Filippo v Huobi Global Limited (CS 92 of 2023) [2024] SCSC 174 (15 November 2024)

Introduction

1. This is an action by way of plaint of which the plaintiff avers in his plaint that during the half of the year 2022, fraudsters scammed and stole the plaintiff’s crypto currency assets on the platform and transferred the assets into the following crypto currency wallet on the same platform as follows;

1L15W6b9vkxV81xW5HDtmMBycrddiettHEL

2. The plaintiff further avers in his Plaint that the defendant is at fault for allowing its platform to participate, store and keep possession of the stolen assets and as such the plaintiff has suffered loss and damage as a result of which the plaintiff is praying this Court for Judgment ordering the defendant;

1. To seize the wallet in favour of the plaintiff

2. To either

 

1. transfer Assets up to the value of 24.61 bitcoins in the afore-mentioned cryptocurrency wallet to the plaintiff or

2. transfer 24.61 bitcoins to the plaintiff

 

3. In this matter, on a subsequent date, the defendant failed to appear in court upon being served whereby this Court upon application of counsel for the plaintiff granted leave to the plaintiff to proceed with the matter ex-parte.

The evidence

4. The plaintiff gave evidence that one day he opened an account with these people and they had advised him that there are different levels for that sum of money. He also produced a certificate of incorporation of Huobi Global of which the Court admitted the said document as exhibit and marked it as exhibit P1.

5. He gave evidence that he was using the defendant’s platform for his crypto currency investment and that the fraudsters had transferred his crypto currency into another wallet on the defendant’s platform.

6. He further gave evidence that a person known as Milla Green told him that if he gave 9 to 10 thousand dollars, he could get bigger trading opportunities. So every day he checked his account up to a point where his account had reached about 50,000 USD. So at this point she said she was finding some difficulty and that AML picks people randomly from different countries. As such the AML association sent him a lot of emails of which they wanted to know who he was and details of his company and then they sent him a lot of documents.

7. According to the witness, at that time he was being encouraged to keep trading until they were up to eighty thousand USD and AML then said that he needs to go through 4 different steps to get his money back of which thereafter they wanted to see all details of his personal account going to his wallet.

8. The witness stated that AML asked him to transfer the money from his business account into his personal account into the wallets and onto the block chain. After a point they said to him that the tax here is 20 percent. At this point he said that he needed his money for his payroll etc and then Milla Green was encouraging him that all the customers have done this and at that time all his bitcoins were indeed going to the defendant

9. At that point, his book keeper Joyce started to become suspicious and went online to find a lawyer that deals with fraud cases and sought the services of an expert to investigate the matter namely Mr Matt Macguire of the AML Shop of which he produced a report which stated at page 9 that 24.6 bitcoins was transferred to wallet 1L15W6b9vkxV81xW5HDtmMBycrddiettHEL and hence the scammers had stolen his crypto currency assets in that amount and that this crypto currency wallet is on the defendants platform.

10. According to the witness he had lost one million one hundred and seven thousand dollars and as such he produced the said report from AML shop dated 1^st March of which the Court admitted the said document as exhibit and marked it as exhibit P2.

11. The plaintiff further gave evidence that the defendant’s online platform allowed the scammers to steal his crypto currency assets and to transfer his assets into another wallet on the same platform and as such the defendant was at fault for allowing its platform to participate, store and keep possession of his stolen crypto currency assets.

12. The Plaintiff gave evidence to the fact that the scam affected his health, his family, his retirement as he was trying to build a company for his family and so the defendant should return the cryptocurrency assets to him back to his wallet namely;

NDAX’s wallet: bc1qmak6ejwefzj28jwej7kru88nzw6czk9geyalwy
 

13. The other witness which testified for the plaintiff is Joyce Ramdewar a book keeper by profession living in Canada who is employed by the plaintiff doing all the books who gave evidence to the fact that she was aware that the plaintiff was using the defendant’s platform to trade crypto currency assets as early as 2022.

14. She also gave evidence to the fact that in 2022 scammers stole the plaintiff’s crypto currency assets that has been transferred on a wallet on the same platform. She stated that Micheal came to her and explained that he had invested a little bit and need some money in order for him to pay tax for him to get back the money which was suggested by Milla Green who was communicating with the Plaintiff via WhatsApp.

15. She testified that Mr Filippo came to her for money since he had to pay certain amount of money as a condition to get his money back from the scammers and that the said Milla Green was aware of the transaction with the AML Authorities and that Milla Green the broker influenced the Plaintiff to conduct these transactions. She testified to the fact that she found these transactions to be unusual.

16. According to the witness, the plaintiff took from the company 1 million dollars. She was aware that Mr Micheal Filippo had contacted an expert and confirmed the 10 page report issued by AML shop produced by Matt Mcguire dated the 1^st march 2023.

17. The witness further testified that the plaintiff was asking her money to pay the scammers between July 2022 to October 2022. The scamming incident affected him greatly even his marriage.

Submissions of Counsel

18. Counsel for the plaintiff relied on Article 1382 of the Civil Code of Seychelles Act and submitted to the Court that since the defendant had facilitated the fraudsters and scammers unlawful transfer of the plaintiff’s crypto currency assets into another wallet and the defendant has allowed its platform to participate, store and keep possession of the Plaintiffs stolen assets the defendant has indeed committed a fault in law.

19. Counsel further submitted that since this scamming incident greatly harmed the plaintiff in view that the plaintiff’s health, daily operations of his company, his family members were adversely affected. The fact that the scammers never returned the said crypto currencies means that the plaintiff endured severe financial loss which has led to his current state of impoverishment.

20. He further submitted that the defendant’s duty to comply with its due diligence obligations under the AML Act lies under the cause of action under the law of faute and that since the defendant attracts liability under article 1382, it cannot illegally possess and store the plaintiff’s crypto currencies.

 

Analysis and determination

21. This Court hereby reproduces Article 1382 of the Civil Code of Seychelles Act, 2020 which reads as follows;

1382.

(1) Every human act that causes harm (dommage) to another requires the person by whose fault the harm occurred to repair it.

(2) (a). Fault is an error of conduct that would not have been committed by a prudent person in the circumstances.

(b). Fault may be the result of an act or an omission.

 

(c). Fault may also consist of an act or an omission the dominant purpose of which is to cause harm to another, even if it appears to have been done in the exercise of a legitimate interest.

 

22. In order for the plaintiff to prove liability of the defendant under Article 1382, the plaintiff has to prove the following;

 

1. There was a damage to the Plaintiff or to the Plaintiff’s property;

2. There is a causal link between the alleged acts of the Defendants and the damage that occurred to the Plaintiff’s property; and

3. The Defendant failed to take all reasonable care to ensure that the acts would not cause damage to the Plaintiff (vide: Shani Properties V Oliaji Trading (2008), SLR 176

 

23. As regards to the issue of whether there was a damage caused to the plaintiff, the plaintiff gave evidence to the fact that the scammers had stolen his crypto currency on the defendant’s exchange platform from his wallet of which he relates this to the fact that he has lost one million one hundred and seven thousand dollars and had transferred 24.61 bitcoins in another wallet on the defendant’s exchange platform. Furthermore, the plaintiff gave evidence that the scam affected his health, his family, his retirement as he was trying to build a company for his family.

24. As a result of the uncontroverted evidence led by the plaintiff in the matter as particularized at paragraph 22 of this Judgment, this court is satisfied that the plaintiff has suffered loss and damages in view that the scammers had stolen his crypto currency assets and that this has greatly affected his family and the company that he was trying to build.

25. The other pre-condition of which plaintiff needs to prove in order to establish the liability of the defendant in the present matter is that of the ‘fault’ of the defendant. Article 1382 of the Civil Code of Seychelles Act, 2020 defines fault as an error of conduct that would not have been committed by a prudent person in the circumstances.

26. In the case of Shani Properties (Pty) Ltd V/S Oliaji Trading Company Ltd (2008) SLR 176, Karunakaran J stated;

“when the Defendants carried out ‘the alleged acts’ including the deep excavation of works for the foundation of OTC building on their site, obviously the Defendants did not take necessary or any precaution and reasonable care to arrest the soil movement from adjoining land, where the Plaintiff had already built a three story building consisting of several offices, shops and residential units on three floors”.
 

27. In the case of Attorney General V/S Labonte SCA 24/2007, the Court of Appeal held that;

“Fault under Article 1382-1384 of the Civil Code depends on what precautions were taken to foresee the occurrence of an event and adopt measures to prevent the consequences”.

The Court further held that;

“There can be no fault where there is diligence in dealing with predictable or unpredictable events”.

28. The Plaintiff gave evidence that he was using the defendant’s platform for his crypto currency investments and that the fraudsters had transferred his crypto currency into another wallet on the defendant’s platform. The Plaintiff further gave evidence that the defendant’s online platform allowed the scammers to steal his crypto currency assets and to transfer his assets into another wallet on the same platform and as such the defendant was at fault for allowing its platform to participate, store and keep possession of his stolen crypto currency assets.

29. Based on the uncontroverted evidence led by the plaintiff in the matter, this Court is satisfied that the defendant has proven on the balance of probabilities that the defendant had committed a fault in law namely by not adopting the due diligence procedures under the AML Act in allowing the said stolen crypto currencies of the plaintiff to be transferred from the plaintiff’s wallet into another wallet on the defendant’s exchange platform. Furthermore, the defendant is at fault for allowing Huobi Global Limited to participate and store, keep possession of the stolen assets which belongs to the plaintiff.

30. As regards to the issue that the plaintiff has to prove that there is a causal link between the alleged acts of the defendant and the damage that occurred to the plaintiff, Article 1382(2)(C) provides that ‘fault may also consist of an act or an omission the dominant purpose of which is to cause harm to another, even if it appears to have been done in the exercise of a legitimate interest’.

31. In the case of Emanuel V/S Joubert Civ Appeal 49/96, Seychelles Court of Appeal Ayoola JA stated;

“It is clear that a claim cannot be based on article 1382(1) of the Civil Code, unless the act and injury or damage co- existed and there is a causal link between the act and the injury or damage”.

32. In the case of Shani properties (Pty) Ltd V/S Oliaji Trading Company Ltd, 2008 SLR 176, Karunakaran J stated;

“The alleged acts of the Defendants must be the sole and immediate cause for the Plaintiff’s damage. The alleged acts must be the ‘primary cause’ and not simply a cause amongst other possibilities”.
 

33. As a result of the uncontroverted evidence led by the plaintiff, this Court is of the view that as a result of the defendant’s lack of due diligence by not following the established due diligence procedures under the AML Act in allowing the said stolen crypto currencies of the plaintiff to be transferred from the plaintiff’s wallet into another wallet on the defendant’s exchange platform. Furthermore, the defendant in allowing Huobi Global Limited to participate and store, keep possession of the stolen assets which belongs to the plaintiff of which such acts caused loss or damages to the plaintiff, this Court holds that the plaintiff has proven on a balance of probabilities that the alleged acts of the defendant was the sole and immediate cause or the primary cause for the plaintiff’s damage.

34. As a result of the above, this Court shall make the following Orders:

1. I Order that the defendant transfer immediately the “stolen assets” to the Plaintiff in the amount of 24.61 bitcoins to the plaintiff from the following crypto currency wallet on the same platform namely; 1L15W6b9vkxV81xW5HDtmMBycrddiettHEL to the plaintiff’s wallet namely NDAX’s wallet: bc1qmak6ejwefzj28jwej7kru88nzw6czk9geyalwy or to the plaintiff in which ever wallet he prefers.

2. I accordingly award cost in favour of the plaintiff.

3. I further Order that the Registrar of the Supreme Court serves a copy of this Judgment on Huobi Global Limited represented by its director at the company’s registered agent Appleby Global Services (Seychelles) Ltd, at suite 202, 2^nd Floor, Eden Plaza, Eden Island.

Signed, dated and delivered at Ile du Port on the 15^th November 2024.

 

Esparon J