The Court of First Instance of the Dubai International Finance Centre (DIFC) has handed down judgment following trial of a claim arising from the misappropriation of 300bitcoins. This is the first time that the DIFC Courts have considered a cryptocurrency case of this kind and the case touches on several of the key questions facing the courts around the world.

Facts of the case:

• The case is about a cryptocurrency trade that went wrong
• The claimants, Gate MENA DMCC and Huobi MENA FZE, were trying to sell 300 bitcoins to a buyer
• hey agreed to use Tabarak Investment Capital Limited (D1) and its Director (D2) as an escrow agent to hold the bitcoins until the buyer paid.
• The bitcoins were stolen from the escrow account during the transaction.
• Expert witnesses claim potential ways in which the BTC was misappropriated was: (i) by physical breach, (ii) by tampering with the Wallet, (iii) by collusion between the non-claimant parties, and/or (iv) by the buyer's representatives having scrolled down the screen of the Wallet when they were passed the laptop computer into which the Wallet had been plugged to find and then memorizing or recording all 12 words of the seed phrase - the last of which was concluded to be the likely occurrence.

Here are some of the key issues that were raised in the case:

• Whether D1 and D2 owed a contractual duty of care to the claimants.
• The claimants, Gate MENA DMCC and Huobi MENA FZE, were trying to sell 300 bitcoins to a buye Whether D1 breach its obligation pursuant to Article 18 of the DIFC Obligations Law (DIFC Law No. 5/2005, as amended) arising from alleged negligence in the advice given before and at the Meeting.
• Some other factual issues including best practice for custody/storage of BTC and how to quantify damages in a cryptocurrency case given their fluctuating price.

The Judge's findings in relation to the role of D2, namely that they were not in breach of contractual duties owed, means the judgment does not contain any insight regarding the appropriate security protocols for custodians of digital assets, or whether the DIFC Court would be prepared to order payment of damages in BTC, or if it would order damages in fiat currency, in what amount and on what basis. Had the court found the defendants in breach, and thus ordered the payment of damages, it would’ve given them the interesting opportunity to comment on how cryptocurrency damages are calculated i.e. (i) at the date of misappropriation; (ii) at midday on the date of judgment; or (iii) at midday on the date of payment following judgment. Over the course of events, the value of 300 BTC fluctuated from approximately USD 3 million at the time of the misappropriation to a high of USD 18.3 million in November 2021. On the date of judgment, 300 BTC was valued at approximately USD 6.1 million. This is yet to receive any judicial consideration globally. It’s worth noting that the claimants have been granted permission to appeal on eight grounds. These grounds include appeals on points of fact and law in relation to the claims for breach of confidence, breach of contract, negligence and breach of fiduciary duty. This leaves open the possibility that these issues may yet receive judicial consideration. The appeal is likely to attract significant interest as it will be one of the first of its kind not only in the DIFC, but globally. If you wish to find out more about this topic please feel free to reach out to us for support at admin@bankslegal.com