In any event, this ruling not only gives parties the opportunity to overcome the hurdle of legally pursuing persons unknown, but also opens the door for service by NFT’s in other types of legal proceedings. However, in a system which does not allow service of court documents by email as the default option, it is likely to take some time for the courts to become confident and accepting of this technology.