UK High Court finds that a cryptocurrency exchange arrangement was not a trust


The High Court decided that no trust could arise where two parties had agreed to an exchange of cryptocurrencies (in essence a sale and repurchase agreement), as the essential economic reciprocity precluded the existence of any trust.

In the context of a Worldwide Freezing Order, the court however also decided that a personal fiduciary claim against a party holding cryptocurrency in respect of the profits generated through holding the relevant cryptocurrency was possible and should be determined at trial (Wang v Darby [2021] EWHC 3054 (Comm)).


Mr Wang (the Claimant) and Mr Darby (the Defendant), who met via the messenger service Telegram, entered into two contracts exchanging specified quantities of the cryptocurrencies Tezos and Bitcoin which specified a reciprocal restoration of the same amounts of each currency at the contractual end dates.

Tezos permit a user to stake (or in the specific parlance of Tezos ‘bake’) their holding to generate additional units of the cryptocurrency by signing and publishing a new block in the blockchain, thereby validating transactions. The parties agreed for Mr Darby to bake 400,000 Tezos, with Mr Darby to account to Mr Wang for the baking profits at the time of the reciprocal restoration of cryptocurrencies.

However, in March 2019 Mr Darby communicated that he would be “shutting down” the baking service. Mr Wang demanded compensation in the form of additional Bitcoins, but Mr Darby offered to compensate him only for any “real world losses”, which he stated did not exist, and to unwind the transactions. Eventually, Mr Darby blocked Mr Wang on Telegram. Mr Wang then demanded the return of the 400,000 Tezos from a different device and by other means, but Mr Darby did not return them. The value of Tezos rose significantly from when the parties entered into their contracts, and had trebled by April 2019.

The court had to decide two main applications:

  • Mr Darby’s application to strike out or enter reverse summary judgment in respect of the proprietary claims pleaded against him. Effectively, the key issue was whether a form of trust arose in respect of the 400,000 Tezos transferred by Mr Wang to Mr Darby.
  • Mr Wang’s application to continue a worldwide freezing order (“WFO”) and proprietary injunctions granted in August 2021 (“the WFO Continuation Application”)

No trust of any kind where there is economic reciprocity 

It was common ground between the parties that cryptocurrency such as Tezos constituted property capable of being held on trust.1 The court considered that whether Mr Darby took on any trust or fiduciary duties under the contracts was a self-contained question of contractual construction or characterisation based on the evidence.  The court was therefore satisfied that it should determine the proprietary claims on a final basis.

Mr Wang claimed that the 400,000 Tezos and their traceable proceeds were held on trust for him by Mr Darby, either in an express trust, Quistclose resulting trust or constructive trust. However, the court found that the essential economic reciprocity of the transaction, which involved the transfer (and re-transfer) of ownership was inimical to the concept of a trust as a beneficiary has an interest in and right to receive the trust property, not an option to (re-)acquire it for value, or (re-)purchase it for consideration.

The court therefore concluded (on a final basis) that there was no trust of any kind, and that such an argument had no real or reasonable prospect of success at trial.

Fiduciary duties and the WFO Continuation Application

The court interpreted the claim for breach of fiduciary duty absent or beyond any trust to be limited to “non-capital” and therefore non-trustee obligations, i.e. using the 400,000 Tezos to generate rewards or profits, and accounting for these after the contractual periods. The claimed remedies for dishonest breach of such fiduciary duties were equitable compensation and account for profits, which were not proprietary claims but personal claims, and therefore did not justify a proprietary injunction against Mr Darby. The court considered that the account of profits claim could have a real or reasonable prospect of success consistent with the position on the other personal claims against Mr Darby for breach of contract. However, the merits of the personal claims was a matter for trial.

In relation to the WFO Continuation Application, the key issue was the risk of unjustified dissipation of assets by Mr Darby. The court found there was such a risk on the basis that Mr Darby traded the 400,000 Tezos for his own gain, taking advantage of the rising value of Tezos.

Overall, therefore:

  • the court granted Mr Darby’s reverse summary judgment application, bringing an end to Mr Wang’s proprietary claims, and the proprietary injunction was set aside; and2
  • the WFO Continuation Application was granted on the basis of Mr Wang’s personal claim for equitable compensation and account of profits based on dishonest breach of fiduciary duty independent of any trust.


While this decision generally follows orthodoxy, for example by accepting that crypto assets can constitute property under English law, there are some points of interest.

First, notwithstanding its finding that no trust existed, the judge observed obiter that the transfer of digital assets for the purpose of baking could constitute a trust, although this would depend on all the circumstances (for example whether a loan or sale would be the more appropriate characterisation to give effect to the parties’ commercial objective). That position is consistent with the New Zealand Cryptopia case3 (which held that the Cryptopia crypto exchange held the digital assets of its customers on express trust). However, the judge’s comment should be read in light of the fact that it was common ground between the parties that a unit of Tezos constituted property that could in principle be the subject of a trust.

Second, the case is also novel in that it is the first instance of the court considering personal fiduciary claims arising in relation to crypto assets. Such claims may arise more frequently as the use of cryptocurrencies using a staking consensus mechanism continues to become more prevalent, where the holder of the relevant cryptocurrency can potentially generate additional units of the cryptocurrency if it is ‘staked’. This is in contrast to the mining consensus mechanism used by bitcoin, where holding the currency does not generate additional units.

1 Which the judge noted was consistent with caselaw citing AA v. Persons Unknown [2019] EWHC 3556 (Comm); [2020] 4 WLR 35 at [55]-[61] (Bryan J) and Ion Science Limited & another v. Persons Unknown (21 December 2020, Butcher J)
2 Save insofar a viable claim could be maintained for constructive trust in respect of any gains made by Mr Darby and not accounted for on the basis of alleged breach of fiduciary duty independent of any trust. In this regard, the judge noted that such a claim was very different and much smaller than the original pleaded proprietary claim based on capital deprivation (i.e. non-return of the 400,000 Tezos) and that it was not yet clear whether any such claim existed or (if it did) whether any proprietary injunction would be appropriate.
3 Ruscoe v Cryptopia Ltd (in Liquidation) [2020] NZHC 728

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