$4.5bn Hack - English Court Of Appeal Decides On Duties Of Crypto Developers

• Published date: 20 March 2023
• Subject Matter: Litigation, Mediation & Arbitration, Technology, Trials & Appeals & Compensation, Fin Tech
• Law Firm: Matheson
• Author: Mr Rory O'Keeffe and Samuel Elliott

In a significant case for investors in, and developers of, cryptocurrencies and other blockchain assets, the English Court of Appeal delivered judgment in Tulip Trading v Wladimir van der Laan and Ors¹. The Court overturned an earlier High Court decision (also known as the Tulip Trading v Bitcoin Association case) which held that developers do not owe fiduciary duties to end-users. The Court of Appeal held that such duties may, in fact, be owed.

Round One: High Court

What Was the Claim For?

The plaintiff company, Tulip Trading Limited ("TTL"), alleged that it suffered significant losses following a hack carried out against TTL's owner, which resulted in TTL becoming unable to access $4.5bn in cryptocurrency. TTL issued proceedings against the defendant developers alleging a breach of fiduciary duties and tortious duties on the part of the developers. TTL also sought an order compelling the developers to change the codebase for the cryptocurrencies in question, to negate the alleged fraudulent transaction and return the $4.5bn to TTL's wallet (please click here for previous Matheson coverage of the High Court action).

What Did the Court Decide?

The High Court held that the developers owed no such duties to end users. It held that the relationship...