In the case of D’Aloia v. Binance Holdings & Others, the High Court of England and Wales has issued an order that lets the court serve court papers through the transfer of a non-fungible token (NFT) on the blockchain.
This is the first time a court can “serve” papers on a blockchain in the United Kingdom and only the second time in the world. A US court let a service use an NFT in June.
“Service” is a legal term for the actions required by court rules to make sure that a person knows about papers that will be used in court proceedings.
Fabrizio D’Aloia, an Italian engineer and the founder of the online gambling joint stock company Microgame, filed a claim against four cryptocurrency exchanges—Binance, Polo Digital Assets, Aux Cayes Fintech, and Bitkub Online—after his cryptocurrency was stolen by people running a fake clone online brokerage.
The court’s decision is unique in that it lets the claimant warn these unknown people in different ways, such as by sending NFTs to the two wallets where Mr. D’Aloia first put his stolen coins.
Giambrone & Partners LLP, which represents Mr. D’Aloia, said, “This judgment makes it possible for more victims of crypto asset theft to go after unknown people who stole their bitcoin when they wouldn’t have been able to do so before.” For example, this strategy could be used when the contact information for fraudulent platforms is out of date. The legal company says that it also opens up new ways to use the benefits of blockchain technology, like the fact that it can’t be changed and that it can be verified, to serve court papers.
In his lawsuit, Mr. D’Aloia explained how some of the money he had was stolen from him. According to the complaint, the anonymous thieves used a fake online broker to get investors to put crypto assets into two different wallets. Mr. D’Aloia says that his cryptocurrency assets were illegally copied and sold on brokerages.
It’s important to note that the crypto assets were put into two wallets that Binance and the other defendants ran as centralized exchanges.
This is important because, in addition to the fact that blockchain-based services are new, the court recognized in this case that the cryptocurrency exchange defendants who hold Mr. D’Alaio’s cryptocurrencies are constructive trustees, which could make them responsible for the stolen funds that were deposited on the exchange.
Even though exchanges are not held responsible for theft, they may still be held responsible for these assets. The wallets that are linked to the trading platforms are hosted since they are centralized. This means that their infrastructure manages and protects the private keys and cash that are put inside them, and they must do certain things as good trustees.
Because the criminals used their platforms to move the assets and the exchanges agreed not to let the stolen cryptocurrency be moved or withdrawn, they may be responsible for these amounts.
According to a press release from the Federal Trade Commission, customers lost more than $1 billion to crypto fraud between January 2021 and March 2022. (FTC). Most of the reported losses came from fake offers to invest in cryptocurrency, which cost $575 million since January 2021.
Many of the scams involve the promise of “great profits” for people who join the scammers’ cryptocurrency schemes. Still, many victims lose most or all of their money.
Regulators in the United Kingdom have also warned customers about the rise in cryptocurrency scams. Between April 2021 and September 2021, the Financial Conduct Authority got about 16,400 possible scam reports. About 3,000 of them were about cryptocurrency. The most common type of scam was when bad actors tried to get their victims to buy worthless, overpriced, or non-existent shares or bonds over the phone.