Are Cryptocurrencies “Goods” at Common Law?
The Copytrack Pte Ltd. v. Wall, 2018 BCSC case involved the unlawful distribution of Ether Tokens to five lucky (but unauthorized) wallets.
This unique set of facts arose, as is outlined below, in the context of a Summary Judgment Motion under the British Columbia Rules. The motion was brought by the plaintiff, Copytrack PTE Ltd. (“Copytrack”), a cryptocurrency company based in Singapore.
The defendant was an individual who lived in British Columbia, Canada. He bought into the newfound cryptocurrency introduced by Copytrack as an ICO (initial coin offering), purchasing 530 “CPY Tokens.”
In February 2018, instead of depositing CPY Tokens, Copytrack inadvertently sent 530 Ether Tokens to the defendant’s “wallet” (Note: a wallet is a virtual holding space for digital currency and the Ether is a cryptocurrency). The Ether Tokens were worth approximately $495,000 as opposed to $780 for the CPY tokens.
Copytrack quickly realized its mistake and on the same day requested the Ether Tokens be returned, to no avail. In fact, to the date of the court decision, the Ether Tokens had not been returned to Copytrack and the defendant had passed away the day before the court hearing.
The Summary Judgment Motion spoke only to the torts of conversion and wrongful detention of the Ether Tokens. In order to grant a motion for summary judgment, a judge must be satisfied that the claim has no chance of succeeding at trial.
However, and crucially, Copytrack assumed that Ether Tokens are in fact a “good”, which is a requisite element in order to prove the common law torts of conversion and wrongful detention. The judge was not able to make a determination on this point on the basis of the parties’ submissions. As such, there is unfortunately no court guidance to date as to whether tokens are a “good” versus a form of currency.
Ultimately, the judge determined that Copytrack was entitled to “trace and recover the 529.8273791 Ether Tokens received by the defendant from Copytrack in whatsoever hands those Ether Tokens may currently be held.” His reasoning was in large-part based on the fact the Ether Tokens were sent to the defendant erroneously, and he therefore had no proprietary interest in them.
The judge took, what is in our opinion, a “high road” which facilitated justice for Copytrack. This case is important for two reasons: 1) it is still uncertain whether the misappropriation of cryptocurrencies can, under Canadian law, be the subject of an action in conversion or detinue; and, 2) in the appropriate circumstances, a Canadian court may grant a court order to trace cryptocurrencies in the wallets of receivers. Practically, however, a tracing order in this context may be of little or no practical utility due to the anonymous way that certain cryptocurrencies are transacted.