The collapse of FTX, and the legal ramifications arising from it around the world, will certainly throw up many novel and interesting legal and jurisdictional questions concerning crypto-assets and the duties and regulations (or lack thereof) in the crypto sector. Given that FTX has filed for US bankruptcy, one would expect claims against FTX (the natural target) to be limited, but all eyes will be on how the insolvency practitioner (who has already made certain ominous public statements) claws back money for creditors via claims against the former management, potential fraud claims, and cross jurisdictional asset tracing. Claimants who have lost significant sums may also look for alternative entities with deep pockets / insurance policies to sue for a recovery, such as celebrities who endorsed the platform, and the broader base of professional service providers who will have provided the infrastructure to support FTX (such as lawyers, accountants, holding banks etc).

In other legal developments, we recently saw the issue of the first ever funded and insured group action concerning crypto- currency. And this isn’t any group action. It’s a £9.9 billion claim bought on behalf of an opt-out class of 240,000 investors before the Competition Appeals Tribunal. The class representative is the former head of Ofgem and the CAT, and the claim relates to allegations that four platforms publicly colluded to manipulate the price of Bitcoin Satoshi Vision by simultaneously de-listing it. The claim is significant not only because it is the first crypto class action, but also because of its sheer scale. The litigation funder and insurer will have had to stump up a serious amount of cash, and it perhaps symbolises a sea change in the attitude of funders and insurers towards crypto claims. The claim will need to be certified by the CAT in order to proceed, so it is very much a case of watch this space. It hasn’t all been plain sailing, as the court has refused to allow bitcoin to be deposited as security for costs, and has also held that Bitcoin software developers do not owe a fiduciary duty or general duty of care to those using their software, in particular to write a patch to resolve hacks (see Tulip Trading v Bitcoin Association for BSV – June 2022).

 You can read full the article here on the Times behind the paywall.