2023/10/9 10:59 High Court judgment handed down in highly anticipated case - Osbourne v Persons Unknown & Ors

Unknown & Ors [2023] - Lexology

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High Court judgment handed down in highly anticipated

case - Osbourne v Persons Unknown & Ors [2023]
Blog Duane Morris London

Duane Morris LLP

MEMBER FIRM OF

United Kingdom February 28 2023

A highly anticipated judgment has been passed down from the High Court, allowing for service
via Non-Fungible Token (NFT) on a defendant as the sole means of service. Osbourne v Persons
Unknown & Ors [2023] EWHC 340 (KB) concerns Ms. Lavinia Osbourne, who sought to restrict
the movement of two NFTs, which were misappropriated from her cryptoasset wallet in 2022. In
the judgment, Mr Healy-Pratt (sitting as a Deputy High Court Judge) expanded on the comments
made by Lavender J in his January 2023 judgment relating to the same case.
By way of background, Ms. Osbourne was the victim of an incident whereby an unknown third
party accessed her cryptoasset wallet and misappropriated two NFTs titled ‘Boss Beauties #680’
and ‘Boss Beauties #691’ without her knowledge or consent. In March 2022, Ms. Osbourne
initially obtained an injunction to prevent the further movement of her NFTs and a disclosure
order to obtain information on the wrongdoers who may have assisted in their removal from her
cryptoasset wallet.
Following additional movement of Boss Beauties #691 (which was in breach of the injunction
already in place), Ms. Osbourne sought a further injunction in a bid to restrain any subsequent
movement of her NFTs. She also added a named defendant to the proceedings and expanded
the categories of Persons Unknown to which the injunction and underlying claim applied. As part
of that process, permission was sought to serve the injunction and pleadings on three wallets:
the original ‘hacker’ wallet, the wallet which at the time contained Boss Beauties #680 and the
wallet which at the time contained Boss Beauties #691.
A without notice hearing for Ms. Osbourne’s application took place in September 2022. Lavender
J granted an interim injunction in relation to all Defendants and permitted service out of the
jurisdiction (i.e. England) by alternative means via NFT alone (in relation to the First and Second
Defendants) and via email and NFT (in relation to the Third Defendant).
Service by NFT constitutes the airdropping of a freshly minted NFT into the designated wallet.
This “service NFT” contains a web link / URL, which directs the intended viewer to a document
depository, which in turn contains all the relevant service documents for the custodian of the

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2023/10/9 10:59 High Court judgment handed down in highly anticipated case - Osbourne v Persons Unknown & Ors [2023] - Lexology

wallet to view.
At the return date hearing, as set out in his judgment, Mr Healy-Pratt affirmed the interim order
granted by Lavender J and allowed Ms. Osbourne to serve via NFT on the Defendants. The
application was granted on the basis that: (i) there remained a strong case for restitution and
unjust enrichment against the First Defendant; and (ii) that one or more of the NFTs were held by
the Second and Third Defendants on constructive trust for Ms. Osbourne. There also remained a
need to continue the restraint of both assets due to the risk of further risk of movement.
Paragraph 19 of the judgment is striking for its analysis of NFTs and how nefarious individuals
exploit the underlying decentralised technology for their own ends:
“NFTs are a type of cryptoasset that represent an underlying asset, whether tangible or
intangible. In that sense, they are digital representations of value. The value of an NFT is, in
large part, governed by the provisions of the underlying smart contract that conveys rights to,
and in some instances, imposes obligations on the holder. There are low barriers to entry.
Users merely need an internet-connected device and knowledge of the relevant private key to
transact with cryptoassets. Moreover, users need not identify themselves by anything other
than a user name such that this transactional activity is conducted anonymously. Given these
characteristics, it is therefore no surprise that this technology can be exploited to
unscrupulous ends, notwithstanding that cryptoasset transactions are recorded on the publicly
available immutable digital ledger that is the Blockchain. Bryan J noted in AA v Persons
Unknown [2020] 4 W.L.R. 35 that such assets are at risk of being moved at “…the click of a
mouse.” Perhaps another contemporary risk of movement would be at the tap of a smart
phone.”
In his judgment, Mr Healy-Pratt expanded on the points made by Lavender J, noting that there
was “…a realistically arguable case that NFTs are to be treated as property as a matter of
English law,” adding NFTs to the list of digital assets which can be classed as property alongside
cryptocurrency. Additionally, although this is not the first time that service of a court order has
been served by NFT for a cryptocurrency fraud case, the case of Osbourne is perhaps the first
instance in the UK, if not the world, where sole service by NFT has been used in relation to an
NFT fraud case.
This reaffirms and highlights the sympathy and willingness shown by the English courts to cases
involving misappropriated digital assets, following a string of other favorable judgments in the
sector such as D’Aloia v Persons Unknown & Others. It will be interesting to see how this space
develops in the next year or so as the recognition of NFTs as property, along with the tools in
the Court’s arsenal to serve on Persons Unknown via NFT, opens new avenues of recourse for
victims of digital asset fraud.
Ms Osbourne was represented by Racheal Muldoon of Maitland Chambers, who was instructed
by the London office of Duane Morris.
Duane Morris LLP - Charlyn Cruz

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