Fabrizio D'Aloia v Persons Unknown Category A & Ors
| Court | Chancery Division |
| Judge | Richard Farnhill |
| Neutral Citation | [2024] EWHC 2342 (Ch) |
| Date | 12 September 2024 |
| Year | 2024 |
| Counsel | Terence Bergin Kc,Celso De Azevedo,Darragh Connell,Eoin Maclachlan |
Neutral Citation Number: [2024] EWHC 2342 (Ch)
Case No: BL-2022-001008
IN THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
BUSINESS LIST (ChD)
Rolls Building
Fetter Lane
London EC4A 1NL
Date: 12 September 2024
Before :
Richard Farnhill
(sitting as a Deputy Judge of the Chancery Division)
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Between :
FABRIZIO D’ALOIA Claimant
- and -
(1) PERSONS UNKNOWN CATEGORY A
(2) BINANCE HOLDINGS LIMITED
(3) POLO DIGITAL ASSETS INC
(4) GATE TECHNOLOGY CORP
(5) AUX CAYES FINTECH CO LTD
(6) BITKUB ONLINE CO LTD
(7) PERSONS UNKNOWN CATEGORY B Defendants
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Terence Bergin KC and Celso De Azevedo (instructed by Giambrone & Partners LLP) for
the Claimant
Darragh Connell and Eoin MacLachlan (instructed by Quillon Law LLP) for the Sixth
Defendant
Hearing dates: 6-7, 10-11 and 14 June 2024
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JUDGMENT
Approved Judgment D’Aloia v Persons Unknown
Richard Farnhill (sitting as a Deputy High Court Judge of the Chancery Division):
1. In these proceedings the Claimant, Mr D’Aloia, alleges that he is the victim of a
cryptocurrency scam. His claim against the Second Defendant ( Binance) has settled
and his claim against the Fifth Defendant (Aux Cayes Fintech) was struck out. He
has issued a separate application seeking summary judgment against the First
Defendants, the Third Defendant (Polo), the Fourth Defendant (Gate) and the
Seventh Defendants. The trial before me principally concerned the issues between Mr
D’Aloia and the Sixth Defendant (Bitkub).
2. Broadly, Mr D’Aloia alleges that a fraud was perpetrated on him by the First
Defendants in which he was induced to hand over cryptocurrency in the form of
Circle (which is not relevant for this trial) and Tether ( USDT) totalling around £2.5m.
The First Defendants then passed that cryptocurrency through a number of blockchain
wallets before it was withdrawn as fiat currency by the Seventh Defendants. Polo,
Gate and Bitkub (the Exchange Defendants) were the cryptocurrency exchanges with
whom the Seventh Defendants are said to have held their various accounts.
The issues
3. The parties summarised the issues for determination before me by way of an updated
List of Issues. This is a lengthy and, perhaps inevitably, rather technical judgment.
Parties quite legitimately are generally more concerned about the end destination than
the legal route. I therefore start with a brief summary of the issues and my findings.
What is the pleaded basis for Bitkub’s alleged liability to the Claimant?
4. The pleading issue comprised a number of sub-issues:
i) What is the pleaded basis for the Claimant’s allegation that he can identify his
“Identifiable Cryptocurrency” and his related contention that his “Identifiable
Cryptocurrency” is comprised within the USDT 400,000 that was transferred
to the 82e6 Wallet held with Bitkub on 21 February 2022 ? For the avoidance
of doubt, this sub-issue turns on the pleading point: whether the Claimant
pleaded that he has relied upon following or tracing. The statements of case
adequately plead a claim premised on tracing USDT to the 82e6 wallet.
There is, of course, a separate question of whether the alleged flow of
assets is adequately evidenced.
ii) What is the pleaded basis for the Claimant’s allegation that Bitkub holds the
Claimant’s “Identifiable Cryptocurrency” on constructive trust and that Bitkub
is liable to the Claimant as a constructive trustee? Paragraph 30 of the Re-
Amended Reply asserts, in terms, a constructive trust imposed on Bitkub.
Paragraphs 40-41 of the Re-Amended Particulars of Claim and
paragraph 37 of the Re-Amended Reply set out the basis (and, for the
avoidance of doubt, the only basis) on which that constructive trust is said
to arise: that the assets were subject to a constructive trust imposed on the
First and Seventh Defendants by virtue of their fraud and as a
consequence the Sixth Defendant could not acquire the beneficial title,
alternatively it held the assets on constructive trust.
Page 2
Approved Judgment D’Aloia v Persons Unknown
iii) What are the matters on which the Claimant’s allegation that Bitkub “ did not
act in a commercially acceptable way” can be permissibly advanced with
reference to the Claimant’s pleadings? The allegation goes to, and only goes
to, the defences of good faith purchase for value without notice, change of
position and ministerial receipt (paragraphs 17, 23 and 28(j) of the Re-
Amended Reply).
iv) What are the matters on which the Claimant’s allegation that Bitkub
“unconscionably received” the Claimant’s “Identifiable Cryptocurrency” can
be permissibly advanced with reference to the Claimant’s pleading? The
Claimant can refer to the matters pleaded as regards KYC, albeit there is
no expert evidence against which to assess them. He can also refer to the
systems and controls of Bitkub and Bitkub’s application of them in the
present case. The unconscionable receipt claim is an aspect of the
constructive trust claim set out at (ii), above.
USDT as property
5. Whether the Claimant and Bitkub are correct in acknowledging that the stablecoin,
USDT, that forms the subject matter of the Claimant’s claim against Bitkub, is
considered property under the law of England and Wales and if so, what is the nature
of the property in question and what is the effect of the same on the Claimant’s claim?
USDT attract property rights under English law. It is neither a chose in action
nor a chose in possession, but rather a distinct form of property not premised on
an underlying legal right. It can be the subject of tracing and can constitute
trust property in the same way as other property.
Expert evidence
6. Whether the Claimant can establish, as a matter of fact, with reference to expert
blockchain analysis, that his “Identifiable Cryptocurrency” reached the 82e6 wallet
for which the Bitkub holds the private key. The Claimant has failed to show that
any of his funds were received in the 82e6 wallet.
Following / Tracing
7. Whether the Claimant can establish, as a matter of law, that USDT 46,291 of his
allegedly “Identifiable Cryptocurrency” reached the 82e6 wallet, for which Bitkub
holds the private key by reference to the principles of following or, if pleaded, tracing.
Specifically, which methods were legally open to the Claimant to follow/trace the
allegedly “Identifiable Cryptocurrency” to the 82e6 wallet. This issue raises a
number of sub-issues:
i) Is tracing at common law possible through a mixed fund? In my view it is
not. As such, tracing is only available to the Claimant in respect of his
equitable claims, where tracing through a mixed fund is possible.
ii) Was it possible to follow the USDT to the 82e6 wallet? This was expressly
part of the agreed issue, although I was not addressed in any detail on it.
To my mind it turns on two linked issues. The first is whether in principle
the property interest in USDT is, for these purposes, more akin to a chose
Page 3
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