Hong Kong Cryptocurrency Fraud

Hong Kong Cryptocurrency Fraud

 

Case Study

Hong Kong High Court Action (HCA 902/2018)

Nico Constantijn Antonius Samara (Plaintiff) v Stive Jean-Paul Dan (Defendant)

 

Case Background

• The Plaintiff (a Netherlands citizen) claimed that there was an agreement with the Defendant that he would transfer some bitcoins from his personal bitcoin wallet to the Defendant’s bitcoin wallet at Gatecoin Limited in Hong Kong, so that the Defendant could help to trade the bitcoins for him for some commission in return, as the Plaintiff is not a Hong Kong citizen and could not open bank account in Hong Kong.
• Pursuant to the agreement, the Defendant had given the login details and security token of his Citibank account in Hong Kong to the Plaintiff so that the Plaintiff could transfer the sale proceeds of the bitcoins from the Defendant’s Hong Kong Citibank account to the Plaintiff’s personal bank account in Germany.
• Some bitcoins of the Plaintiff were sold by the Defendant. But since the beginning of November 2017, the Defendant had suddenly put the money in the Hong Kong Citibank account out of the Plaintiff’s reach without prior notice to the Plaintiff.
• The Plaintiff claimed that the Defendant owed him US$2,597,639.

 

Legal action by the Plaintiff

• It is an unusual feature of this case that the Gatecoin bitcoin wallet account and the Hong Kong Citibank account of the Defendant had been locked in February 2018 prior to any injunction order made by the Court.
• Still, on 20 April 2018, the Plaintiff obtained urgent ex-parte injunction order from the Hong Kong High Court to freeze the Gatecoin bitcoin wallet account and the Hong Kong Citibank account of the Defendant.
• On 23 April 2018 (after the Injunction Order was obtained), the Plaintiff issued legal action against the Defendant for damages.
• On 24 April 2018, Plaintiff applied to the Hong Kong High Court to continue the injunction order granted by the Court on 20 April 2018 for, inter alia,  a Mareva injunction, preventing the Defendant from removing assets from Hong Kong up to the value of US$2,597,639.

 

Defendant’s position

The Defendant applied to discharge the Injunction Order on the following basis:

• the application had been “wholly unmeritorious” and an “egregious abuse of process”, as both the Defendant’s Citibank account and Gatecoin account have both been locked since February 2018,
• there was therefore no need for protection against dissipation, no urgency or secrecy which justified the application for ex parte relief, and there was material non-disclosure of the position regarding the Citibank account.

 

Court decision

Court discharged the Injunction Order. The reasons are:

• it should not have been obtained on an urgent ex parte basis.
• there was material non- disclosure by the Plaintiff of the fact that the Citibank and Gatecoin accounts had already been frozen since February 2018 and so there was no purpose for the Mareva injunction at all.

Court ordered the Plaintiff to pay costs of the hearing to the Defendant on an indemnity basis, to be taxed if not agreed.

 

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