High Court Sets Aside Interim Proprietary Injunction Against Cryptocurrency Exchange Binance

• Jurisdiction: European Union
• Law Firm: Herbert Smith Freehills
• Subject Matter: Technology, Fin Tech
• Author: Mr Chris Bushell and Gary Horlock
• Published date: 18 May 2023

The High Court has discharged an interim proprietary injunction against the cryptocurrency exchange Binance which required it to preserve certain cryptocurrency that the claimant, the alleged victim of a cryptocurrency fraud, claimed to be able to trace to the exchange: Piroozzadeh v Persons Unknown and Others [2023] EWHC 1024 (Ch).

There have been a number of recent cases in which the High Court has granted interim proprietary injunctions against cryptocurrency exchanges on a without notice basis. This is the first decision we are aware of where a cryptocurrency exchange has challenged the grant of such an injunction, and it highlights a number of important points in relation to such applications.

Where the victim of a cryptocurrency fraud claims to be able to trace their assets to an account on a cryptocurrency exchange, and seeks an injunction to preserve those assets, the claimant's legal advisers should consider whether it would be sufficient to obtain an injunction against the owner of the cryptocurrency account and to serve that injunction on the exchange as a third party (which is common practice in relation to bank accounts), rather than naming the cryptocurrency exchange as a respondent itself. If an injunction is inappropriately obtained against the cryptocurrency exchange itself and later discharged, the claimant may be left with a significant adverse costs order.

If the claimant does seek an injunction against the exchange itself, the claimant's legal advisers should be careful to distinguish the position of the exchange from the position of other potential defendants (for example, the alleged fraudsters). Particular consideration should be given to:

• Whether there is a proper basis for making an application against the exchange without notice. If the application is made without notice, the claimant must be careful to comply with the duty of full and frank disclosure.
• Whether there is a serious issue to be tried in respect of a claim against the exchange itself, and the defences that the exchange might have to such a claim. If the application is made without notice, the potential defences must be clearly drawn to the court's attention.
• Whether damages would be an adequate remedy against the exchange in respect of any claim against it. If damages would be an adequate remedy, an injunction should not be granted.
• Whether there are identifiable assets at the time the application is made which the exchange could be required to preserve. If the assets have been mixed or dissipated and are no longer identifiable, an injunction should not be granted because it would serve no useful purpose. Any...