In crypto fraud cases, the perpetrator can often only be identified by his wallet address, but not his real name. This has recently been demonstrated once again by a decision of the BVI Commercial Court. This anonymity of the perpetrator poses an issue for victims of crypto frauds who want to pursue a civil action in Switzerland. Legislative changes are needed.
Recently, the BVI Commercial Court rendered a judgment in a case, where unidentified crypto hackers made off with millions of USD stablecoins (Link). The court ordered a worldwide freezing injunction against the unidentified hackers and permitted service via a centralised crypto exchange. The court listed the defendants not by name (as their names were unknown), but rather by a description of certain details of the fraudsters that were known (e.g. owner of the digital wallet with the number […] or of the e-mail address […]).
This pragmatic approach of the court is just what is needed to provide victims of crypto frauds with access to civil remedies. It enables them to seek a freezing injunction and pursue a civil claim for recovery of the frozen assets. This can be an effective tool if the fraudster moves the tokens to a wallet held with a crypto exchange. In such scenario, the exchange can be caught by the freezing order and forced to disclose what it knows about the owner of the wallet.
Unfortunately, Swiss civil courts do currently not entertain actions against “persons unknown”. They require a claimant to identify the respondent by name and provide the respondent’s address. Naturally, this is impossible for most crypto fraud cases. A victim of crypto fraud is therefore factually barred from requesting a freezing order from civil courts. The only legal remedy available is filing a criminal complaint (which may be made against “person unknown”) and request the prosecutor’s office to freeze the fraudster’s assets.
But is this limitation of remedies really necessary? Would the current provisions of the Swiss Code on Civil Procedure not leave room for the courts to entertain an action against “persons unknown”? At least the wording of the relevant statutory provision (art. 221) only requires the “designation” of the respondent. The code is silent on the exact level of detail required. This would leave room to argue that a description as accepted by the BVI court (e.g. owner of a certain digital wallet) is sufficient. Yet, it is unlikely that the courts will depart from their current ban on actions against “persons unknown”. The reasoning behind this ban is that a court must be given the possibility to examine the respondent’s capacity to be a party (art. 66; i.e. is the respondent subject to legal capacity and has it the capacity to act?), which it can only do if the respondent’s identity is revealed to it.
Nonetheless, there are arguments for the courts to change their approach when it comes to crypto frauds. In such cases, it is typical that the perpetrator is only identifiable by the number of his digital wallet. By requiring the claimant to designate the respondent by name, the courts essentially strip crypto fraud victims of their civil remedies. This stands in contradiction to their fundamental right to have access to a court. Accordingly, courts should give a more liberal interpretation to art. 221 of the Swiss Code on Civil Procedure and allow an action against “person unknown” where the circumstances make it impossible for the claimant to provide the name of the respondent. To my knowledge, no Swiss court had so far to deal with this issue in the context of a crypto fraud.
It is, however, unlikely that the courts will themselves change their practice. Thus, there is need for legislative change. New provisions should be included in the Swiss Code on Civil Procedure, which explicitly allow for actions against “persons unknown” if the claimant demonstrates that it cannot be reasonably expected to provide the name and address of the respondent. While an action against “person unknown” certainly brings about some issues (e.g. determination of jurisdiction), complete rejection of such claim strips the victims of crypto frauds of their civil remedies.
Until such legislative change has come about, victims should try to find a connection of their case to a common law jurisdiction, where civil remedies are more readily available to them.
