Dubai Court finds Canadian company and its owner liable in USD 7M cryptocurrency dispute

Background

Plaintiff, a Canadian businessman, filed a suit in Dubai Primary Court against First Defendant, an individual who owns Second Defendant, a company incorporated under the laws of British Columbia, Canada. The company has operated in the cryptocurrency market, facilitating the buying and selling of various currencies using fiat currencies such as Canadian dollars and US dollars.

In early 2018, the first defendant traveled from Canada to the United Arab Emirates and met with the plaintiff at a hotel in Dubai. Discussions resulted in an agreement that the plaintiff-owned company would utilize the services of a Canadian company (Second Defendant) to facilitate wire transfer payments. It was agreed that the second defendant would act as a third-party payment processor with respect to payments and wire transfers for both plaintiffs individually and plaintiffs’ companies.

As part of the agreement, the plaintiff opened a trading account with the second defendant. The plaintiff will use a personal account to transfer bitcoin or other currency to her second defendant. The terms of this contract allowed plaintiffs to cancel their accounts and withdraw all balances at any time.

By the end of 2018, the second defendant delayed multiple transfers and claimed to have sent electronic transfer confirmation forms to the plaintiffs, but the plaintiffs never received any of these transfers. In early 2019, the plaintiff emailed the first defendant pointing to a pending transfer without a tracking code. He asked the first defendant to provide tracking numbers for these transfers. The First Defendant promised to send them to the Plaintiff, but the Plaintiff never received a tracking number or the money transfer that the First Defendant claimed to have sent.

In mid-2019, the plaintiff attempted to withdraw cryptocurrency assets from a second defendant’s account. However, the first and second defendants refused to hand over the virtual currency assets and held them illegally. The value of virtual currency in Plaintiff’s account against Second Defendant amounted to $6,782,459.96, and, according to the details of an expert report filed by Plaintiff, the amount of virtual currency in said account for the period from February 2021 to March 2021 was It represents the average price of a currency. .

procedure

The court reviewed the submissions and issued an interim order appointing a financial expert to report on plaintiffs’ technical submissions.

Court-appointed experts relied on plaintiffs’ digital currency wallet details extracted from the website of a Canadian company (the second defendant). Details included the digital currency balance and its value at the date of the transfer and claim process. The total digital currency balance was found to be $2,711,570.98 as of the date of transfer to the second defendant, and $7,460,838.38 as of the date of the court-appointed preliminary expert report.

analysis

The Court found that there was a definite relationship between the parties, as evidenced by the email exchanges exchanged between Plaintiff and First Defendant. Additionally, cryptocurrency wallet details, including cryptocurrency balances and their values, obtained from the website of a Canadian company (the second defendant) played an important role in the lawsuit.

The Court recognized the value of US$2,711,570.98 and US$7,460,838.38 as points for formulating the amount of claims.

The plaintiff had a snapshot of the trading account with the second defendant and was able to confirm the balance claimed in the lawsuit. This balance was paid by both defendants to the plaintiffs based on emails sent by the first defendant to the plaintiffs in early 2019, as the state-appointed expert pointed out in the report. The plaintiff also includes the existence of cryptocurrencies in cryptocurrency wallets.

In addition, Plaintiff presented an excerpt from the accounting software used by both Defendants, showing Plaintiff’s owned cryptocurrency wallets and deposited cryptocurrency balances. The court found that the electronic communications and documents point to the liability of the first and second defendants for the plaintiff-owned cryptocurrency wallets.

Arrangement

Based on these findings, the Court reasoned that the First Defendant, as the owner of the Second Defendant, had control over the tracking number of the remittance and the cryptocurrency in the Plaintiff’s crypto wallet.

The court found that the first and second defendants were jointly and severally liable to pay the plaintiff US$6,782,459.96 or the equivalent of the UAE dirham, together with statutory interest of 5% per annum from the date of judgment until full payment.

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This recent ruling by the Dubai Primary Court set an important precedent that demonstrated the Dubai Court’s ability to break through the corporate veil to question the personal liability of managers of foreign (in this case, Canadian) companies. The decision underscores the universal scope of Dubai courts, effectively adjudicating disputes across multiple jurisdictions regardless of the place of incorporation or domicile of the entity involved.

In this case, the Dubai First Court’s decision to hold the owner of a Canadian company to individual liability represents a significant expansion of the Court’s powers over international bodies in cryptocurrency disputes, ensuring justice and enforcing liability. Demonstrates the Dubai courts’ commitment to enforcement.

The ruling also highlights that Dubai courts have accepted sophisticated evidence regarding cryptocurrency transactions and cryptocurrency wallets. This development can be considered progressive in today’s rapidly evolving digital world.

Courts’ reliance on digital currency balances, inspection of email communications, and data from accounting software demonstrates a deep understanding and acceptance of digital and cryptographic evidence.

As the world continues to grapple with the legal implications and complexities of cryptocurrencies, the Dubai court ruling marks an important step towards developing an effective judicial framework capable of handling litigation involving cross-border cryptocurrency transactions. . The ruling sends a clear message that Dubai courts can provide justice in litigation involving cryptocurrencies, despite the complexities inherent in cryptocurrencies and international jurisdictional issues.

The progressive attitude and competent handling of such complex cases by Dubai courts is likely to attract more international cryptocurrency-related litigation, thereby allowing Dubai to settle disputes in the field of digital currencies. Dubai will be further established as a global hub for resolving issues, reaffirming Dubai’s commitment to: Positioning as a pioneering jurisdiction in the age of innovation, technological advancement and digital finance.