You’ve Been Airdropped: English Courts Approve Claim Processing via NFT | White & Case LLP
White & Case Technology Newsflash
As the popularity of cryptocurrency as an investment asset balloons, the number and types of lawsuits involving crypto assets have also increased. Issues such as traceability and effective methods of service are now at the forefront of the courts’ attention.
In a landmark decision handed down on 24 June 2022, the English High Court ruled allowing the service of process against persons unknown via non-fungible tokens (“NFT“) on a blockchain.
New methods of service
In D’Aloia v (1) Persons Unknown (2) Binance Holdings Limited and others,1 Mr D’Aloia (the “Plaintiff“) commenced proceedings for the alleged fraudulent misappropriation of cryptocurrency assets worth approximately USD 2.1 million Tether and USD 230,000 coins.2 In doing so, the Claimant sought permission to serve legal proceedings outside the jurisdiction via both (i) email and (ii) NFT by way of airdrop in the digital wallets where the Claimant made its initial transfer to the persons unknown behind the fraudulent website tda finan.
The court granted the claimant’s application, showing flexibility and a willingness to “embrace Blockchain technology”.3 The court accepted that allowing service via NFT airdrop in this case would lead to a greater prospect of the unknown persons behind the fraudulent tda-finan website being notified of the proceedings, finding that “the difficulties which would otherwise arise and the complexity of service by the first defendant means that there is a factual reason shown’. 4
A growing trend
The English court has already allowed other new forms of service in recent years – including via WhatsApp5 and by Facebook Messenger.6 This latest decision reflects the fact that the English court is, in appropriate cases, willing to authorize service by alternative means to ensure that proceedings can be effectively brought against the accused. By providing services via NFT airdrop, the court solved the problem of the anonymous identities of the fake “persons unknown” – using the very blockchain technology with which the crypto-abuse was committed.
This decision to allow service via NFT airdrop follows the June 2022 decision by the New York State Supreme Court in LCX AG v. John Doe No. 1-25, which also allowed claimant’s attorneys to serve documents via NFT airdrop. It is noteworthy that both English and US courts have shown openness to providing service via NFT, and it is a potential indicator of increasing international coordination on what are permissible methods of service in crypto disputes. This international adaptation is desirable, given the borderless nature of cryptocurrency and its global reach.
1 24 June 2022, [2022] EWHC 1723 (Ch).
2 USD coins, also known as one of the “stablecoins”, are pegged to the US dollar.
3 Above n.1 [39].
4 Above n.1 [40].
5 Gray v. Hurley [2019] EWHC 1636 (QB); in which the court upheld an order for alternative service of the claim form via WhatsApp on the defendant in New Zealand.
6 CMOC Sales & Marketing Ltd v Persons Unknown [2018] EWHC 2230 (Comm); in which the court allowed alternative service of the claim form via Facebook Messenger and WhatsApp.
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