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Do bitcoin developers owe fiduciary duties to the true owners of a defrauded cryptoasset owner?

Outer Temple’s Anson Cheung comments on the case of Tulip Trading which was first heard in the High Court. This case generated much interest in being the first case to argue that bitcoin developers owed fiduciary duties to the true owners of a defrauded cryptoasset owner.

That argument was quickly shot down in the High Court for having no prospects of success, but has now been resuscitated by the Court of Appeal.


Following an alleged hacking and subsequent theft of keys controlling approximately £3b in cryptoassets, Tulip Trading Limited (Tulip) issued proceedings against certain crypto developers who it claimed controlled and ran 4 different bitcoin networks.

Tulip claimed that the developers owed it a fiduciary duty and/or tortious duty of care, such that the developers were obliged to assist Tulip in regaining control and use of the cryptoassets. In a novel argument, Tulip argued the fiduciary duties owed should extend to implementing the necessary software patch which would have the effect of transferring the digital assets to which access has been lost to a new address.

All the developers were out of jurisdiction, and jurisdiction was so challenged. Therefore the proceedings before the first instance judge and the Court of Appeal proceeded in the context of the first limb of the jurisdiction test, being whether that there is a serious issue to be tried.

The first instance judge held that the second and third limb of the jurisdiction test had been established, but that Tulip could not establish the first limb – i.e. there was no realistic prospect of establishing that the facts pleaded amount to a breach of fiduciary or tortious duty owed by the defendants to Tulip.

Case Comment

The judgment of the Court of Appeal was outstandingly clear. There are three interesting observations that are worth bearing in mind:

First, Birss LJ recognised that any recognition that the developers owed a fiduciary duty to bitcoin owners would be a significant development in the law (at [86]). However, he noted that there was often frequent warning in the authorities against deciding controversial points of law in a developing area on assumed or hypothetical facts rather than on the basis of actual factual findings. Therefore, whether or not there was a fiduciary duty in law in the circumstances alleged by Tulip ought to be decided “once the facts are established” (at [91]). This is particularly relevant given that there was dispute between Tulip and the developers as to whether it was the miners who controlled the software in a decentralised manner by creating a ‘fork’ in the software, or whether it was the developers who would create such a ‘fork’ by producing rival protocols.

Second, Birss LJ noted that applying common law principles on fiduciary duties – particularly, the classic definition of a fiduciary as set out in Bristol and West Building Society v Mothew [1998] Ch 1 – were capable of applying to developers:

“The developers of a given network are a sufficiently well-defined group to be capable of being subject to fiduciary duties. Viewed objectively the developers have undertaken a role which involves making discretionary decisions and exercising power for and on behalf of other people, in relation to property owned by those other people. That property has been entrusted into the care of the developers. The developers therefore are fiduciaries[…] The content of the duties includes a duty not to act in their own self interest and also involves a duty to act in positive ways in certain circumstances. It may also, realistically, include a duty to act to introduce code so that an owner’s bitcoin can be transferred to safety in the circumstances alleged by Tulip.”

Such an approach highlights the incremental approach of courts of England and Wales to blockchain technology and cryptoassets more generally: the courts apply the usual common law principles “by analogy with existing cases”, for example by considering whether bitcoin (itself a new and novel concept) fits the classic definitions of ‘property’.  (at [71])

Third, Birss LJ’s analysis of how fiduciary duties would function in the context of bitcoin network developers was enlightening. He noted that the developers control the software which creates bitcoins, much like banks but ‘the bank’s developers have nothing like the control over the customer’s assets which Tulip alleges the bitcoin developers have over bitcoin” (at [72]). Such control involved taking active steps to update, or to decline an update to the code, and such decisions ultimately involved an exercise of authority which were entrusted to them by bitcoin owners, much as beneficiaries would entrust decisions to trustees. In making such decisions, the developers would owe duties to bitcoin owners “not to compromise the owners’ security in that way. It would be a duty which involves abnegation of the developer’s self-interest. It arises from their role as developers and shows that the role involves acting on behalf of bitcoin owners to maintain the bitcoin software.” (at [76])


To conclude, the argument proceeds to a full trial. If it succeeds and the courts of England and Wales do impose such a fiduciary duty on the developers, it will undermine the notion of decentralised governance of bitcoin, and one of the fundamental tenets behind blockchain technology and cryptoassets. Indeed, as the Court of Appeal concluded in its final paragraph, “if the decentralised governance of bitcoin really is a myth, then in my judgment there is much to be said for the submission that bitcoin developers, while acting as developers, owe fiduciary duties to the true owners of that property”.

To view the judgment from the High Court, click here.

The Court of Appeal judgment can be found here.

Find out more

Anson Cheung practices in international arbitration, construction and commercial litigationfinancial servicesprofessional negligence and pensions.

Prior to starting the BPTC, Anson worked in the Legal Office of the UN World Food Programme in Rome. For the BPTC, Anson was awarded the most prestigious scholarship at Gray’s Inn, the Bedingfield Scholarship, and an Advocacy Award for aptitude in advocacy from BPP University. She was called to the Bar by Gray’s Inn in 2019.

To find out more, contact Sam Carter on +44 (0)203 989 6669 or Colin Bunyan on +44 (0)20 7427 4886 for a confidential discussion.

Legal Blogs 23 Apr, 2023


Anson Cheung

Call: 2019

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