Can Fraudsters Close The Gateway To England And Wales By Dissipating To Persons And Places Unknown? Osbourne v Persons Unknown

• Law Firm: Astraea Group
• Subject Matter: Technology, Fin Tech
• Author: Lisa McCreath and Harmish Mehta
• Published date: 01 February 2023

Introduction

The decision of Lavender J in Osbourne v (1) Persons Unknown Category A (2) Persons Unknown Category B (3) Thembani Dube [2023] EWHC 39 (KB) has, despite granting the relief sought by the claimant, raised some doubts about cryptoasset recovery where additional relief is sought against subsequent recipients of stolen cryptoassets whose connection to the jurisdiction is less established than that of persons who first stole them.

Background

The case concerns the unauthorised transfer of two non-fungible tokens ("NFTs") entitled "Boss Beauties #680" ("BB#680") and "Boss Beauties #691" ("BB#691"). BB#680 and BB#691 are said to be worth between '3,000 and '5,000. Aside from their value in fiat currency, the holder of the NFTs is also entitled to certain benefits and invitations to attend exclusive virtual events.

On 17 January 2022, the NFTs were transferred out of the claimant's electronic wallet, which was linked to a marketplace trading as "Opensea", by alleged hackers. An investigator was able to track the NFTs and, by March 2022, BB#680 was in a wallet which has been referred to as "the E29269 User Wallet", and BB#691 was in a wallet which has been referred to as "the jawwn.eth User Wallet" (together, the "Unknown Opensea Wallets").

In March 2022, HHJ Pelling KC granted an injunction restraining the first defendants (being the unknown alleged hackers) from dealing with the NFTs. Separately, he ordered Opensea to disclose information to the claimant about the holders of the Unknown Opensea Wallets, but no response was ever received.

Following the injunction, evidence came to light that BB#691 had been transferred out of the jawwn.eth User Wallet and moved, through various intermediary wallets, into a wallet connected to the South African email address of a Thembani Dube. Whilst there is no suggestion that BB#680 has been removed from the E29269 User Wallet, BB#691 was being advertised for auction until 24 September 2022.

The Applications

In light of the above developments, the claimant sought effectively to extend her claim, and the relief that HHJ Pelling KC had granted previously, to new defendants. She argued that the new defendants held the NFTs on constructive trust for her benefit.

Lavender J allowed amendments to the Claim Form and Particulars of Claim to join "Persons Unknown Category B" (being persons currently in possession and/or control of the NFTs) and Thembani Dube, on the basis that issues involving them were connected to the matters in dispute.

Lavender J then turned to the claimant's remaining applications:

1. an interim injunction against the additional defendants;
2. an order permitting service of the amended Claim Form outside the jurisdiction;
3. service of the amended Claim Form, injunction and associated documents by alternative means, namely by (a) email and (b) transfer, to Opensea wallets associated with the defendants, of NFTs containing embedded hyperlinks.

Decision: interim...