A new cryptocurrency remedy against software developers?

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.


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 fiduciary duty?

The Court of Appeal held that there was a realistic argument that the law on fiduciary duties should be developed. It found that the developers are a sufficiently well-defined group to be capable of being subject to fiduciary duties and that they had undertaken a role which involved making discretionary decisions and exercising power for and on behalf of other people in relation to property owned by other people. That property had been entrusted to the care of the developers. The developers could therefore be seen to be fiduciaries. The essence of that duty could be a single minded loyalty to the users of bitcoin software. The content of the duties could include a duty not to act in their own self-interest and to act in positive ways, for example, to introduce code so that an owner's bitcoin can be transferred to safety.

Cryptoassets as property

Obiter, the Court of Appeal stated that "a cryptoasset such as bitcoin is property" thus affirming the position in AA v Persons Unknown [2019] EWCH (Comm) 3356.

Practical Considerations

In light of this decision and the recent decision in D'Aloia v Persons Unknown and Others [2022] EWHC 1723 (Ch) (in which the Court ruled that it might be possible for victims of crypto fraud to pursue direct claims against controllers and operators of crypto exchanges where a constructive trust claim is made out) it is clear that the Courts are demonstrating a willingness to use and potentially extend common law and equitable principles to assist victims of fraud.

For more information on this issue, or if you require advice such matters or any other Cayman Islands, BVI or Bermuda legal issues, please contact any of the primary contacts from the Hong Kong Insolvency and Dispute Resolution team listed below.


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