The Supreme Court of British Columbia has ordered Michael Gokturk, the founder of a failed cryptocurrency exchange, to pay $535,000 to Scott Nelson, who had agreed to sell him 50 bitcoin in 2019, but not pay the more than $3 million the bitcoin is worth today. Justice Sheila Tucker said the law required her to award Nelson the amount lost at the time of the breach, not the amount his bitcoin would be worth in 2021, following recent astronomical gains. CBC News spoke to Evan Thomas, Osler’s Counsel, Litigation, in the firm’s Digital Assets and Blockchain Group, about the decision.
Evan told reporter Jason Proctor that the decision is notable because it’s one of only a few in a growing body of law to deal with disputes involving cryptocurrency. Evan noted that it’s interesting to see judges treat bitcoin as property in the same way as a physical asset like a gold bar. He said that courts have also had to grapple with the question of how to determine the value of a commodity that has seen such rapid shifts in worth in recent months.
In coming to a decision, Justice Tucker found Gokturk had breached a contract that concluded on June 7, 2019, when he sent Nelson a text reading that confirmation of their transaction would be sent. Gokturk’s cryptocurrency exchange closed its doors several months later.
Evan told CBC News that it’s well-settled law that breach of contract disputes assign value at the date the breach occurred – which in Gokturk’s and Nelson’s agreement was June, 2019. He said that it’s easy to see how Nelson might feel out of pocket by $2.5 million, even if Gokturk pays the court-ordered amount. But had bitcoin dropped in value instead of soaring in the interim, Evan said Nelson likely wouldn’t have asked for 50 worthless bitcoin as compensation.
“The law says that if you’re going to make that argument when the price goes down, you have to live by the same argument if the price goes up. We can all disagree on whether that’s fair or not, but that’s just what the law is.”
Read CBC News full report, "Founder of failed B.C. cryptocurrency exchange ordered to pay $535K for broken bitcoin contract", posted May 7, 2021.
