English High Court Rules on Cryptocurrency Investments

May 23

On April 21, 2019, the English High Court ruled that it would have jurisdiction to hear the case of Ramona ANG v Reliantco Investments Ltd, following its determination that speculative investments, in this case Bitcoin futures, are not inherently a business activity. Therefore, the protections afforded to consumers under EU law (the Brussels Regulation (Recast) No 12/5/2012 (the “Regulation“) to bring claims via the courts in their own jurisdictions could apply to individual investors using an online trading platform where the purpose of the investor’s use was as a consumer.

The case was brought by Ms. Ang, the partner of Craig White (a computer scientist and early pioneer of blockchain technology who previously identified himself publicly as being ‘Satoshi Nakamoto’, the ‘person’ generally credited with creating Bitcoin). Ms Ang had significant private wealth and signed up to Reliantco’s UFX platform to trade Bitcoin futures. Ms Ang claimed that Reliantco had blocked her access to, and ability to withdraw funds from, her UFX platform account. The UFX terms of use contained an exclusive jurisdiction clause in favour of Cyprus.

One of the key issues that the High Court had to consider was whether Ms. Ang could try these claims in the English courts by virtue of the fact that she was a consumer and therefore afforded the protection of the Regulation to try the case in her place of residence. Reliantco argued that Ms. Ang could not be a consumer on the basis that: (i) a contract to trade Bitcoin futures online could not amount to a consumer contract and (ii) the conduct of her trading activity amounted to that of a profession and therefore was not in the scope of the Regulation.

The meaning of ‘consumer’ under the Regulation, particularly in the context of activities which have a professional element such as investing, has received mixed judicial attention across EU Member States over the years. In particular, a sharp difference of approach had been taken between the Greek and the English courts.

In this case, the High Court rejected the submission advanced by Reliantco, based in part on the Greek decisions, that Ms. Ang’s UFX activity demonstrated the sophisticated trading strategy of a professional trader. Rather, the Court understood her activity as that of an individual playing with some of her money in the hope of making a large investment gain but at the risk of suffering a substantial or total loss. The Court disagreed that contracts to trade speculatively, in this case Bitcoin futures, could never amount to consumer contracts (as appeared to be the position of the Greek court decisions). The Court noted that the spread, regularity and value of investment activity cannot determine the issue of whether the end-user is contracting as a consumer. Instead, the Court must look at the purpose of the activity in question and on that basis determined that Ms. Ang was a consumer and could try her claims in the English courts.

This case provides useful guidance for defendants operating trading platforms, particularly where they offer sophisticated and quasi-professional investment options such as Bitcoin futures. In particular, it will not be an automatic assumption that a person who invests large sums of money on volatile products will be doing so as a professional, even if a degree of technical knowledge or familiarity with the product is required. Indeed, many individuals who hoped to ‘cash-in’ on the sharp increase in the value of Bitcoin during 2017 were doing so as enthusiastic hobbyists, as opposed to a full time profession.

Dan Relton is an Associate in the London office of Baker McKenzie.
Gabriella Steuer is a Trainee Solicitor in the London office of Baker McKenzie.

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