ZIBA LTD v. PERSONS UNKNOWN CATEGORY A (AS DEFINED IN PARAGRAPH 1 OF SCHEDULE 1 OF THE INDORSEMENT OF CLAIM) AND OTHERS

HCA 1266/2024

[2024] HKCFI 3572

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1266 OF 2024

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BETWEEN

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DECISION

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1.  By its Amended Summons dated 7 August 2024 (“Amended Summons”), the Plaintiff applies for a disclosure order against the 5^th Defendant in respect of the documents enumerated in Schedule 1 appended thereto.

2.  On 23 October 2024, solicitors acting for the 5^th Defendant confirmed that the 5^th Defendant adopts a neutral stance in respect of the Amended Summons and that they would not lodge any skeleton submissions in response to the Plaintiff’s Skeleton Submissions lodged on 21 October 2024.

3.  The Plaintiff is a victim of a phishing scam perpetrated by the 1^st Defendant on or about 22 March 2024, as a result of which, the Plaintiff paid 4,500,000 USDT (“P’s USDT”) into a cryptocurrency wallet controlled by the 2^nd Defendant (“D2’s Wallet A”). The Plaintiff reported the matter to the Hong Kong police on 2 May 2024.

4.  On 5 July 2024, the Plaintiff obtained a proprietary injunction. A tracing exercise revealed that the entire sum of P’s USDT transferred to D2’s Wallet A was dissipated to various “destinations”. Relevant for present purpose is that, of P’s USDT, 78,265.690635 USDT (“Relevant USDT”) was “swept into a hot wallet address” (“Binance Wallet A”) which is operated by a crypto-exchange operated by the 5^th Defendant via a customer wallet with an address identified in the evidence (“Binance Account”).

5.  The Amended Summons seeks the following records and documents in relation to the Binance Account:

(1) Schedule 1 §1(a): The account balance as at the date of the Order, and the complete transaction log of the Binance Account, including but not limited to the fiat and/or cryptocurrency deposits and withdrawals for the period starting from 22 March 2024 to the date of the Order to be made herein;

(2) Schedule 1 §1(b): The full name(s), address, particulars, email address(es), IP address(es) and a full set of Know Your Client documents in relation to the Binance Account.

6.  As explained in the evidence in support of the Amended Summons, the documents sought under the Amended Summons are justified because:

(1) Schedule 1 §1(a) is required to enable the Plaintiff to ascertain how the recipient user has dealt with the customer credit received as a result of the Relevant USDT;

(2) Schedule 1 §1(b) is required to enable to Plaintiff to ascertain the identity of the platform user(s), on whose behalf the 5^th Defendant had received the proceeds representing the Relevant USDT;

(3) Generally, the assistance of the 5^th Defendant will enable the Plaintiff to identify who is currently holding onto the Plaintiff’s assets and to join additional parties, if so advised.

7.  I accept the Plaintiff’s submissions that it is appropriate to accede to the Amended Summons. As stated in Pacific King Shipping Holdings Pte Ltd v Huang Ziqiang [2015] 1 HKLRD 830:

“[29] If the case involves a proprietary claim where the plaintiff seeks to trace property which in equity belongs to him, the court not only has jurisdiction to grant an injunction restraining the disposal of that property, it may in addition make orders designed to ascertain the whereabouts of that property. In particular, it may order a third party bank to give discovery of documents in relation to the bank account of a defendant who is alleged to have defrauded the plaintiff of his assets”

8.  In the context of an application for Norwich Pharmacal relief, the following principles are established (A Co v B Co [2002] 3 HKLRD 111 at §§12 and 13):

(1) There must be cogent and compelling evidence to demonstrate that serious tortious or wrongful activities have taken place (where fraud or similar serious allegations are made, the degree of proof must correspondingly be high);

(2) It must also be clearly demonstrated that the order will or will very likely reap substantial and worthwhile benefits for the plaintiff, and where a tracing claim is likely to be made, there must be a serious possibility that the discovery sought will either allow the plaintiff to preserve what may well be his assets or realistically lead to the discovery of such assets; and

(3) The discovery sought must not be unduly wide; any order must be specific and also restricted to those documents or those classes of documents that are necessary to enable the plaintiff to preserve or discover assets.

9.  In so far as necessary, it seems to me that the principles applicable to an application made pursuant to section 21 of the Evidence Ordinance Cap 8 are relevant by analogy. As stated at CTO (HK) Ltd v Li Man Chiu & Ors [2002] 2 HKLRD 875 §13:

“In Arab Monetary Fund v. Hashim and others (No.5) [1992] 2 All ER 911, Hoffmann J (as he then was) imposed three limits on the Bankers Trust jurisdiction at pp.918e to 920a. First, the plaintiff must demonstrate a real prospect that the information may lead to the location or preservation of assets to which he is making a proprietary claim. For the jurisdiction rests upon the proposition that unless the assets in question can be located and secured, the ultimate determination of ownership of those assets may be frustrated by their removal or dissipation and there will be no point in calling on the third party at the trial to produce the required documents or give the requested information. Second, the jurisdiction is more restricted than a request to a party for general discovery on an issue. When documents are required to be disclosed, the third party should be entitled to the same specificity in the documents he is asked to produce as he would be served with a subpoena. Likewise, if he is asked for information, the questions should be directed with specificity to ascertaining the whereabouts of the assets in question. Third, even if the application is prima facie falling with the Bankers Trust principle, the court needs to balance the potential advantage against the detriment to the person against whom the order is sought, not merely in terms of costs (for which he is ordinarily compensated on an indemnity basis by the terms of the order) but by way of invasion of privacy and requiring breach of obligations of confidence to others.”

10.  I accept the Plaintiff’s submissions that the above requirements are satisfied in the present case, the gist of which has already been set out at §§3-6 above. It is noted that the Amended Summons also provides specifically that the 5^th Defendant would be indemnified of reasonable expenses to comply with the order.

11.  For the above reasons, I make an order in terms of the Amended Summons §§1, 3 and 4, save that the reference to Schedule 2 at Amended Summons §1 should be amended to Schedule 1.