Crypton Digital Assets Ltd v Blockchain Luxembourg SA

JurisdictionEngland & Wales
JudgeMr Justice Edwin Johnson
Judgment Date29 November 2021
Neutral Citation[2021] EWHC 3194 (Ch)
Docket NumberCase No: CH-2021-000164
CourtChancery Division

[2021] EWHC 3194 (Ch)

IN THE HIGH COURT OF JUSTICE

BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES

CHANCERY APPEALS (ChD)

ON APPEAL FROM THE ORDER OF DEPUTY MASTER BRIGHTWELL DATED

19TH JULY 2021

Royal Courts of Justice

7 The Rolls Building

Fetter Lane

London

EC4A 1NL

Before:

Mr Justice Edwin Johnson

Case No: CH-2021-000164

Between:
(1) Crypton Digital Assets Limited
(2) Crypton Partner Management Limited
Claimants/Respondents
and
(1) Blockchain Luxembourg SA
(2) Blockchain (GB) Limited
Defendants/Appellants
(3) Stephen Jones
(4) Petros-Alexander Koumpas
(5) Mark Curtis
(6) Castramet Limited
Defendants

Niranjan Venkatesan (instructed by Goodwin Procter (UK) LLP) for the First and Second Defendants/Appellants

James Sheehan (instructed by Ashurst LLP) for the Claimants/Respondents

Hearing date: 9 th November 2021 Draft judgment sent to parties: 22 nd November 2021

APPROVED JUDGMENT

I direct that no official shorthand note shall be taken of this judgment and that copies of this version as handed down may be treated as authentic

Mr Justice Edwin Johnson

This judgment was handed down by the judge remotely by circulation to the parties' representatives by email and release to Bailii. The date and time for hand-down is deemed to be 10:00am on 29 th November 2021

Introduction

1

In this case the First and Second Defendants, to whom I will refer collectively as Blockchain, seek to challenge parts of an order made by Deputy Master Brightwell on 19 th July 2021. By the relevant parts of this order (“the Order”) the Deputy Master dismissed the bulk of Blockchain's application to strike out various parts of what are now the Amended Particulars of Claim in this action.

2

The Deputy Master refused to grant permission to appeal against the relevant parts of the Order. Blockchain renewed its application for permission to appeal to the appeal court (the High Court). By an order made on 23 rd September 2021 Miles J. directed that the application for permission to appeal should be listed for an oral hearing, with the hearing of the appeal (if permission to appeal was granted) to follow.

3

The hearing of the application for permission to appeal/the appeal came before me on 9 th November 2021. This is my reserved judgment on the application for permission to appeal/the appeal.

4

At the hearing Blockchain was represented by Mr. Niranjan Venkatesan, counsel. The respondents, the Claimants in this action, were represented by Mr. James Sheehan, also counsel. There are other Defendants to the action, but they are not directly affected by this particular dispute, and were not represented at the hearing.

5

Both counsel sensibly approached the hearing on the basis that all the arguments which would be engaged by the substantive appeal should be addressed at the hearing, subject to the reservation, on Mr. Sheehan's side, that this was without prejudice to his contention that permission to appeal had not been granted and should not be granted. I am grateful to both counsel for their assistance, both in their skeleton arguments for the hearing and in their well-organised oral submissions.

6

For ease of reference I will, unless otherwise indicated, use the expression “the Appeal” to refer to what is both an application for permission and, if permission should be granted, an appeal. It goes without saying that my use of this expression does not pre-empt my decision on the application for permission to appeal.

Summary of the claims in the action

7

The following summary of the claims in this action is taken from the Amended Particulars of Claim in the action. Blockchain has not yet, by reason of its strike out application, pleaded to the Amended Particulars of Claim. It is however apparent that the content of the Amended Particulars of Claim is substantially in dispute between the Claimants and Blockchain. My summary is intended only to set the scene for the arguments in the Appeal. The summary does not contain any findings of fact.

8

The Claimants, to whom I shall refer collectively as Crypton, describe themselves in the Amended Particulars of Claim as technology and research companies. Crypton says that, during the period relevant to this claim, it used a combination of quantitative data science and artificial intelligence to implement optimised trading strategies in respect of exchange-based cryptocurrencies and other digital assets which use blockchain technology.

9

The Second Claimant, Crypton Partner Management Limited (“Crypton PM”), is described as a wholly owned subsidiary of the First Claimant, Crypton Digital Assets Limited (“Crypton DA”). Crypton says that Crypton PM was formed for the purposes of exploiting the work which was being done to create a new investment platform for cryptocurrency dealing.

10

The First Defendant, Blockchain Luxembourg SA (“Blockchain SA”), is described as a major cryptocurrency wallet provider, operating a cryptocurrency exchange on which it seeks to encourage cryptocurrency-based trading. The Second Defendant, Blockchain (GB) Limited (“Blockchain GB”), is described as a wholly-owned subsidiary of Blockchain SA.

11

In addition to Blockchain there are four other Defendants to the action. As I understand the position these four other Defendants have all pleaded to the Amended Particulars of Claim and, in the case of the Sixth Defendant, a counterclaim has been made. As the remaining Defendants are relevant to the arguments in the Appeal, I should identify them.

12

The Third Defendant, Stephen Jones (“Mr. Jones”), is described as a former employee of Crypton DA, as a former director of Crypton DA and Crypton PM, and as Crypton's former Chief Investment Officer, with responsibility (among other things) for creating Crypton's signals, investment strategies and algorithms in respect of what is referred to as the Crypton Platform, as well as for artificial intelligence.

13

The Fourth Defendant, Petros Alexandros Koumpas (“Mr. Koumpas”), is also described as a former employee of Crypton DA, as a former director of Crypton DA and Crypton PM, and as Crypton's former Chief Technology Officer, with responsibility for data, analytics and artificial intelligence in respect of the Crypton Platform.

14

The Fifth Defendant, Mark Curtis (“Mr. Curtis”), is described as having worked for Crypton DA pursuant to a contract for services, referred to as the Curtis Contract. Mr. Curtis is described as having been Crypton's Principal Engineer, with responsibility for the creation of the Crypton Platform infrastructure, in particular its core software, source code and private network.

15

The Sixth Defendant, Castramet Limited (“Castramet”) is included as a Defendant to the action on the alternative basis that the Curtis Contract was between Crypton DA and Castramet, in which event Crypton claims against Castramet in contract, and on the basis that Castramet was vicariously liable for the alleged wrongdoing of Mr. Curtis.

16

So far as the essential complaints of Crypton in this action are concerned, it is most convenient to adopt the same course as the Deputy Master in his judgment, and quote the summary of the claim which appears in paragraphs 9–16 of the Amended Particulars of Claim. This summary is in the following terms (italics have been added to all quotations in this judgment):

“9. Between August 2018 and early 2020, Crypton developed a valuable bespoke institutional-grade multi-asset high-frequency, low latency trading platform using AI, with a focus on digital assets, specifically cryptocurrencies (the “Crypton Platform”), designed to function as a digital asset / fund manager.

10. From August 2019 onwards, Crypton engaged in discussions and negotiations with a number of third parties with a view to attracting investment into Crypton. One such third party was Blockchain SA. In late 2019 the negotiations between Crypton and Blockchain SA developed into a proposed acquisition by Blockchain SA of the entire share capital, business and assets of Crypton, including the Crypton Platform.

11. However, instead of seeing through the negotiations with Crypton to a concluded acquisition, Blockchain instead entered into a wrongful combination with Mr Jones, Mr Koumpas and Mr Curtis (and/or Castramet) pursuant to which these individuals simply purported to resign from Crypton and were engaged by Blockchain almost immediately thereafter.

12. Blockchain and the individual Defendants referred to above then proceeded to solicit other key staff from Crypton, and (it is to be inferred) Blockchain is now exploiting the Crypton Platform, using Crypton's intellectual property, and/or seeking to rebuild that platform using the ideas and concepts used to create it, and the skill, expertise and know-how of those of its employees and contractors who had contributed to its development.

13. Blockchain has made no payment of any kind to Crypton in return.

14. As set out in more detail below, the wrongful combination between the Defendants first involved Mr Jones, Mr Koumpas and Mr Curtis seeking to take control of the process of negotiation between Crypton and Blockchain SA, and of Crypton's technology assets and data. They did so:

14.1. With a view to ensuring that they were able to decide on whether and (if so) on what terms the acquisition took place, purporting in breach of duty to agree terms which were contrary to Crypton's interests and instead favoured Blockchain SA and these individuals. Blockchain SA had offered a bonus pool to transferring employees and, as Mr Jones explained at the time, he wanted to “keep the head count down” so that there was “more money in the pot for us”. Mr Jones and Mr Koumpas used these negotiations with Blockchain SA to secure an increase in the salary to be paid to them personally after the acquisition.

14.2. Later, in order to enable them to exploit the opportunity presented by Blockchain SA's interest...

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