This is a landmark judgment, as it is the first time that a common law court has made such a judicial decision. In this brief client update, we set out below a summary of the facts and the judge’s grounds for the decision before concluding with our brief comments to the impact that this decision may have upon the crypto space. 

The facts

• The first defendant Ms Ho Kai Xin (“Ms Ho”) was employed by WeChain Fintech Pte Ltd (“WeChain”) which provided payroll services for the claimant Bybit Fintech Limited (“Bybit”). 
• In September 2022, Bybit discovered that 8 unusual cryptocurrency payments (the “Anomalous Transactions”) involving about 4.2 million United States Dollar Tether (“USDT”) (the “Crypto Asset”) had been made between May 2022 and August 2022 into 4 cryptocurrency addresses (the “Addresses”). Tether is a United States Dollar-backed cryptocurrency stablecoin, and the Crypto Asset was redeemable at about USD 4.2 million. Bybit also discovered that Ms Ho had caused almost SGD 120,000 (the “Fiat Asset”) to be paid into her personal bank account in May 2022. 
• Ms Ho was the only individual who updated the spreadsheets that listed the cryptocurrency addresses designated by Bybit’s staff to receive their pay in cryptocurrency. 
• ByBit interviewed Ms Ho in September 2022 and October 2022 as part of its investigation into the Anomalous Transactions. After the last interview, Ms Ho ceased contact with Bybit and WeChain and failed to attend follow-up interviews.
• After being served with an originating claim, Ms Ho disclosed by affidavit that the Addresses were owned by her cousin (“Jason”) and that it was him who had performed the Anomalous Transactions without her knowledge through her work laptop. Ms Ho also claimed that the Fiat Asset was made to her bank account by mistake.  
• Dissatisfied with Ms Ho’s disclosure, Bybit upon further investigation discovered that Ms Ho had made several substantial purchases from July 2022 onwards including a penthouse, a new car, and several Louis Vuitton products.
• Subsequently, Bybit sought a summary judgment against Ms Ho. Bybit’s claim against Ms Ho was that in breach of her employment contract, she had abused her position to transfer the Crypto Asset to the Addresses secretly owned and controlled by her, and the Fiat Asset to her own bank account. “Jason” was a fabrication and Ms Ho had provided no evidence supporting his existence. Further, her version of events was inherently implausible which was supported by her suspicious luxury spending spree. 
• The main relief sought by ByBit was a declaration that Ms Ho held both the Crypto Asset and the Fiat Asset on trust for Bybit. Accordingly, Bybit sought a court order for the return of the same or of its traceable proceeds, or for payments of a sum equivalent in value.
• The High Court held that Bybit had established its case for summary judgment and accordingly granted the declaration sought on the basis of institutional constructive trust. 

Grounds for the decision

In his decision, the judge (Justice Philip Jeyaretnam) stated that there were 2 issues to be determined in this matter:

1. whether USDT is property capable of being held on trust; and 
2. whether ByBit was entitled to summary judgment. 

For Issue 1, 

• Justice Jeyaretnam first referred to a consultation paper recently published by the Monetary Authority of Singapore in July 2023 on proposed amendments to the payment services regulations that will implement segregation and custody requirements for digital payment tokens. He held that the proposed amendments reflect the reality that it is possible, in practice, to identify and segregate such digital assets, and hence support the view that it should be legally possible to hold them on trust. 
• Justice Jeyaretnam also referred to Order 22 of the Rules of Court 2021 (which deals with the enforcement of judgments and orders), which defines “moveable property” to include amongst other things “cryptocurrency or other digital currency”. Cryptocurrency has thus been expressly recognised as a form of property capable of being the subject matter of an enforcement order. 
• In considering the question on whether USDT can be classed as a chose in action, Justice Jeyaretnam held that although there is no individual counterparty to the crypto holder’s right, over time the category of choses in action has expanded to include documents of title to incorporeal rights of property and ultimately incorporeal rights themselves (e.g. copyrights). The category of chose in action is broad, flexible, and not closed. Therefore, the judge held that the holder of a crypto asset has in principle an incorporeal right of property recognisable by the common law as a chose in action and so enforceable in court. He also held that the type of reasoning adopted by him was not strikingly different from how the law approaches other social constructs, such as money. 
• An additional point that the Justice Jeyaretnam observed was that upon examining the online terms of service for USDT, he held that the terms provided for a contractual right of redemption for a USDT holder who is a verified customer of Tether Limited (the issuer of USDT).  The judge subsequently held that this feature of USDT could constitute an additional chose in action that the holder of a USDT may have. Notwithstanding this, the judge expressly pointed out that the presence of such a contractual right was not necessary to his conclusion that the right represented by the USDT was itself a chose in action. 

For Issue 2, 

• Justice Jeyaretnam accepted on, a balance of probabilities, Bybit’s claim that Jason did not exist (or at any rate did not play the role asserted for him by Ms Ho). The judge was convinced based on the overall evidence that Ms Ho had fraudulently transferred the Crypto Asset and the Fiat Asset to herself. 
• Given the judge’s findings of the fact, he hence declared a constructive trust over the Crypto Asset and the Fiat Asset, and that Bybit was the legal and beneficial owner of the Crypto Asset. An institutional constructive trust arises over stolen assets at time of the theft, and the remedy of tracing in equity is available in respect of stolen assets. The constructive trust could operate even if Ms Ho had mixed the USDT with other USDT in the balance of the respective online wallets, or the Fiat Asset with other money in her bank account. 

Brief concluding thoughts

This case is significant as this is the first time that a common law court has made such a decision. Previously, the courts in Singapore (and elsewhere) had in granting interlocutory injunctions recognised that there is at least a serious question to be tried or, at the least, a good arguable case that crypto assets are property capable of being held on trust. In doing so, it was not necessary for the courts (then) to determine whether such digital assets are choses in action or another novel type of intangible property. In this landmark decision, the Singapore High Court went further and expressly decided that the crypto asset in question (in this case USDT) was indeed property capable of being held on trust and hence enforceable in court. 

Going forward, the express recognition by the Singapore High Court of a crypto asset holder having a legally enforceable property right means that, in practice, crypto assets will be provided greater legal protection to cryptocurrency owners in enforcing their rights in respect of their digital assets. 

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Clyde & Co is a leading global law firm with over 60 offices and associated offices worldwide, 480 partners, 2,400 lawyers, 3,200 legal professionals and 5,000 total staff. The Singapore office of Clyde & Co has advised a range of companies in size and scope (from start-ups to incumbent financial service companies) on contentious and non-contentious crypto asset matters, including crypto assets fraud and disputes. Should you have any queries on crypto assets fraud investigations and regulatory matters, our team would be happy to assist. Please do not hesitate to contact the authors of this article.