The claim was brought by BSV Claims Limited in response to a decision by the defendant exchanges in April 2019 to de-list the cryptocurrency, Bitcoin Satoshi Vision ("BSV"). The representative action was brought on behalf of over 240,000 claimants, all of whom were holders of BSV around the time the cryptocurrency was de-listed.

While the Court of Appeal's decision is not entirely unexpected, it will be welcomed by crypto exchanges which are increasingly being regarded by investors and regulators as the gatekeepers for crypto investments, and which are perceived as bearing particular responsibility and, potentially, liability for investor losses.

Background

BSV emerged as a popular cryptocurrency in 2018 following a series of protocol changes that led to splits in the Bitcoin blockchain, and disagreements in the community about how Bitcoin should develop and grow. A key promotor and public advocate of BSV was now notorious computer scientist and businessman, Dr Craig Wright. Among other things, Dr Wright famously claimed to be the pseudonymous and unidentified creator of Bitcoin, Satoshi Nakamoto.

Dr Wright's highly controversial claim to have created Bitcoin was thoroughly rejected in a high profile judgment of the English High Court in June 2024. Even before that, however, Dr Wright's association with BSV led to a series of announcements in which the defendant exchanges stated their intention to delist the BSV coin, and encouraged other exchanges to do the same. These de-listings occurred in a short space of time, occurring between April and June 2019.

The Representative Claimant alleged that this attempt to de-list BSV was collusive conduct by the exchanges causing the value of BSV to fall by £16 per coin between 11 and 18 April 2019. It brought a claim in the Competition Appeals Tribunal (CAT) on behalf of the many claimants, subdivided into three classes, with each class pursuing damages based on a differing assessment of quantum.

One of these classes ("Class B") comprised around 75,000 holders. The members of this class are holders who retained their BSV holdings on 29 July 2022. The Class B Holders sought damages for "foregone growth". This was based on the proposition that the defendant exchanges either prevented BSV from becoming, or cost it the chance to become, a major cryptocurrency, thereby preventing the holders from benefiting from a chance at the coin's supposed massive growth.

Claims for "loss of a chance" such as this demand a comparison between what happened versus a counterfactual scenario. The counterfactual proposed by BSV Claims Limited relied on Bitcoin as a comparator asset, and given Bitcoin was valued at 352.62 times the value of the holdings on 11 April 2019, the total value of the claim for B Class Holder was almost £9 billion.

One defendant, well-known exchange Binance, applied to the CAT to have the Sub-Class B claims struck out on the basis that the "foregone growth" is irrecoverable under the market mitigation rule. This provides that, where an available market exists for whatever has been lost (in this case, substitutable cryptocurrencies), a claimant must mitigate its losses by going into that market and transacting appropriately.

Binance argued that BSV was at all times capable of being bought and sold on other exchanges, i.e. there was always a market in which it was open to BSV holders to try to mitigate their losses. Binance argued that the Class B Holders ought to have traded in cryptocurrencies substitutable for BSV, and that by doing so, they would have mitigated any losses suffered.

The Representative Claimant resisted the strike out application on four bases, of which three were rejected entirely. The CAT struck out the secondary "loss of chance" argument on the grounds that it depended not on the defendants' actions, but rather on the speculative contention that BSV would have become a top-tier cryptocurrency.

This broadly (subject to arguments about holder awareness of de-listing) reduced the Sub-Class B claims to the same value as those in Sub-Class A, taking the value from c.£9 billion to nearer tens of millions.

The Representative Claimant appealed in the Court of Appeal, which agreed with the CAT's decision on the basis that the Sub-Class B holders who knew of the de-listing events could have mitigated their loss on the available market of substitutable cryptocurrencies, comparing cryptocurrencies to "shares, derivatives or other tradeable financial instruments" stating that "[i]t would be unthinkable for the holders of freely tradeable shares, whose value had been reduced by tortious conduct, to be able to claim more than the current value of those shares to compensate them for the prospect that their value might have substantially increased in the future. The same principle applies here. It is called the market mitigation rule." Sub-Class B holders retaining damaged BSV holdings did so at their own risk.

The appeal judgment refined but broadly agreed with the CAT's judgment, concluding that the application was successful in striking out claims for:

• Damages beyond the difference in value of BSV holdings on 11 April 2019 and a time shortly after they were, or ought to have been, aware of the delisting events (and quantifiable consequential losses such as trading fees), and

• damages based on a loss of a chance

Conclusions

This judgment restates effectively the rules of what constitutes an actionable "loss of chance". Here, the "chance" lost did not depend on an action or decision of any party, but rather on speculation that BSV would have, but for the alleged infringement, become an extremely valuable cryptocurrency. To bring a loss of chance claim, it must be the action of another party which has deprived the claimant of the chance in question.

While cryptocurrency trading can be perceived as different to trading in traditional financial instruments, this judgment shows that the Courts seem to be treating decentralised finance ("DeFi") and traditional finance ("TradFi") as being subject to the same legal principles. The market mitigation rule applies to crypto in precisely the same way as it would to TradFi instruments.

Crypto exchanges are increasingly in the spotlight as gatekeepers for investments. The FCA is proposing to apply a market listing and abuse regime which puts Crypto exchange at the centre of controlling risk. Investors are increasingly looking to crypto exchanges as being responsible for losses, much in the same way investors look to their bank for TradFi losses. The English Courts have always been cautious in giving encouragement to opportunistic claims. It is encouraging that the same principles are being applied to the crypto market.

Jonathan Brogden (Partner and Head of Crypto Disputes), Alexander Bradley-Sitch (Senior Associate), and Henry Gregory (Trainee Solicitor) are part of the Commercial Disputes team of DAC Beachcroft, in London. They regularly advise clients on disputes and investigations relating the cryptocurrencies, DeFi and FinTech.