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Can crypto be held on trust? Possibly, but not on these facts.

  • United Kingdom
  • Crypto assets
  • Financial services - Digital Financial Services



Zi Wang v Graham Darby [2021] EWHC 3054 (Comm)

In the context of the Defendant’s application for summary judgment, the High Court addressed for the first time whether or not cryptocurrency could be held on trust.  The Court gave the impression that it could, but determined on the “ultra-bespoke” facts of this case, that there was no trust.


The parties, being two crypto traders, entered into an agreement whereby the Defendant would provide ‘baking’ services to the Claimant for a percentage of the return (the “Agreement”).  Baking is the process by which token transactions are validated on the blockchain; similar to mining in Bitcoin.  Under the terms of the Agreement, the Claimant sold 400,000 altcoin (being an alternative cryptocurrency to Bitcoin by virtue of its subsequent launch), namely Tezos, to the Defendant in two equal tranches in exchange for 13 and 17 Bitcoin respectively.  The Agreement required the Defendant to keep the Claimant’s Tezos in a designated crypto wallet for two years and utilise the holding to yield additional tokens, after which he would sell them back to the Claimant.  By way of payment, the Defendant would receive 50% of the accrued additional tokens from the baking services.

Upon expiry of the two year period, the Claimant could return the Defendant’s Bitcoin in exchange for the Tezos.  However, around four months after the Agreement was entered into, the Defendant began trading (as opposed to ‘baking’) the Tezos.  As a result, and contrary to the Agreement, the Tezos were no longer held in the designated crypto wallet.  The Claimant issued the claim against the Defendant for breach of the Agreement and breach of trust and/or fiduciary duties.  The Claimant also obtained a worldwide freezing order (“WFO”) and injunction preventing the Tezos being traded.

Can cryptocurrency be held on trust?

The Claimant alleged that once he had transferred the Tezos to the Defendant, the Tezos were held on trust by the Defendant as either: (i) an express trust (where property is expressly transferred to a trustee), (ii) a Quistclose trust (where a creditor lends money to a debtor for a particular purpose), or (iii) a constructive trust (imposed by law because of an arrangement or understanding between two parties).

The Defendant accepted that cryptocurrency: (1) was ‘property’ and (2) could, therefore, be held on trust.  Accordingly, the Court did not need to consider these questions.  However, the Defendant denied the claim on the basis that the sale and buyback arrangement under the Agreement meant that no trust could be established.  Upon the Defendant’s application for summary judgment on the proprietary claims, Deputy Judge Stephen Houseman QC agreed that on the “ultra-bespoke set of facts”, the “essential economic reciprocity” of the transaction (i.e. the sale and buyback) under the Agreement was legally valid and precluded a trust from arising.  Summary judgment was granted in favour of the Defendant on the proprietary claims, and the proprietary injunction in respect of the 400,000 Tezos against the Defendant was discharged subject to a further hearing.  However, the personal claims for equitable compensation and account of profits, outside of trust law, were allowed to proceed and the WFO remained in place in those respects.


Firstly, the Court was clear in that “it is common ground that fungible and non-identifiable digital assets such as Tezos constitute property” (paragraph 55).  This follows the position in earlier caselaw (see AA v Persons Unknown [2019] EWHC 3556 (Comm) (see our earlier briefing) where an interim proprietary injunction in respect of cryptocurrency was granted.  It seems therefore likely that the Court will continue to recognise cryptocurrency as property and afford legal protection to cryptocurrency by upholding proprietary injunctions.

Secondly, although there was no trust found on the specific facts of this case because of the nature of the arrangement between the parties, the Court observed that in a non-reciprocal scenario, such as a unilateral or asymmetrical transaction between two account holders, the transfer of digital assets could involve or constitute a trust in the same way that other assets can (paragraph 89).  However, in an effort to avoid embarking upon a hypothetical discussion, the Court noted that there was no need to consider whether a trust could be created in different circumstances.