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For the first time, Spain’s Supreme Court has issued a ruling involving the cryptocurrency Bitcoin in a case of fraud in its recent judgment 326/2019 of June 20, 2019. The context of that litigation concerns a defendant who, acting through the company Cloudtd Trading & DEVS LTD. of which he was the sole director, entered into a series of High-Frequency Trading contracts with several Bitcoin holders in 2014. Under those contracts, he committed to managing the bitcoins entrusted to him, with the obligation to deliver the profits obtained on maturity of the contracts in exchange for a commission. At the trial, the court considered it proven that when entering into those contracts, the defendant’s intention was to take possession of the bitcoins he received with no intention of fulfilling his obligations, and that he failed to return any amount to the plaintiffs whatsoever, despite the many demands to that effect. The first-instance judgment had ruled against the defendant, ordering him to indemnify the contracting parties “for the value of the Bitcoin at the time each of their respective contracts ended, to be determined in the enforcement of the judgment, plus the statutory interest provided in section 576 of the Spanish Civil Procedure Act.” In their appeal to the Supreme Court, the contracting parties’ attorneys argued that sections 110 and 111 of the Spanish Criminal Code require the return of the asset that is the object of the crime, meaning that it would be appropriate for the judgment to sentence the accused to return the misappropriated bitcoins, and only if those assets were not restored at the enforcement stage of the judgment, to then agree on the valuation and appropriate compensation for the damages or losses caused. In this regard, the Supreme Court ruled that, “Although this court’s case law has expressed the obligation to return any assets that are the object of a crime, including money, the plaintiffs were not defrauded of bitcoins that should be returned to them. Instead, the misappropriation of property that must be remedied involved money in euros that, through deception inherent to the fraudulent acts, they handed over to the defendant for investment in assets of that type. In addition, the so-called Bitcoin is not susceptible to being returned, since it is not a material object, and it does not have the legal consideration of money either.” The judgment goes on to state that, “The Bitcoin is merely an accounting unit of the network of the same name. Based on a public and distributed accounting ledger, where all of the transactions are permanently stored in a database known as Blockchain, 21 million of those units were created, which are commercialized in a divisible manner through a verified computer network. Thus, a bitcoin is merely an intangible asset in the form of an accounting unit, defined by IT and cryptographic technology called Bitcoin, whose value is that of each accounting unit or fraction reached at the intersection of supply and demand in the sale of those units when conducted via the Bitcoin trading platforms.” The judgment also stresses that a bitcoin is “in no way money, nor can it be given the legal consideration as such,” since it is not included under the definition of electronic money found in section 1.2 of Spanish Law 21/2011, of July 26, on electronic money. The court concludes that, even though the plaintiffs delivered bitcoins and not euros, “The court cannot agree to restitution of the bitcoins, since the appropriate way to repair the loss and compensate the damages is as indicated in the contested judgment, i.e., to return the amount of the monetary contribution (damages) to the injured parties, increased by the amount of lost profits that would have resulted from the price variation of the Bitcoin units between the time of the investment and the maturity dates of their respective contracts.” As a conclusion in relation to the assessment of the Supreme Court, it is worth taking into account the rise in Bitcoin prices experienced in recent years and the potential losses for the contracting parties whose bitcoins were not returned. As an example, one of the parties had signed a contract in relation to 14 bitcoins, with a value at that time (October 11, 2014) of €3,982.26. The Bitcoin price today is around €10,000, after peaking at nearly €20,000 in late 2017.

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