Cryptocurrency Management

To achieve stretch goals such as reinventing the means of control and therefore maximizing profits, there is the risk the key activities that one engages in might be non-compliant with existing rules. Transaction illegality might result as a breach of unwritten laws (eg as against public policy in contracts or trusts), or written laws (eg as against security regulations), or be a conspirator to commit an economic crime in a domestic or foreign context. In my view, investors or speculators in cryptocurrencies, or subscribers to initial coin offerings (ICOs) should take into account if the contracts they make or the trusts they create are legal or not?

Transactions may be illegal because of (1) an express statutory provision, or (2) the implied effect of an express statutory provision, or (3) their association with or in furtherance of illegal purposes, although not expressly or impliedly prohibited. There are two Latin maxims ie (1) ex turpi causa non oritur actio (no action arises from a disgraceful cause) and (2) in pari delicto portior est conditio defendentis (where both parties are equally in the wrong, the position of the defendant is the stronger). Behind the two maxims are two broad discernible policy reasons: (1) a person should not be allowed to profit from his own wrongdoing and (2) the law should be coherent and not self-defeating, condoning illegality by giving with the left hand what it takes with the right hand.

The essential rationale of law's illegality doctrine is that it would be contrary to the public interest to enforce a claim if to do so would be harmful to the integrity of the legal system. In assessing whether the public interest would be harmed in that way (as stated in the case of Patel v Mirza [2016] UKSC 42), it is necessary to consider (a) the underlying purpose of the prohibition which has been transgressed and whether that purpose will be enhanced by denial of the claim, (b) any other relevant public policy on which the denial of the claim may have an impact and (c) whether denial of the claim would be a proportionate response to the illegality.

The public interest at stake is the preservation of the integrity of the justice system. Although one might have to rely on the illegal character of a transaction in order to demonstrate that somebody has been unjustly enriched, a possible court order for restitution would not give effect to the illegal act or to any right derived from it, as it would simply return the parties to the status quo ante where they should always have been. I believe the relative certainty of the common law on illegality and restitution should provide some virtual comfort in cryptocurrency management!