Target Global: Worldwide Freezing and Proprietary Injunctions in Cryptocurrency Disputes

In a Nutshell

In granting a worldwide freezing order the Grand Court (the “Court”) provided a clear and convenient summary of the legal principles relevant to the grant of worldwide freezing and proprietary injunctions in support of fraud claims. The guidance will be particularly useful in the context of crypto specific dissipation risks.

Background

The plaintiffs alleged that their investment of US$31.5 million into XanGroup Holdings Corp, a Cayman Islands company, had been induced through the defendant’s fraudulent misrepresentations and the defendant intended to divert the funds from the company’s business as a decentralised payment network operator for his personal use. Among other alleged misconduct, the plaintiffs claimed the defendant had signed a false share repurchase agreement on behalf of XanGroup to disguise payment transfers into his own account. The defendant maintained that there had simply been a failed commercial investment.

The plaintiffs had previously obtained a temporary worldwide freezing order in Singapore in aid of the anticipated Cayman Islands proceedings. At a very late stage immediately before the hearing, the defendant had attempted to resolve matters by offering an undertaking to the plaintiffs in lieu of the injunctions sought. The matter was heard on notice to the defendant, and he was represented at the hearing.

Worldwide Freezing Order

The Court noted that a worldwide freezing order is “a very big step to take” and that it must “scrutinise the basis for such an injunction with the utmost care”. Nevertheless, an application for an injunction should not be treated as a mini-trial and the court will not have the benefit of witness examination or discovery. Such injunctions are granted to avoid a judgment that a plaintiff may ultimately obtain going unsatisfied because of an unjustified dissipation of assets.

The Court applied the accepted common law test for freezing orders, which requires the applicant to show:

• A good arguable case on the merits: this is equivalent to a “serious issue to be tried” and does not require a better than 50% chance of success;
• A real risk of dissipation of assets: which is defined as “something which is more than fanciful”. Solid evidence of a risk of dissipation is needed, albeit there is no requirement to show a high probability or that dissipation is more likely than not; and
• That it would be just and convenient to grant the injunction.

The key question was whether the real risk of dissipation requirement was met. In finding that it was, the Court considered the totality of the circumstances, including:

• The defendant admitting to using company funds in his personal name to make high-risk cryptocurrency trades resulting in substantial losses;
• The defendant’s numerous worldwide connections. He gave an address in China, appeared to have residency and employment rights in Singapore, had dual nationality in the Netherlands and Hong Kong and was for a time stranded in Vietnam when his passport was confiscated;
• The speed with which the defendant could transfer assets, particularly cryptocurrency, with the Court noting that digital wallets can be “completely anonymous and untraceable to the owner and can be easily dissipated and hidden in cyberspace”;
• The defendant’s apparent temporary disappearance whilst his passport was confiscated and during which he failed to keep in contact with the plaintiffs, who were major investors; and
• The defendant’s use of false documentation and false declarations when conducting the KYC process with a cryptocurrency exchange.

Proprietary Injunction

The Court noted that “where a plaintiff seeks to trace a beneficial interest in assets it is well established that the court can grant a proprietary injunction for the purpose of preserving the assets so that they can be made over to the claimant as his property if the claim succeeds.” The purpose of such an injunction is to preserve the status quo until the plaintiff’s substantive claims are determined. The requirements to be satisfied are:

• A serious issue to be tried in respect of facts which, if proven, would afford the plaintiffs a proprietary remedy;
• The balance of convenience favours the grant of a proprietary injunction; and
• It must be just and convenient to grant such relief.

The Court found that these requirements were met in the present case.

Key Takeaways

• The list of factors considered when assessing the risk of dissipation was noteworthy in the cryptocurrency context. The ease with which this class of assets can be anonymously transferred in a short timeframe was a relevant factor in the grant of injunctive relief.
• An undertaking is not necessarily a complete answer to an applicant’s concern that assets may be dissipated. The defendant’s conduct and the specific terms of the undertaking offered will be assessed by the Court when considering the weight to be placed on it.
• The mere fact that a fraud claim is brought, even when the allegations reach the standard of good arguable case/serious issue to be tried, does not automatically satisfy the threshold for establishing a real risk of dissipation. If evidence of fraud and dishonesty is relied upon to establish the risk of dissipation, the Court will typically have to draw inferences from that evidence and so should be satisfied that the dishonesty alleged is relevant to the risk of dissipation.
• The fact that another court had found that the requirements for worldwide freezing relief were met on the same facts can provide assurance to the Court in considering granting such relief in this jurisdiction.

¹ [2025] CIGC (FSD) 45