High Court Decision in D’Aloia v. Persons Unknown & Others: Implications for Crypto-Fraud Victims and Exchanges

High Court Dismisses Claim Against Bitkub in Landmark Crypto-Scam Case

In a groundbreaking decision, the High Court of England and Wales has dismissed a claim brought by the victim of a crypto-scam against Bitkub, one of the exchanges allegedly involved in the fraudulent scheme. This ruling comes after a full contested trial that delved into complex issues surrounding the treatment of cryptocurrency and the potential liability of exchanges in cases of crypto-frauds.

The case, D’Aloia v. Persons Unknown & Others, involved Fabrizio D’Aloia, who alleged that fraudsters induced him to transfer approximately £2.5 million worth of cryptocurrency to wallets associated with a scam website. D’Aloia brought proceedings against the alleged fraudsters and several cryptocurrency exchanges, including Bitkub, where he claimed a significant amount of USDT had been transferred.

Despite the lengthy judgment traversing various legal issues, the High Court ultimately dismissed D’Aloia’s claim against Bitkub. The court found that D’Aloia failed to demonstrate that his funds had reached the Bitkub wallet, which was crucial to his claims of unjust enrichment and constructive trust.

However, the judgment did shed light on important legal principles regarding cryptocurrency. The court confirmed that USDT can attract property rights under English law, allowing victims of crypto-frauds involving USDT to bring equitable claims to trace or follow those assets. Additionally, the court emphasized the importance of clear and coherent tracing methodologies in crypto-related disputes.

The ruling also highlighted the significance of exchanges implementing robust AML and KYC policies to prevent fraudulent activities. Bitkub’s awareness of suspicious account activity was deemed fatal to the defenses it sought to raise, underscoring the need for exchanges to ensure compliance with regulatory requirements.

Overall, while this decision marks a significant development in the evolving landscape of crypto-frauds, important questions remain regarding exchanges’ liability to victims of fraud. The case serves as a cautionary tale for exchanges to prioritize compliance and transparency in their operations to avoid potential legal repercussions in cases of fraudulent activities involving cryptocurrency.