by Keith Oliver (Partner) and Amalia Neenan (Trainee Solicitor) at Peters & Peters LLP
In 1981, Phil Collins sang the immortal line, ‘I can feel it coming in the air tonight (oh lord!)’, spawning decades of enthusiastic air drummers, all eager to replicate the iconic drum solo – imaginary drumsticks flailing. 41 years later, these lyrics can conceivably be transposed as the anthem for crypto-fraud victims. Today, what is ‘coming in the air tonight’ is instead the NFT, modified for use in crypto litigation and airdropped onto the blockchain as a means to serve official court documents.
A kind of magic
The ground-breaking decision – the first of its kind in Europe – was played out in the courts last month in Fabrizio D’Aloia v. (1) Persons Unknown (2) Binance Holdings Limited & Others. Here, the founder of Microgame (an online gambling company) fell victim to an alleged fraud, losing approximately £190,000 of USD Coin and £1.8 million of Tether to individuals claiming to operate a crypto-brokerage/trading platform using the web address, tda-finan.com.
As the story goes in most crypto-fraud cases, the defendants who had allegedly looted these funds were persons unknown. The anonymity characteristics inherent to cryptocurrencies’ design make it increasingly difficult to pinpoint the identities of those operating on the blockchain – whether they be innocent users, or nefarious actors, all are equal and shielded under Distributed Ledger Technology. The twist in this tale, however, is that faced with the usual hurdle of bringing proceedings against nameless perpetrators, the English Courts did what they do best – they got creative.
Taking a leaf out of the New York Supreme Court’s book, who employed the same tactic a few weeks prior, the English High Court gave permission for D’Aloia to serve proceedings against the unknown defendants through the medium of an NFT.
Originally used to determine the provenance of digital art, NFTs (Non-Fungible Tokens) are irreplicable due to the distinctive identifying code that each token contains, creating a digital footprint of ownership for both real and hyper-real assets. Essentially, NFTs can be used to demonstrate an individual’s stake in something, whether that be property, or in this case, legal proceedings. The court ruled that the NFTs would be airdropped into the wallets that D’Aloia had previously used to transfer the funds.
Using NFTs in this way allows for the immutability and traceability of the blockchain to be used to the claimant’s advantage as was the case in the US. There, the NFT had an embedded hyperlink to the court documents, as well as a tracking tool that logged the data of any person who clicked on the link. Gone are the days of uncertainty when serving by post.
It’s the end of the world as we know it
The English courts, although pipped to the post here, look set to be one of the frontrunners in the race for technological and legal innovation – a comfort for crypto-fraud victims. However, this digital creativity is nothing new. The English courts have a proven track record of moving with the times, having previously ordered service via the tech platforms du jour – Facebook Messenger, WhatsApp and Instagram.
Yet this latest foray into the crypto-arena truly signals the English courts’ intention to fly the flag for imaginative solutions to technologically complex problems.
How better to encapsulate the significance of this moment in our legal history than by quoting another 80s classic that has surged in recent popularity, thanks to the binge-worthy nostalgia-fest that is Stranger Things? The iconic Kate Bush track that pervades the entirety of the latest season perhaps best epitomises the attitude of the English courts when it comes to tackling crypto-criminality – now they are ‘running up that hill…with no problems’. A warning to all you crypto-fraudsters out there – it’s all over now. NFTs will liberally be plastered on the net to bring your nasty little schemes to an end.