A New Cryptocurrency Remedy Against Software Developers?

• Jurisdiction: United States,Federal
• Law Firm: Walkers
• Subject Matter: Litigation, Mediation & Arbitration, Technology, Trials & Appeals & Compensation, Fin Tech
• Author: Ms Adeola Adeyemi, Colette Wilkins and Victoria Raymond
• Published date: 28 February 2023

There has been an increase in claims relating to misappropriated cryptoassets in offshore jurisdictions. The Courts of the Cayman Islands, BVI and Bermuda are guided by the decisions of the Courts of England and Wales.

To date, a major problem with regard to the recovery of stolen cryptoassets is the fact that the perpetrators are often untraceable rendering traditional proprietary restitutionary remedies of limited use.

In Tulip Trading Limited v Van Der Lan & Others [2023] EWCA Civ 83, the Court of Appeal of England and Wales unanimously allowed Tulip's appeal and found that there was a serious issue to be tried in relation to Tulip's case that the law on fiduciaries should be significantly developed. The Court of Appeal found that software developers may have a duty to introduce code so that stolen bitcoin could be transferred to its rightful owner. This would potentially provide an alternative remedy to victims of cryptoasset theft

Background

Tulip claims to be the owner of around US$4 billion of bitcoin. Tulip lost the ability to access its bitcoin after its private keys were stolen by unknown hackers.

The 16 defendants are developers of four relevant bitcoin networks.

Tulip argued that the developers had undertaken to control the software of the relevant bitcoin network and exercised control over the bitcoin property held by others and that that the developers owe fiduciary duties to the true owners of that property. It was said that this duty includes a duty to introduce a software patch to help Tulip recover its stolen property.

The developers denied that they owe duties of any kind to Tulip. In particular, they said that this description of the developers' position would contradict the nature of cryptocurrency networks - namely the decentralised application of blockchain technology. The defendants argued that the developers are a large and shifting class without organisation or structure which precluded the application of fiduciary duties.

Do software developers owe a...