United Kingdom January 30 2023
The High Court ruled that proceedings may be served exclusively by non-fungible token (NFT) where no other method of service is available. The case of Osbourne v Persons Unknown Category A is the latest ruling showing the English court’s commitment to assist victims of cryptoasset fraud.
Background
The claimant, Mrs Osbourne, fell victim to a hack when two of her NFTs were transferred out of one of her wallets without her knowledge by unidentified persons. That wallet was linked to Mrs Osbourne’s account on a cryptoasset marketplace trading as ‘Opensea’. Mrs Osbourne employed a digital assets tracing company (‘Mitmark’) to help locate her NFTs. Mitmark traced the NFTs to a number of wallets linked to different accounts with Opensea. In March 2022, Mrs Osbourne obtained an injunction against the persons unknown to restrain them from dealing with her NFTs. She served the claim form on Opensea, which was one of the defendants, via email.
Mitmark then uncovered further evidence that one of the NFTs had been transferred to another wallet and Mrs Osbourne sought to extend the injunction accordingly. As Mrs Osbourne was unable to identify the prospective defendants, she asked permission from the Court to serve the amended claim form by NFT. It was intended that the NFTs would contain embedded hyperlinks to the court documents.
The decision
The court allowed service by NFT. Mr Justice Lavender held that “the Claimant had no other available method of service…that was a good reason for authorising service of these documents by NFT” (paragraph 47).
In practice, the NFTs used to effect service will be on the blockchain, meaning that the documents served will be accessible to the public. This has the advantage of providing proof that service has been effected. Mr Justice Lavender did, however, rule that the documents served should be redacted to prevent public access to personal data. The defendants were to be offered access to unredacted versions of the documents.
The English court previously authorised service by NFT and email in the case of D’Aloia v Persons Unknown. The Osbourne decision has allowed service by NFT as the sole method of service of documents, albeit in respect of certain of the defendants only.
Implications of this decision
Reports of cryptoasset investment scams proliferate. This is another decision intended to combat crypto-fraud. It paves the way for other fraud victims to pursue unidentified fraudsters where a postal or email address for service is unavailable. Mr Justice Lavender noted in his judgment that approval was also granted for service by alternative means including by NFT airdrop in the case of Jones v Persons Unknown, as well as D’Aloia v Persons Unknown.
From an international standpoint, the Osbourne decision is consistent with the New York Supreme Court ruling in LCX AG v. John Doe Nos. 1-25 which allowed claimants to serve legal documents via NFT airdrop into the unidentified defendants’ wallet.
Cases referred to
Osbourne v Persons Unknown Category A [2023] EWHC 39 (KB)
D’Aloia v Person Unknown & Others [2022] EWHC 1723 (Ch)
Jones v Persons Unknown [2022] EWHC 2543 (Comm)
LCX AG v. John Doe Nos. 1-25 (Dkt.No.,154644/2022) (N.Y. Supreme, Ct., NY County)
