Binance, the cryptocurrency exchange, has had an interim proprietary injunction set aside by the United Kingdom high court. The injunction was issued after a victim of cryptocurrency fraud claimed to have traced the stolen funds to accounts held with Binance. The claimant had sought the preservation of a certain amount of cryptocurrency, but Binance argued that it was not possible to comply with the injunction as the funds had already been moved.
Cryptocurrency Exchange Challenges Proprietary Injunction
The discharge of the proprietary injunction against Binance is one of the first known cases where a cryptocurrency exchange has challenged the granting of such an injunction. Binance had argued that the claimant had proceeded to seek the injunction without notice and that it was not possible to comply with the order as the funds had already been mixed and dissipated in the ordinary course of its business.
High Court Orders Claimant to Pay Binance’s Costs
In addition to discharging the injunction, the high court ordered the claimant to pay Binance’s costs of the application on the indemnity basis, amounting to £90,000 ($113,685.00). This is a significant ruling as it highlights the potential risk for fraud victims seeking injunctions against cryptocurrency exchanges. If an injunction is obtained against an exchange inappropriately and is later discharged, the fraud victim could be left with a significant adverse costs order.
Legal Advisers Should Consider Proper Basis for Making Application Against Exchange
Before seeking an injunction, legal advisers of victims of crypto fraud should distinguish the position of a crypto exchange from that of other defendants. They should also consider if there is a proper basis for making an application against the exchange without notice and ensure that there are identifiable assets when the application is made. This is important to avoid leaving the fraud victim with substantial costs if the injunction is later discharged.
In conclusion, the discharge of the proprietary injunction against Binance highlights the challenges faced by fraud victims seeking injunctions against cryptocurrency exchanges. Legal advisers should carefully consider the position of the exchange and the basis for making the application before seeking an injunction.