Crypto Disputes - A temporary setback?

Numerous disputes related to crypto are being heard by courts around the world. It’s an area which is increasing at such a pace that it’s becoming quite a challenge to keep up with the number of cases, and not all of the actions will be publicised if an out of court settlement is reached early on.

Luxury fashion heavyweight, Hermes International, recently sued Mason Rothschild in a Manhattan Federal Court alleging trademark infringement based on Rothschild creating 100 Metabirkin NFTs, and trading them, which Hermes say infringed on their Birkin bag trademark. Rothschild is defending the action asserting the fair use defence, citing Andy Warhol’s Campbell Soup Cans series as justification, that he is simply selling his expression of the Birkin design, rather than passing off the artwork as the real thing. This is one of a number of key actions which is likely to shape the legal landscape for IP law in crypto.

In Singapore, a court issued a freezing injunction preventing the sale of a Bored Ape NFT, which we understand is the first time an injunction has been applied to a digital asset. The NFT cannot be sold until the issue of an ownership dispute has been resolved.

Probably one of the more surprising decisions we have come across comes in the ruling from Shanghai High People’s Court in China. This case concerned a dispute between two parties regarding the recovery of a loan of 1 BTC. The Court recognised Bitcoin as having economic value, scarcity and disposability and therefore confirmed it was subject to property rights and could be defined under Chinese law as virtual property. When the Defendant failed to return the BTC to the Claimant, the parties reconvened at Court and following mediation it was agreed that the Defendant would pay compensation to the Claimant at a discounted value of the BTC as it was valued at the time of the loan. This is all the more surprising because whilst the Court ruled that BTC is indeed a virtual asset, and therefore subject to Chinese law as it has economic value. The Court’s decision may offer some solace to crypto investors and enthusiasts alike, as it opens the door for crypto activities perhaps resuming in China in due course.

Whilst full-blown trials involving crypto disputes are unlikely, there will be hotly contested preliminary and interlocutory hearings. The contentious landscape in the crypto arena will leave firms scrambling to hire talent, and the larger crypto companies are likely to recruit in-house counsel, which can already be seen by the raft of vacancies advertised in multiple jurisdictions. We shall keep an eye on the crypto disputes area and provide updates in subsequent blogs. Lawyers will need to navigate this evolving landscape using existing law and applying it to a developing area, thereby shaping the future of the crypto legal landscape.

Meanwhile, should you be seeking dispute resolution advice in crypto, then please contact me to see how I can help you. In any dispute, but particularly those involving crypto, you need to act fast.

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