The Applicant, a broker for gold bullion, alleged that he had become a victim to an “address poisoning” scam. This is a form of scam where a scammer produces a wallet address that looks similar or near identical to the wallet which the victim is known to interact with such that the victim thinks he is making a payment to a bona fide wallet, but instead the payment is routed to the scammer. As a result of the scam, the Applicant had made various transfers of cryptocurrency (valued at over US$3 million) to the wallets of the unknown scammers. Within 24 hours, the cryptocurrency was further transferred to various other wallets as part of a “layering” process meant to obfuscate the ownership history of the cryptocurrency.

Redress was sought from the Singapore courts and the Applicant successfully obtained an injunction against the unknown scammers from dealing with their assets, as well as secured several disclosure orders against various cryptocurrency exchanges. While the Issuers (who are based in the BVI) were not part of the scam, they can “freeze” the defrauded cryptocurrency in the various private wallets to prevent further dissipation. The Issuers were however unwilling to do so unless there was intervention by law enforcement (or by extension, the BVI Court). Parallel injunctions were therefore sought in the BVI against both the unknown scammers and the Issuers.

1. In relation to the freezing order against the unknown scammers, the BVI Court was satisfied that based on the transfers between the wallet addresses and the way the wallets have interacted with one another, a freezing order was justified. In particular, the fact that the transfers were made in quick succession and sometimes in a round tripping-style of obfuscation between the various “layers” of wallets, raised questions on whether they were indeed legitimate transactions.
2. As for the mandatory interim injunction sought against the Issuers, the BVI Court was convinced that such an order involved the least risk of injustice since it was possible for the Issuers to “freeze” the defrauded cryptocurrency in the wallets, which were likely related to individual(s) involved in the fraud. In this regard, the BVI Court highlighted that it will develop new practices (as against non-parties) to address new technology challenges.
3. Significantly, the BVI Court also granted the Applicant’s application to serve the requisite papers out of jurisdiction by way of (among others) NFT airdrop to the digital wallet addresses of the unknown scammers, a first in the jurisdiction. In making this novel order, the BVI Court drew inspiration from the recent English case of D’Aloia v Persons Unknown and Binance Holdings Limited and Others  [2022] EWHC 1723 (Ch), in which service by NFT was permitted.

This decision should give comfort to potential victims of cryptocurrency scams, especially in cases where anonymous scammers implement a “layering” strategy to mask the trail of ownership of the defrauded assets. The case also demonstrates the willingness and innovativeness of the BVI Court in assisting victims where there are significant difficulties in identifying and serving on the scammer(s).

With the growth and increasing reliance of the crypto industry on the offshore jurisdictions, this is indeed good news for cryptocurrency users.