Bybit Paymaster Responsible for Massive USDT Theft, Singapore Court Elaborates on Cryptocurrency Property Attributes
Original Translation: Wu discusses blockchain
Bybit, a cryptocurrency exchange, has filed a lawsuit against Ms. Ho, who is responsible for paying company salaries, for abusing her authority by transferring a large amount of USDT to an address that she secretly owns and controls. The Singapore High Court maintained the ruling on July 25th, stating that cryptocurrency is widely recognized as property and that holders of cryptocurrency have in principle the proprietary rights recognized by common law for intangible property, which can be enforced in court as items in litigation. The court ruled that Ms. Ho must immediately pay Bybit all transferred funds and interest.
Here is the full translation of the judgment (original link)
Introduction
1. This case involves a form of cryptocurrency called Tether, which is an example of a stablecoin. This means that its issuer claims to support each issued stablecoin with an equivalent value of fiat currency or other reserves. The issuer usually provides terms of service under which verified holders of stablecoins have the right to redeem them for fiat currency from the issuer. This link to fiat currency, in this case the US dollar, is reflected in the commonly used name for Tether, namely USDT, which stands for US dollar Tether. In this judgment, I will use this abbreviation.
2. In this application, ByBit Fintech Limited (ByBit) seeks judgment against the first defendant, who is named Ho Kai Xin (Ms. Ho). The allegations against her are that she violated her employment contract, abused her position by transferring some USDT to an "address" that she secretly owns and controls, and transferred some fiat currency to her own bank account. The primary relief sought is a declaration that Ms. Ho holds the USDT and fiat currency on trust for ByBit. Consequently, ByBit seeks the return of the same or traceable proceeds, or the payment of an equivalent sum.
3. Courts in Singapore and elsewhere have already recognized, in granting interim injunctions, that at least there is a serious question to be tried or a good arguable case that cryptocurrency can constitute property held on trust. In doing so, it is not necessary yet to determine whether these cryptocurrency assets are things in action or a new form of intangible property. In order to grant the declaratory relief sought and ultimately declare the trust, this court must determine further whether the cryptocurrency assets in this case, namely USDT, do indeed constitute property held on trust and if so, what type of property they are.
4. In this case, I found that USDT, even without the assistance of a legal system, can be transferred from one holder to another through passwords, but it is still an actionable thing. In this judgment, I mostly use the phrase "actionable thing", which means the same as an actionable thing. Although USDT also has the right to exchange equivalent US dollars from Tether Limited in the British Virgin Islands ("BVI"), which makes it more like a traditionally recognized actionable thing, I do not believe that this feature is a necessary condition for classifying a cryptocurrency as an actionable thing. Like any other actionable thing, USD++++++++++++++++++++++ can be held as a trust.
5. Furthermore, ByBi has demonstrated its case seeking a judgment, so I grant the sought declaratory relief based on the constructive trust principles.
6. I now explain the reasons for my conclusions.
Background
7. Seychelles company ByBit owns a cryptocurrency exchange named after itself. ByBit pays its employees' salaries in traditional currency, cryptocurrency, or a combination of both. Singapore company WeChain Fintech Pte Ltd ("WeChain") provides salary services to ByBit and related entities. Ms. Ho is an employee of WeChain responsible for handling salary calculations for ByBit employees.
8. As part of her duties, Ms. Ho maintains a Microsoft Excel spreadsheet that records the cash and cryptocurrency payments due to ByBit employees each month (referred to as the "Fiat Excel file" and "Cryptocurrency Excel file", respectively). The Cryptocurrency Excel file lists the "addresses" through which ByBit employees receive cryptocurrency payments. An "address" can be understood as an encrypted digital "folder" that can "receive" and "store" cryptocurrency. Each address is a unique alphanumeric string. The corresponding "private key" is required to access and authorize transfers between addresses. These private keys are, in turn, stored in "wallets," which can be understood as the means of interacting with cryptocurrencies. Wallets hosted online by service providers (typically cryptocurrency exchanges) are referred to as "custodial wallets." Custodial wallets usually exist in the form of user-interface applications. Offline wallets are referred to as "self-custodial wallets," which may be a simple piece of paper with the private key written on it or complex encryption software that restricts access to the private key. In short, accessing a wallet means gaining access to the stored private key, thereby controlling the addresses and the cryptocurrencies stored therein. ByBit's employees can and do frequently change their designated addresses by communicating new addresses to Ms. Ho, who then updates the Cryptocurrency Excel file. Only Ms. Ho has the ability to update the Cryptocurrency Excel file, and she is the only one who can access these files, except for the monthly submission to her immediate supervisor, Casandra Teo, for approval.
9. On September 7, 2022, ByBit discovered eight unusual cryptocurrency payments ("abnormal transactions") occurring between May 31, 2022, and August 31, 2022. These transactions involved large amounts of USDT being transferred to four addresses (referred to as addresses 1, 2, 3, and 4). A total of 4,209,720 USDT ("cryptocurrency assets") were transferred. USDT, short for Tether, derives its name from its value being pegged to the US dollar, with each USDT granting its holder (referred to as a "verified client" of Tether Limited) the contractual right to exchange their USDT for US dollars. These abnormal transactions were documented in a reconciliation Excel file. Ms. Ho was assigned the task of explaining these discrepancies. Initially, Ms. Ho attributed the abnormal transactions to unintentional errors or technical mistakes and suggested the calculation of the amount to be recovered from ByBit employees.
10. From September 9 to 22, 2022, Ms. Ho still failed to provide any explanation regarding the abnormal transactions. When questioned about why payments intended for different employees were directed to the same address, address 1, Ms. Ho suggested that it might have been an inadvertent mistake on her part. Ms. Ho continued to provide status updates in the reconciliation Excel file, describing the abnormal transactions as "overpayments" to ByBit employees.
11. On September 27, 2022, ByBit contacted a presumed recipient of the abnormal transactions. 1.3 million USDT had been paid to address 1 under his name. However, according to ByBit, the employee denied ever specifying an address, as he had only been paid in traditional currency and was unaware of who owned address 1. ByBit's internal investigation revealed that Ms. Ho had sent herself an email on May 19, 2022, containing address 1 using her work email. Additionally, on August 29, 2022, Ms. Ho's work email received an email containing all four addresses, this time from her personal email. These emails were recovered by ByBit as they had been deleted.
12. ByBit also discovered that in May 2022, Ms. Ho caused $117,238.46 ("fiat assets") to be paid into her personal bank account. It is indisputable that Ms. Ho had no right to obtain these fiat assets, as she expressly acknowledged holding the fiat assets as a trust for ByBit. However, thus far, Ms. Ho has taken no steps to return the fiat assets.
13. On September 29, 2022 and October 4, 2022, ByBit conducted interviews with Ms. Ho. In the first meeting, Ms. Ho claimed that she couldn't remember the details of the abnormal transactions. In the second meeting, Ms. Ho faced the investigation results by ByBit. Ms. Ho told ByBit that she did not own the wallets associated with the four addresses, which belonged to her cousin. She had no access to them. Ms. Ho said that her cousin proposed that she help him transfer cryptocurrency, and she had surveillance footage recording him conducting abnormal transactions at her house. Ms. Ho admitted to being involved in this plan before the meeting three months ago and told ByBit that she wanted to report it to the police because she didn't own any cryptocurrency assets. After the meeting, Ms. Ho refused to sign the single-page statement that documented the incident. However, it is undisputed that Ms. Ho made these statements to ByBit. Subsequently, Ms. Ho lost contact with ByBit and WeChain and did not attend any further meetings.
14. ByBit initiated this lawsuit on October 12, 2022. ByBit successfully obtained several interim reliefs, including a global freezing order against Ms. Ho and an ownership injunction over the cryptocurrency (i.e., cryptocurrency assets) in the four addresses and the fiat currency assets in Ms. Ho's bank account. Ms. Ho personally accepted the original claim and order on October 18, 2022. On October 31, 2022, Ms. Ho disclosed in an affidavit that the wallets associated with the four addresses belong to her cousin, Jason Teo ("Jason"). Ms. Ho claimed that she couldn't access any of the wallets and that she deleted text message conversations with Jason before receiving the order of service. She also didn't turn off the surveillance footage because the recordings older than seven days would be automatically deleted. On November 11, 2022, Ms. Ho submitted her defense and provided third-party notice to Jason.
15. Ms. Ho fully acknowledges that the cryptocurrency assets belong to ByBit, and she has no rights to them. Ms. Ho's main defense is that Jason stole ByBit's cryptocurrency assets without her knowledge. She didn't benefit from it because the wallets associated with the four addresses are solely owned and controlled by Jason. Her story is that starting from May 2022, on "multiple occasions," she asked Jason to assist in checking a cryptocurrency Excel file when he visited her house. Subsequently, Jason, without her knowledge or consent, accessed her work laptop, which Ms. Ho only found out after reviewing the surveillance footage at home following ByBit's alert about abnormal transactions. She then confronted Jason, who admitted to intentionally replacing several addresses designated by ByBit with the four addresses. Despite her repeated requests, Jason refused to return the cryptocurrency assets. Ms. Ho's position is that as of September 9, 2022, she still didn't know the reason for the abnormal transactions, which was more than seven days after the last abnormal transaction (dated August 31, 2022). She did not explain how she was able to view the alleged recordings.
16. ByBit sought and obtained an order for wider disclosure to Ms. Ho and some third parties, including her father and husband, on December 7, 2022, in response to Ms. Ho's dissatisfaction with the disclosure. This was because ByBit discovered that Ms. Ho had made some large-scale purchases starting from July 2022, including a top-level apartment with permanent ownership rights purchased together with her husband, a brand new car, and several Louis Vuitton products. It is worth noting that despite initially denying ownership of any real property, Ms. Ho later explained that she used money earned from cryptocurrency transactions on MetaMask and crypto.com to purchase the top-level apartment with permanent ownership rights. This contradicts her previous claim that her MetaMask account was completely unused. Ms. Ho did not provide her MetaMask and crypto.com addresses, nor did she provide account transaction statements. According to Ms. Ho, she lost access to her crypto.com account as it was registered to her personal email, which has been disabled for unknown reasons. Similarly, she is unable to access her MetaMask account because she purchased a new phone in October 2022 and cannot retrieve the necessary password from her previous device. I also noted that contrary to the disclosure order, Ms. Ho initially failed to disclose all her assets, such as her bank accounts, which requires further inquiry from ByBit.
17. Meanwhile, Ms. Ho applied for and obtained a license for substitute service on Jason. Strangely, Ms. Ho stated in her supporting affidavit that Jason deleted their text message history after she informed him that she had been served with a lawsuit. Jason did not appear in this lawsuit.
18. On March 30, 2023, ByBit filed this application for summary judgment. Ms. Ho did not file any affidavit in reply to the application as required under Rule 17(3) of the 2021 Court Rules. On April 18, 2023, prior to the hearing, Ms. Ho took over her own defense. Ms. Ho did not attend any of my previous hearings or submit any memorandum.
19. For the sake of completeness, ByBit also applied to amend their claim and filed further memoranda, which I directed to be filed by May 19, 2023. ByBit initially alleged that Ms. Ho holds the cryptocurrency assets and fiat assets in remedial constructive trusts. Therefore, ByBit sought to amend in order to present an alternative argument based on institutional constructive trusts. I allowed Ms. Ho to make submissions on the amendment and extended the deadline for her to file submissions on the summary judgment to May 26, 2023. As before, Ms. Ho did not file any submissions or oppose the amendment application.
20. ByBit submits that the amendments are merely clarifications and do not introduce any new facts. The statement of claim has already made it clear that Ms. Ho was responsible for the erroneous trades, and Ms. Ho's defense will not be affected by the amendments. Instead, the amendments allow the true issues in dispute to be identified, and Ms. Ho will not suffer any damages that cannot be compensated for by costs.
21. I agree that the proposed revisions are clarifying and add alternative legal conclusions for the establishment of the institution-building trust based on the facts already stated, so that the true disputes can be fully and finally determined. Therefore, I allowed the modification on June 30, 2023, and filed an application for summary judgment based on ByBit's second amended complaint, which was submitted on July 5, 2023.
Parties Involved
Ms. Ho's Case
22. As mentioned earlier, Ms. Ho's main argument is that the responsibility should be fully borne by Jason (see paragraph [ 15 ]). From the affidavit, it appears that Ms. Ho claims she has no way of identifying Jason or knowing his personal information or address. Additionally, Ms. Ho believes that it was Jason who accessed her work and personal emails, sent and then deleted an email stating four addresses (see paragraph [ 11 ]). Jason did so without her authorization, and Ms. Ho denies deleting those emails. Furthermore, Ms. Ho claims that she implied lying to ByBit during an interview on October 4, 2022 (see previous paragraph [ 13 ]). According to Ms. Ho, ByBit strongly warned her that her behavior was criminal and consistently insisted that she was responsible for the unusual transactions. Ms. Ho responded this way in order to protect Jason, with whom she has a close relationship, and because she needed to take care of her two-year-old son who was ill. Due to her son's condition, she refused to sign the one-page confirmation letter after the interview because she didn't have time to review its contents, and she also declined to participate in any further interview sessions.
23. As for the statutory assets, Ms. Ho stated that she accidentally inputted her own data into another employee's data while preparing the statutory Excel document, resulting in incorrect payment.
ByBit's Case
24. ByBit argues that, under Rule 17(1)(a) of the 2021 Court Rules, it has the right to obtain summary judgment as it has proven a prima facie case and Ms. Ho has not defended the claim. ByBit's statement focuses on the cryptocurrency assets because Ms. Ho holds ByBit's statutory assets in trust.
25. First of all, ByBit argues that "Jason" is completely fictitious. Ms. Ho has no evidence to support Jason's existence, and her description of the events is fundamentally unbelievable. Concurrent with the suspicious trades, Ms. Ho also indulged in a questionable luxury spending spree. She spent approximately $362,000 on a new car, $30,000 on Louis Vuitton products, and suddenly canceled her existing pre-sale HDB apartment to purchase a top-floor apartment worth around $3.7 million. Furthermore, ByBit obtained incriminating information from the service provider of the wallet associated with Address 1. This proves that Ms. Ho owns the wallet, including her identification card and selfies, which she provided during the account registration process. The public transaction records also match the abnormal transactions flowing into Address 1, and the amounts transferred on certain dates suggest that USDT transferred to Address 2 and Address 3 were quickly moved to Address 1. This demonstrates that Ms. Ho owns and controls the wallet associated with Address 1 and may also own and control wallets associated with other addresses.
26. Secondly, ByBit argues that cryptocurrency assets consist of options and can therefore be considered trust property. This is because USDT grants certified clients of Tether Limited the right to redeem USDT for an equivalent amount of fiat currency. ByBit asserts that Address 3 is associated with a self-custody wallet, meaning Ms. Ho can directly access the corresponding private key and thus control Address 3 and its USDT, which can be held as an option for trust. As for Address 1, 2, and 4, they are associated with custody wallets. In the case of custody wallets, access to the private key is held by the service provider, not the user of the custody wallet. Conversely, users of custody wallets have contractual rights to instruct the service provider to transfer cryptocurrencies between addresses. ByBit likens this to a bank account, where the declared cryptocurrency balance in a custody wallet (equivalent to an account balance) is an option to the service provider (equivalent to a bank). Therefore, the related property is also an option, namely the right to instruct the service provider regarding the USDT credit balance.
27. Thirdly, ByBit argues that Ms. Ho either holds the cryptocurrency and statutory assets in a constructive trust, or that Ms. Ho has been unjustly enriched in the sum of the cryptocurrency and statutory assets. ByBit argues that Ms. Ho obtained the cryptocurrency by fraudulent means, as she manipulated the cryptocurrency Excel file, leading to the erroneous payment of the cryptocurrency to four addresses controlled by Ms. Ho, thereby creating an institutional constructive trust. Alternatively, ByBit argues that a remedial constructive trust should be recognized in this case, as there has been fraud or wrongdoing and Ms. Ho's conscience has been affected. Therefore, ByBit argues that I should grant a tracing order as Ms. Ho traded the cryptocurrency and statutory assets in breach of the freezing order. For the claim of unjust enrichment in the alternative, ByBit relies on the factually mistaken unjust factor, namely that ByBit was mistaken into believing that the cryptocurrency payments should be made to its employees at the four addresses. Therefore, ByBit submits that it is entitled to compensation for the value of the cryptocurrency.
Issues to be Determined
28. There are two issues to be determined in this case:
(a) Whether USDT can be held as property in trust;
(b) Whether ByBit is entitled to summary judgment.
Issue 1: USDT can be held as property in trust
29. Despite the novelty of cryptocurrency assets, they have not only been transferred for value, but also appear on their balance sheets when held by companies, as the accounting industry is developing standards for valuing and reporting these assets. The Monetary Authority of Singapore ("MAS") recently published a consultation paper on proposed amendments to the Payment Services Act regulations, which would implement segregation and custody requirements for digital payment tokens: MAS, "Proposed Regulatory Measures for Digital Payment Token Services - Public Consultation Response" released on 3 July 2023. The proposed amendments reflect the reality of identifying and segregating such digital assets in practice and therefore support the view that they can be held in trust legally.
30. In addition, the court rules have universally recognized cryptocurrency as property. In Rule 22 of the 2021 court rules, this is related to the enforcement of judgments and orders. O 22 r 1(1) defines "chattels" to include "cash, debts, deposits, bonds, shares or other securities, membership of a club or association, and cryptocurrency or other digital currency" [emphasis added]. Therefore, cryptocurrency is explicitly considered a form of property that can be the subject of an enforcement order. Although the individuals who formulated the 2021 court rules did not specify the specific methods for carrying out such enforcement orders (see Civil Justice Committee Report (29 December 2017) (Chairman: Justice Cheng Yong Guang)), it is worth noting that the procedures for serving a notice of seizure on an individual or entity that owns or controls chattels (O 22 r 6(4)(b)) or registering the ownership of intangible chattels (2021 Court Rules O 22 r 6(4)(g)) can logically extend to cryptocurrency or other digital currency.
31. Cryptocurrencies are not classified as tangible assets because we cannot possess them in the same way as cars or jewelry. They do not have a fixed physical identity. However, cryptocurrencies do manifest themselves in the physical world, albeit imperceptibly to humans. The combination of private and public keys unlocks the previous cryptographic lock and locks the unspent transaction outputs of cryptocurrencies to the public addresses of holders on the blockchain. Professor Kelvin Low argues that the right of a private key holder is correctly conceptualized as a "narrow right to unspent transaction outputs (UTXOs) of the cryptocurrency locked to the holder's public address on the blockchain": see Kelvin FK Low, "Trusts of Cryptoassets" (2021) 34(4) Trust Law International 191. This physical manifestation at the level of digital bits and bytes is not permanent and changes with each transaction. Nevertheless, we identify the specific digital tokens that are involved, much like naming a river, despite the ever-changing water in its bed.
32. While some may be skeptical about the value of cryptocurrencies, it is important to remember that value is not inherent in an object. Although we say certain materials are valuable, such as gold being more valuable than wood, this is a judgment made by collective human thinking. It is also a judgment that can change with the circumstances. On a sinking ship, a floating wooden chair may be more valuable than a golden throne.
33. This description of cryptocurrencies suggests that modern humans can define and recognize them, enabling them to be traded and assessed as holdings. They undoubtedly meet the maxim frequently cited by Lord Wilberforce in National Provincial Bank v. Ainsworth (1965, 1 AC 1175, page 1248):
Before a right or interest can be subsumed into the category of property, or affect the rights of property, it must be definable, identifiable by third parties, capable in its nature of being assumed by third parties, and have some degree of permanence or stability.
34. The next question is whether USDT can be classified as a chose in action. The argument against classifying cryptocurrency assets as choses in action is based on the origin of this category, which is the right enforced against a person through litigation (in a court), such as the right to obtain payment of money or a debt, or contractual rights. There is no separate opposing party's right against cryptocurrency holders. However, over time, the category of choses in action has expanded, including ownership documents of intangible property rights and ultimate intangible rights, such as copyright: see W.S. Holdsworth, "The Treatment of 'Choses' in the Common Law" (1920) 33(8) Harvard Law Review 997. As Holdsworth pointed out in the introduction to his authoritative article on page 998:
Clearly, the diversity of things classified as choses in action necessarily leads to a diversity of legal events for each category of choses in action. Indeed, their legal events are significantly different; because they themselves are different, they are necessarily treated differently in courts and legislative bodies. It is not possible to comprehensively address the law of choses in action; the various categories of choses in action are often dealt with in their respective branches of law, rather than within this overarching category. For example, if we want to understand the law on bills and notes, shares, copyright, or patents, we would not look for it in the discussion of choses in action, but rather in books on commercial law, company law, or specialized treatises on these particular things.
35. Holdsworth's historical survey demonstrates the diversity of intangible property classified as choses in action. This diversity indicates that the category of choses in action is extensive, flexible, and not closed. It is precisely these characteristics that explain and prove the maxim frequently cited by Justice Fry in Colonial Bank v. Whinney (1885) 30 Ch D 261, 285: "All personal things are either held or in action. The law knows no tertium quid."
36. Therefore, my conclusion is that, in principle, holders of cryptocurrency assets possess an intangible property right recognized by common law as a chose in action, and therefore can be enforced in court. While someone might argue that this conclusion has elements of circular reasoning, as it can also be said that the right to be enforced in court is what makes it a chose in action, this mode of reasoning does not significantly differ from how the law treats other social constructs, such as currency. It is only because seashells or beads or differently printed pieces of paper have exchanged value widely accepted by people that they become currency. The acceptance of currency is due to collective behavior of trust. This is reflected in the famous observation by Lord Mansfield in Miller v. Race (1758) 1 Burr 452, 457, where he pointed out that something "universally accepted by mankind" as currency is endowed with "the credit and circulation of money" "in all intents and purposes."
37. ByBit also relies on the current terms of service for USDT, which include the following provisions regarding the right of redemption in clause 3:
Tether issues and exchanges Tether tokens. Tether tokens can be used, held, or exchanged online as long as someone is willing to accept Tether tokens. Tether tokens are 100% backed by Tether's reserves. Tether tokens are priced based on a range of legal currencies. For example, if you purchase EURT, your Tether tokens will be pegged to the Euro at a 1:1 ratio. If you issue EURT worth 100.00 Euros, Tether will hold reserves worth 100.00 Euros to support these Tether tokens. The composition of the reserves used to support Tether tokens is entirely controlled and determined by Tether. Tether tokens are backed by Tether's reserves, including legal currencies, but the tokens themselves are not legal tender. Tether does not issue tokens based on consideration of digital tokens (such as Bitcoin); only currency is accepted at issuance. To directly issue or exchange Tether tokens, you must be a verified customer of Tether. This requirement has no exceptions. The right to redeem or issue Tether tokens is your personal contractual right. If, due to insufficient liquidity or unavailability or loss of any reserves held by Tether to support Tether tokens, delays in redemption or withdrawal of Tether tokens become necessary, Tether reserves the right to delay redemption or withdrawal of Tether tokens, and Tether reserves the right to redeem Tether tokens by physically exchanging the securities and other assets held in its reserves. Tether makes no representation or warranty as to whether or when trading of Tether tokens will be available on the website, or whether trading of Tether tokens will be available on the website at any time in the future.
38. The terms of service are governed by BVI law. ByBit has obtained a legal opinion from qualified lawyer Sam Goodman in the BVI, which opines that under BVI law, "certified clients" of Tether Limited have a contractual right to redeem USDT by making a claim against Tether Limited. ByBit relies on this to support its argument that USDT is an action in personam.
39. In my analysis, this characteristic of USDT may constitute another form of action in personam that USDT holders may have, but its existence is not necessary for the conclusion that the rights represented by USDT itself are actions in personam.
Question 2: Does ByBit have the right to obtain a judgment?
40. ByBit submitted, and it has established a preliminary case that has overcome the hurdle of needing to prove a good arguable case in order to obtain a worldwide freezing order. Conversely, Ms. Ho has failed to establish a real or genuine prospect of a fair or reasonable defense.
Jason does not exist
41. The most likely inference from all the evidence presented by ByBit is that Jason does not exist (or at least did not play the role as claimed by Ms. Ho). There is indeed compelling evidence showing that Ms. Ho fraudulently transferred crypto-assets and fiat assets into her own name. As stated in [^25^] above, there is direct evidence of Ms. Ho owning the wallet associated with Address 1, as well as indirect evidence of her unexplained extravagant behavior. Exploiting her employment relationship at WeChain, which was engaged to handle ByBit's payroll account, Ms. Ho manipulated the cryptocurrency Excel file and misappropriated crypto-assets and fiat assets.
Presumed Trust
42. Constructive trust arises in the context of asset theft and provides a remedy for the recovery of the stolen assets. As Lord Browne-Wilkinson stated in Westdeutsche Landesbank Girozentrale v Islington London Borough Council [^1996^] 1 AC 669 at 716:
I agree that stolen funds can be traced through a proprietary claim. But in this case the proprietary interest enforced by tracing is arising under a presumed trust rather than a resulting trust. Although it is difficult to find clear authority for that proposition, when property is acquired through fraud by the claimant to the property, there is a presumption of trust: the property is recoverable and can be traced into assets. The recipient of property acquired by fraud is therefore under a duty to return the property: Stocks v. Wilson [^1913^] 2 KB 235, 244; R. Leslie Ltd. v. Sheill [^1914^] 3 KB 607. Money stolen from a bank account can be traced in equity: Bankers Trust Co. v. Shapira [^1980^] 1 WLR 1274, 128 2C-E. See also McCormick v Grogan [^1869^] LR 4 HL 82, 97.
43. I should also add that even if Ms. Ho mixes USDT in her online custodial wallet with the balance of USDT in other wallets, or mixes fiat assets with other money in her bank account, constructive trusts may still arise: Foskett v McKeown [ 2001 ] 1 AC 102.
44. Based on my findings of fact, I declare constructive trusts over the cryptocurrency assets and fiat assets. ByBit is the legal and beneficial owner of the cryptocurrency assets. In light of the remedies granted based on the institutional constructive trust, I do not need to consider remedial constructive trusts and unjust enrichment as alternative grounds.
45. ByBit has sought a range of proprietary and personal orders based on its investigation, which I now grant as follows:
(a) Declaration of constructive trust over the cryptocurrency assets and fiat assets;
(b) Order for Ms. Ho to immediately pay ByBit $647,880 USD (i.e., the value of the cryptocurrency assets in wallets 3 and 4);
(c) Order for Ms. Ho to immediately pay ByBit $117,238.46 SGD (i.e., the value of the fiat assets);
(d) Order for Ms. Ho to immediately transfer all remaining funds in wallet 1 to ByBit, totaling $3,561,840 USD (i.e., the value of the cryptocurrency assets transferred into wallets 1 and 2);
(e) In relation to the remaining cryptocurrency assets transferred into wallets 1 and 2 after deducting the transfer amount in (d) (i.e., the remaining amount of USDT worth $3,561,840 USD):
(i) Order for Ms. Ho to account for the remaining amount or any money or funds representing the value of the remaining amount owned or received by her or held to her order by any person;
(ii) Order for the recovery of the remaining amount or any part of it, so that ByBit may recover and restore converted assets or any proceeds (if any);
(iii) Order for Ms. Ho to pay all amounts determined to be due to ByBit after settlement of accounts.
46. I also calculate interest at the standard annual rate of 5.33%, from the date of transfer of the contested assets by Ms. Ho to the date of judgment, on the amounts paid in [45(b)] and [45(c)].
Conclusion
47. In making the summary judgment in favor of ByBit against Ms. Ho, I also award costs to ByBit in the amount of $45,000.00 USD (taking into account the legal novelty of the issues in dispute and the work done in seeking interim relief, including costs inclusive) and expenses in the amount of $11,500.00 USD.
Philip Jeyaretnam
High Court Judge
Quek Wen Jiang Gerard, Kyle Gabriel Peters, Ling Ying Ming Daniel, Mato Kotwani, and Chua Ze Xuan (PDLegal LLC) are the plaintiff's representatives;
The first to sixth defendants are absent and not represented.
