Software developers not responsible for US$4.5 billion Bitcoin loss

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A cryptoasset owner who lost control of US$4.5 billion of Bitcoins and other virtual currencies has failed to force the software developers to help him access the stolen cryptocurrency. This is the first English case to set out the duty owed by software developers to the owners of cryptoassets.

Dr Craig Wright claimed to own the cryptoassets through a Seychelles company which he accessed via his computer in England. He lost control of the assets when his computer was hacked and his secure private keys were deleted.

Dr Wright’s company, Tulip Trading, started proceedings against the cryptoasset software developers, alleging that they had a duty to help him regain access to his assets. The system developers, who were not based in England, were a fluctuating body of individuals who developed the software on a non-commercial basis.

The High Court was asked to decide whether proceedings could be served on the developers who were based outside the jurisdiction of England and Wales. To allow this, the judge had to be persuaded that Tulip Trading had a real prospect of success at trial.

The judge decided that Dr Wright did not have a serious claim against the software developers and refused to permit service of proceedings. Mrs Justice Falk ruled that the developers did not have a fiduciary or common law duty of care to Tulip Trading.

James Burgoyne of Brunel Professions said: “This was a helpful judgement in considering what duties are owed by cryptoasset software developers under English law. This may not be the last word on the subject however as Mrs Justice Falk also indicated that developers may have a duty of care in other situations and particularly where changes introduced for their own benefit have caused detriment to users of the system – this could create a duty to take action to address bugs or other defects introduced by the developer’s changes.”

Reports about the case have been published by Stevens & Bolton, Herbert Smith Freehills, the Society for Computers and Law and Taylor Wessing.

Professionalindemnity.com is owned by Brunel Professions, which is a leading professional indemnity insurance broker in the UK. Click here to get a quote or call 0345 450 1074 to speak to a broker.

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