BYBIT FINTECH LIMITED V HO KAI XIN & 5 ORS

Facts

ByBit Fintech Limited, a Seychelles company that runs a cryptocurrency exchange, pays its staff in fiat currency, cryptocurrency or both. Its payroll was handled by WeChain Fintech Pte Ltd, whose employee Ms Ho Kai Xin kept the spreadsheets recording the addresses to which staff crypto pay was sent. On 7 September 2022 ByBit found eight unusual payments made between 31 May 2022 and 31 August 2022, sending 4,209,720 USDT (Tether, a stablecoin tied to the US dollar) to four addresses. An employee named as a recipient said he had only ever been paid in cash. Ms Ho had also caused $117,238.46 to be paid into her own bank account in May 2022, which she accepted she held on trust for ByBit.

At an interview on 4 October 2022 Ms Ho said the wallets belonged to a cousin, Jason, and admitted involvement in the scheme; she later said she had lied to protect him and that Jason had accessed her laptop without her knowledge. ByBit sued in Originating Claim No 320 of 2022, obtained a worldwide freezing order and a proprietary injunction, and discovered that from July 2022 she had bought a freehold penthouse, a new car and Louis Vuitton goods. Disclosure from a wallet provider showed Ms Ho had registered the wallet for Address 1 with her identity card and photograph. ByBit applied for summary judgment, seeking a declaration that she held the USDT and the money on trust. Ms Ho filed no affidavit or submissions and did not attend.

Issues

1. Whether USDT is property capable of being held on trust, and if so what kind of property
2. Whether ByBit was entitled to summary judgment declaring a constructive trust over the crypto and fiat assets

Holding

Philip Jeyaretnam J held that USDT is a thing in action capable of being held on trust and granted ByBit summary judgment. He declared an institutional constructive trust over the crypto and fiat assets and ordered Ms Ho to pay USD 647,880 and SGD 117,238.46, to transfer what remained in Wallet 1 up to USD 3,561,840, and to account for the balance, with a tracing order. Interest at 5.33% per annum was awarded on the two payment sums, with costs of $45,000.00 and disbursements of $11,500.00.

Reasoning

The court noted that crypto assets are transferred for value, appear on balance sheets, are the subject of proposed custody and segregation rules, and are expressly listed as movable property for enforcement in O 22 r 1(1) of the Rules of Court 2021. Though not physical, they can be defined, identified and traded, and so meet Lord Wilberforce's test for property in National Provincial Bank v Ainsworth [1965] 1 AC 1175.

On classification, the category of things in action has historically expanded from personal claims to incorporeal rights such as copyright, and is broad and not closed; since personal property is either in possession or in action, the holder of a crypto asset has an incorporeal property right recognisable as a thing in action. Tether's contractual redemption right made USDT look more like traditional things in action, but that feature was not necessary to the conclusion.

On the merits, the court accepted that Jason did not exist, or at least did not play the role Ms Ho asserted. The direct evidence that she owned the Address 1 wallet and her unexplained spending showed that she had abused her position and manipulated the payroll spreadsheets to take the assets. Property obtained by theft or fraud is held on an institutional constructive trust from the time of the taking and can be traced in equity, even if mixed with other funds. The alternative claims in remedial constructive trust and unjust enrichment did not need to be decided.

From the judgment