Presenting Evidence in Crypto Cases – The Case of MiningSky Ltd vs Zhang

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Adducing evidence in court to support one’s claim is vital. Presenting evidence assists a party to either prove the contentions they are making or disprove the ones being made against them.

In the blockchain and cryptocurrency space, the type of evidence that is relied on by parties is categorized under electronic and digital evidence since it is data that is stored, manipulated, and transmitted by manufactured devices, computers, and computer systems. 

Some jurisdictions have had to deal with a number of reported cases regarding stolen cryptocurrencies, and it is a great feat towards the development of case law.

The Supreme Court of British Columbia has upheld various principles of the law of evidence when deciding a case between MiningSky Technology Limited vs Zetong Zhang [2021].

First, the burden of proof lies with the plaintiff – he who alleges, must prove.

Second, when a case is civil in nature or circumstantial, the court ought to be satisfied that the matter has been proven on a balance of probabilities while in criminal cases, the matter should be proven beyond reasonable doubt. 

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SEE ALSOUnderstanding Preservation Orders – A Look at the 102 Million Kenya Shillings Crypto Saga from a Legal Perspective

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In this case, MiningSky accused Zhang of stealing $84,000 CAD from their digital wallet. MiningSky was in the business of issuing hosting services for crypto miners. It provided them with secure internet connections, electricity, monitored, and tested their mining rigs located in British Columbia.

To facilitate this, it had two accounts on Antpool that were initially managed by Zhang, their former employee. Additionally, Zhang together with other employees, had set up their Trezor wallet and deposited bitcoin and other cryptocurrencies.

Unfortunately, Zhang’s employment was terminated and he left without having received his commission from onboarding a new client. Once he demanded to get paid, the CEO informed him that the crypto was missing and he should return the company’s property. He denied having access to the crypto since he had returned all the company devices. This led to an exchange of emails between them where Zhang said he would be happy to help on solving other issues after the commission was paid out. Later on, he sent them an excel sheet containing all the passwords he had ever used.

Seeing that the company had no intention to fulfill its end of the bargain, Zhang filed a complaint with the EBS, and after the mediation, MiningSky agreed to pay him the outstanding commission. However, they filed a suit against him claiming he stole the company’s crypto.

Since the case revolves around crypto, its popular feature of anonymity makes cases circumstantial in nature, hence the need to prove one’s case on a balance of probabilities. Therefore, MiningSky should have presented evidence showing that Zhang had transferred the money to his account and withheld devices and information on how to gain access to the money, for instance, the seed phrase and passwords used to access both the Antpool accounts and Trezor wallet.

However, they failed to do this.

In fact, the sequence of events leading up to the trial did not indicate any urgency to gain back stolen money – they had taken 4 months to report to the police, never filed an insurance claim, were still open to the possibility that the wallet was within the company premises, and had not searched for it.

Based on the aforementioned, the court dismissed MiningSky’s claim. 

Kenyan lawmakers have amended various laws in a bid to align with the pace at which technology has been evolving. The Evidence Act recognizes electronic evidence (e-evidence) as documentary evidence and states that it is admissible in court.

Some of the conditions stipulated for admissibility or acceptance include:

  • The computer output was produced by a person having lawful control over the use of the computer
  • The information contained in the record was fed into the computer in the ordinary course of the said activities
  • The computer was operating properly such that the accuracy of the record was maintained
  • The information record reproduces once fed into a computer in the ordinary course of events

A certificate has to be issued in order to provide e-evidence which is acceptable by the court. The certificate should contain information which points out:

  • The specific electronic record
  • Breaks down how the record was produced
  • Describes the features of the devices involved
  • More importantly, it should be signed by the person who was in charge of operating the device.

Additionally, when relying on e-evidence, courts consider various factors like:

  • The reliability of the manner in which the evidence was generated and stored
  • If the integrity of the evidence was maintained and
  • The identification of the originator of the evidence

As a result, litigants ought to have a great understanding of Digital Forensics, the processes and procedures of gathering e-evidence, and how to present it in court.

We hope to see more decisions in this field that will shape how disputes relating to cryptocurrencies are solved considering the unique features of blockchain technology. 

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RECOMMENDED READING: Blockchain and Intellectual Property Rights – Use Cases and the Legal Implications

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