In July 2024, the Competition Appeal Tribunal (the Tribunal) partially allowed a strike-out application, whilst agreeing to certify, a class action brought by BSV Claims Limited (BCL) against a group of cryptocurrency exchanges for losses allegedly caused by collusion to delist the Bitcoin Satoshi Vision (BSV) cryptocurrency. 

Background

Cryptocurrencies are decentralised digital currencies based on “blockchain” technology; blockchains being immutable digital ledgers of transactions that are distributed among users in peer-to-peer computer networks. Cryptocurrencies can be traded for state-backed "fiat" currencies on cryptocurrency exchanges.

The first widely adopted cryptocurrency is Bitcoin, which was created in 2009 by an unknown inventor under the pseudonym Satoshi Nakamoto. As well as other, wholly independent cryptocurrencies, variants of Bitcoin have been created through protocol changes in the Bitcoin blockchain. One such variant is BSV, which was derived in 2018 from a precursor variant known as Bitcoin Cash and promoted by the computer scientist Dr Craig Wright.

The de-listing of BSV

Since 2015, Dr Wright has claimed to be Satoshi Nakamoto. This claim was disputed, resulting in proceedings against a number of software developers that contributed to the Bitcoin protocols for alleged infringement of Dr Wright’s intellectual property rights. Dr Wright’s claims were ultimately rejected in the High Court, which resoundingly concluded that he was not Satoshi Nakamoto.

The controversy over Dr Wright’s claims led to the defendant cryptocurrency exchanges in the present claim – namely Bittylicious, Kraken, Shapeshift and Binance (the Defendants) – making a series of tweets and other public announcements in April 2019, denouncing Dr Wright’s conduct, declaring their intention to delist BSV, and calling upon other exchanges to do the same. The Defendants terminated the trading of BSV on their exchanges between April and June 2019.

Claim by BCL

On 29 July 2022 BCL issued a claim against the Defendants on behalf of all UK residents that were holders of BSV coins on 11 April 2019 (the Proposed Class). BCL alleges that the Defendants’ announcements and subsequent de-listing of BSV from their exchanges constituted an anticompetitive agreement and/or concerted practice in contravention of the Chapter I Prohibition of the Competition Act 1998 and/or Article 101 of the Treaty on the Functioning of the European Union. BCL alleges that this: 

• caused a crash in the price of BSV in the immediate aftermath of those events; and 
• prevented BSV from developing, or meant it lost the chance to develop, into a “top-tier” cryptocurrency with a value similar to that of Bitcoin or Bitcoin Cash (the Forgone Growth Effect), each of which resulted in loss to the Proposed Class.

The Proposed Class is broken down into three sub-classes, according to the effects of the alleged infringement (both immediate and longer-term) on their BSV holdings. Of those three sub-classes, Sub-Class B comprises those holders who continued to hold onto their BSV coins as at the date the claim was issued, and who allegedly suffered both of the above heads of loss.

Application for strike-out

Grounds for application

Binance brought an application for strike-out and/or reverse summary judgment in respect of Sub-Class B’s Foregone Growth Effect claim, which was the main category of loss claimed by that sub-class. The application was based on two grounds: 

• First, that under the so-called “market mitigation rule”, Sub-Class B members should have mitigated any future losses by selling their BSV coins following the de-listing and purchasing other cryptocurrencies. According to Binance, any loss caused by the retention of BSV coins was the consequence of speculation and irrecoverable in law.
• Second, BCL’s “loss of a chance” claim was legally defective, as a claim for forgone growth cannot fall within the loss of a chance doctrine.

Market mitigation rule: evidential question unsuitable for strike-out

The market mitigation rule applies where loss concerns a product for which there is an available market, such that the claimant can readily obtain a reasonable substitute for it. In such cases, recoverable damages will generally be limited to the cost of entering into the transaction for the substitute product, at the time at which it was reasonable for the claimant to do so. If the claimant has chosen not to enter the available market to mitigate its loss, the law considers that this is generally an independent decision to take a risk, and not one for which the defendant is responsible. The principle presupposes that the claimant was actually aware of the wrongful conduct, or should reasonably have been aware. If the claimant is not aware until later, or there is no available market until later, damages will fall to be assessed at the later date.

The Tribunal ultimately concluded that it was unable to summarily dismiss the claim for loss from the Forgone Growth Effect. However, this was only because there was at least a prospect of some of the Sub-Class B members having (reasonably) remained unaware of the de-listing. Further evidence was required to determine this point; the evidence before the court being very limited but “just about” enough to form a more than fanciful case. Otherwise, the Tribunal was supportive of Binance’s submission that this was a paradigm case for application of the market mitigation rule and that it was not reasonable for the Sub-Class B members to have failed to mitigate their loss at the time the claim was filed.

Loss of a chance claim: successful strike-out

The Tribunal noted that BCL claimed for loss of a chance as a fallback position in case it is unable to establish, on the balance of probabilities, that BSV would have become a major cryptocurrency. It then concluded that such a claim was not sustainable as a matter of principle. 

Damages for loss of a chance may be claimed where a claimant alleges that, but-for the defendant's wrongdoing, they would have obtained a benefit which was contingent on the hypothetical decisions of a third party (such as the willingness of a buyer to purchase a particular asset). 

However, BCL’s claim was not dependant on any particular actions or decisions of a third party, so could not be subject to the “loss of a chance” approach. Rather, it turned on the general question of whether BSV would have turned into a “top tier” cryptocurrency in the long term. This is an ordinary question of causation which should be determined by the Tribunal on the balance of probabilities, as is typical in competition litigation. To conclude otherwise would mean that claimants in every such case can simply fall back on a loss of a chance claim in the event they are unable to establish, on the balance of probabilities, that they would have traded profitably. The loss of a chance claim pleaded by BCL was therefore struck out.

Next steps

Whilst the Tribunal agreed to certify the claim (subject to an undertaking from the funder to comply with certain elements of the ALF Code of Conduct), it noted that elimination of the Forgone Growth Effect would have a dramatic impact on the overall size of the claim. Indeed, on one calculation – using Bitcoin as the benchmark “top tier” cryptocurrency – the Forgone Growth Effect accounted for the overwhelming majority of the nearly £10 billion claimed. That being the case, the Tribunal indicated that a preliminary issue trial to determine the extent to which this element of the claim can be maintained as a matter of principle is likely to be necessary. It also noted that a significant improvement in the evidential position regarding BSV holders’ awareness of the de-listing is needed if BCL is to be successful in this regard.

Commentary

BCL’s claim has passed the certification stage and – just about – survived a strike-out of most of the claim by value. Notwithstanding the Tribunal’s concerns about a number of aspects of the claim, this serves to reiterate the relatively low threshold for collective proceedings to be certified in the UK. However, it appears likely that the claim will face significant challenges as it progresses. In addition to the difficulty of overcoming the market mitigation rule in circumstances such as these, the claim raises some relatively novel and/or untested substantive competition law issues. 

In particular, whilst collusion amongst competitors effected through public announcements can constitute a breach of competition law in some circumstances, there is little in the way of established precedent in respect of such conduct, and what precedent there is generally relates to coordination on price. Similarly, few allegations of collective boycott (which essentially form the basis of BCL’s claim) have been pursued to their conclusion at UK or EU level, and available guidance suggests that only boycotts aimed at competitors (whether actual or potential) are likely to be viewed as inherently anticompetitive.