Cryptoassets – Supreme Court allows service of proceedings exclusively by NFT

On 13 January 2023, the Supreme Court handed down a landmark decision in the case of Osbourne v Persons Unknown and others [2023] EWHC 39 (KB). In what is understood to be a first in the courts of England and Wales, the High Court has authorized the service of legal proceedings solely by non-fungible token (“NFT”) on defendants accused of stealing NFTs from a crypto asset account.

Summary

The case concerned the hacking of a digital wallet held by the claimant. The wallet contained two NFTs representing unique pieces of digital art, with a value in the range of £3,000 – £5,000.

In January 2022, the NFTs were removed from the claimant’s digital wallet by an unidentified hacker, without her consent. Using a digital asset tracking company, the claimant tracked her NFTs to two different wallets. In March 2022, she obtained an injunction against “persons unknown” (such as those who had transferred the NFTs out of her wallet) to prevent the NFTs from being traded. The asset tracking company later discovered that one of the NFTs had been transferred to a separate wallet apparently held by a South African individual on a crypto-asset marketplace, and applied to amend the claim to add that person as a defendant.

Among other things, Justice Lavender was asked to allow service of the amended claim form, amended claim information, his order and supporting documents on some of the defendants exclusively via NFT. Given that the plaintiff had no other available method of serving three of the defendants, Justice Lavender allowed service of the NFTs, with the NFTs containing embedded hyperlinks to the relevant documents. He sanctioned the editing of the documents, on the basis that the NFTs should be placed on the blockchain and therefore accessible to the public. The plaintiff was instructed to offer the defendant access to the unredacted versions of the documents.

Analysis

Osbourne follows a decision last July in which the Supreme Court authorized service by email and NFT on an anonymous defendant in an action to recover stolen cryptocurrency. However, as identified by Justice Lavender in paragraph 48 of his judgment, the ruling in Osbourne is unique. It is considered to be the first occasion where service by NFT has been approved by a court in England and Wales as the exclusive method of service of documents.

The decision in Osbourne further demonstrates the courts’ willingness to embrace NFTs and strengthens the ability of crypto-fraud victims to pursue anonymous hackers for the theft of their property. This latest ruling also shows that the courts are prepared to accept less traditional services when traditional forms of services are not available – an encouraging development for court users in England and Wales.