Chain Law Review: The project party failed to list the currency and asked the intermediary to refund the currency listing fee, and the court ruled to reject the claim

• case file

Trial Court: People's Court of Luohu District, Shenzhen

Case No.: (2019) Guangdong 0303 Minchu No. 34908

Cause of action: Dispute over the return of the original property

basic case

• basic case
  

In October 2018, the plaintiff was introduced to the defendant due to project needs, and discussed with the defendant about the company’s currency listing project at a Shenzhen technology company. The plaintiff finally agreed to entrust the defendant to provide services for its project.

The two parties agreed that the plaintiff entrusted the defendant to provide the full service of the currency project, and facilitated the listing of the plaintiff's project on the Bitfinex trading platform as the service completion standard. Corresponding on-line token payment. It also agreed that if the project has not been launched within 45 working days after the plaintiff paid the deposit, the defendant should refund all the money to the plaintiff.

As of November 19, 2018, the plaintiff transferred to the defendant 89.8 bitcoins equivalent to the service fee and $55,000 in other fees to the defendant's private account. However, the defendant has not actually fulfilled its obligations beyond the agreed time after receiving the payment, the currency listing project has not yet started, and in order to delay the refund, the defendant has notified the plaintiff of false project progress and other fraudulent acts.

After repeated urging by the plaintiff, the defendant returned 10 bitcoins to the plaintiff on March 14, 2019, but still owed 79.8 bitcoins and has not yet returned them.

The plaintiff believed that the plaintiff had fulfilled the obligations agreed upon by both parties as agreed, and the defendant failed to perform the obligations agreed upon by both parties after taking the property of the plaintiff. The behavior of the defendant constituted a fundamental breach of contract and caused huge economic losses to the plaintiff. In order to protect the legitimate rights and interests of the plaintiff, a lawsuit was filed with the court, requiring the defendant to return 79.8 bitcoins (approximately RMB 4,786,002.86) to the plaintiff.

• first instance verdict

The court held that the plaintiff submitted the transaction records of the mobile phone online trading system and claimed to transfer the defendant 89.8 bitcoins through the BLOCKCHAIN ​​wallet. Since the authenticity and legitimacy of the platform could not be determined, and the identities of the two parties to the transaction could not be determined, this evidence could not prove that there was a relationship between the plaintiff and the defendant. Real bitcoin transactions.

The plaintiff provided the receipt issued by "Hong Kong Starlink Future Technology Co., Ltd.", "Hong Kong Starlink Future Technology Co., Ltd." received transfers of 14.03 BTC and 75.775 BTC from the listing project party. The above receipts cannot prove that the plaintiff and the defendant Bitcoin transactions exist.

The plaintiff has no evidence to prove that the defendant received the bitcoins paid by the plaintiff, and there is no evidence to prove the relationship between the defendant and Hong Kong Starlink Technology Co., Ltd. The plaintiff claimed that the defendant had collected his bitcoins but failed to return them, and the evidence was insufficient. The plaintiff’s request for the defendant to return the bitcoins was rejected by this court in accordance with the law.

• Chain Law Review

1. Why did the court reject the plaintiff's claim?

Judging from the content of the current judgment, the author believes that the reason why the court rejected the plaintiff's claim is because the plaintiff lacks a link in the evidence link.

The court’s opinion includes: the identities of the two parties to the transaction cannot be determined, so it is impossible to determine the existence of bitcoin transactions between the plaintiff and the defendant. In layman's terms, the plaintiff is currently unable to prove that the current defendant is the defendant who received their bitcoins, and there is a problem with the subject. Because the plaintiff did not provide sufficient evidence, he had to bear the consequences of insufficient evidence, that is, the claim was dismissed.

Unlike bank accounts, Bitcoin has the characteristics of decentralization and pseudo-anonymity. That is: 1. Anyone can create a Bitcoin address, and no real-name authentication is required; 2. The real identity of the counterparty cannot be directly confirmed through the Bitcoin address; 3. Anyone can apply for multiple Bitcoin addresses, and not connected with each other.

Judging from the cases and consultations represented by the Chain Law team, many bitcoin digital asset disputes are faced with such a problem. The solution to this problem requires a "connection point", that is, a pseudo-anonymous bitcoin address and a specific transaction. To put it simply, the connection point of the counterparty, such as confirming the transaction address with the counterparty through WeChat or email, completes the determination of two contents, one is the real-name confirmation of the counterparty’s identity, and the other is the specific confirmation of the transaction content, such as How many bitcoins were traded at what price etc.

It was the absence of this link that made the court reject the plaintiff's claim in this case.

2. Claims concerning this case

In this case, the plaintiff requested the court to rule that the defendant should return bitcoins to him, and the court also believed that the cause of action in this case was a dispute over the return of the original property. The author believes that, from a practical point of view, such a cause of action and the design of the lawsuit itself are somewhat controversial.

Judging from the Supreme People's Court's "Understanding and Application of the Provisions on the Causes of Cases of Civil Cases", the first-level cause of action for the return of the original is "dispute over property rights", and the second-level cause of action is "dispute over protection of property rights".

Real right is a kind of property right, and it is a basic civil right. Together with creditor's rights, it constitutes the basic civil property right. It refers to the right of people to possess, use, benefit from, and dispose of things. It is a kind of dominance right in nature. And its core is the utilization of things. Among them, movable property refers to all tangible, movable things that can be controlled and used by people. Real estate refers to land, buildings, etc.

The so-called dispute over the return of the original property refers to a dispute in which the obligee requests the person who has no right to possess the real property or chattel to return the property.

If you want to return the original thing, then the law needs to first recognize that "bitcoin" is a real thing. But in fact, it is currently difficult to regard Bitcoin as a "thing" in the legal sense.

The Beijing No. 1 Intermediate People’s Court stated in the Civil Judgment of the Second Instance of the Contract Dispute between Feng Yiran and Beijing Lekuda Network Technology Co., Ltd. (No. 9579, Beijing 01 Minzhong, 2018):

In this case, Feng Yiran’s request for the delivery of bitcoin cash is based on what rights are the basic issues to be solved first. Article 127 of the "General Principles of the Civil Law of the People's Republic of China" stipulates: "If the law has provisions on the protection of data and network virtual property, follow its provisions." Although Bitcoin itself does not contain inherent value, Bitcoin holders must The powers of possession, use, income, and disposal are exercised through the information recorded in the "public accounting book" (database) that is distributed and stored and confirmed by the entire network. Therefore, based on the legal principle of property rights, Feng Yiran could not require Lekuta to deliver the Bitcoin Cash generated by the "fork" of Bitcoin in accordance with the legal provisions of ownership (such as fruits).

Statutory property rights mean that the types and content of real rights (that is, powers) should be directly regulated by law, and should not be created or determined by the parties based on free will.

In addition, it was also mentioned in the above judgment that the transaction of Bitcoin exists in reality, and holders still hope to obtain benefits from it. In the process of commodity exchange in the network environment, the value of Bitcoin depends on the market’s acceptance of Bitcoin as a trading medium. Therefore, Bitcoin is a transaction object in the contract law and has "civil interests" that should be protected by law. Feng Yiran's claim has a basis in contract law.

Specific to this case, the chain method believes that there is a contractual relationship between the plaintiff and the defendant, that is, the plaintiff pays the defendant the currency listing fee, and the defendant provides the currency listing service for the plaintiff, and a service contract relationship is established between the two parties. According to the service contract, the plaintiff can claim that the other party breached the contract, and can also file an infringement lawsuit in accordance with the Tort Liability Law. In terms of appeal, since there is a specific fee for listing the currency, the plaintiff can also ask the other party to return this part of the fee or compensate for losses. In this way, the embarrassment of "unable to recognize Bitcoin as a thing" can be avoided.

3. Some revelations about this case

The decentralization and pseudo-anonymity of Bitcoin are its important features, but it is also a double-edged sword, and at some point, it will also bring some troubles to users. However, this kind of trouble can be completely avoided through risk control in some cases.

Taking this case as an example, if the specific transaction process is as follows, the above situation may be avoided:

Confirm Bitcoin transfers in and out in writing. That is, when transferring bitcoins, confirm that the receiving party is a specific and clear subject (specific to a certain person or a certain company). When transferring bitcoins, confirm the one-to-one correspondence between the above-mentioned subject and the blockchain address, so as to realize the controllable, transparent and authentic links of bitcoin transactions. When conducting bitcoin transactions with enterprises, when employees come forward to handle certain specific matters, they are required to issue corresponding authorization documents from the company to prove their identity.

As a user of digital assets, one must understand that in addition to the risks of the technology itself, there are also many risks in the transaction process of digital assets, especially when large transactions are involved. It is very important to control the risks of the transaction process. Necessary, this is the most basic risk awareness.