What we know

Cryptocurrencies qualify as ‘property’ under English law

This means that Office Holders are required to get in and realise these assets for the benefit ocreditors. It is likely that Office Holders will face significant challenges in locating, getting control of and realising such assets, including when to exchange cryptocurrencies into fiat currencies. We shall see if this applies to all cryptoassets.

And so?

As they are property, Office Holders can obtain proprietary injunctions and freezing orders over cryptocurrencies, which can be instrumental in asset recovery.

The role of the Courts

The Courts in England and Wales have been willing to grant worldwide freezing orders against persons unknown, in the context of cryptocurrency recoveries. These orders can then be served on centralised crypto exchanges or other custodial wallet hosts to require relevant assets to be frozen and protected from dissipation and misuse.

Locating cryptoassets

This can sometimes be difficult, particularly if you don’t know what you are looking for. We work with specialist forensic blockchain analytics partners to help identify, trace and recover crypto assets, including through Court orders (including disclosure and banker’s trust style orders) where required.

Custody of crypto from seizures, restructuring and insolvency

There are times where cryptoassets may be a part of a seizure in a restructuring or insolvency case. In these cases, it is imperative to send and then store the cryptoassets somewhere safe, where it cannot be hacked. We have relationships with the key custody firms that offer institutional grade security to ensure any cryptoasset is held in the safest possible ways for its rightful owners.

Trusts

The Court has indicated that cryptocurrencies can be held on trust (it remains to be seen if this will apply to all cryptoassets) and so there may be a proprietary claim to it. This can also be relevant when acting for a party that is in possession of cryptoassets held on behalf of others. In that context it will be important to review the basis on which that cryptoasset is being held and how it ought to be treated for distribution purposes.

Related claims

There may also be claims connected to cryptoassets and related trading that could be part of a person’s estate. This could take the form of claims against exchanges and platforms and also bilateral claims against their counterparties to the transactions. The claims could range from mis-selling claims that are premised on the basis of information and any representations that were made at the time of the purchase to contractual claims for breach/ seeking to set aside the contract. The viability of these claims will depend on the individual circumstances.