I. Introduction

Cryptocurrency is here to stay. The very fact that regulatory legislation is being considered to regulate and manage, but not eradicate, it underscores the value it can have if properly regulated. It seemed a long time ago when the ubiquitous Bitcoin first emerged, supposedly created by a Satoshi Nakamoto, and some time since the crypto winter of 2022.

While debates and claims rage over “Who is Satoshi Nakamoto?” and we think we now know what SBF did, debates continue to engage on where to legally locate cryptocurrency for the purposes of legal claims. In the words of one prominent property law academic, “the law has approached the subject warily, mostly from a regulatory perspective”, with “much of the legal analysis … focused on its regulation” and “[m]uch less attention … focused on how the private law might deal with [cryptocurrency] “ownership””.¹ Indeed, one defining aspect of cryptocurrency which traditional views of private law has had to grapple with is the fact that cryptocurrency is decentralised and accounted for via a distributed ledger – this typically exists spread across global networks and does not have a single, locatable, contained and physical manifestation.

So, while cryptocurrency is here to stay, where does it legally stay?

The General Division of the High Court of Singapore’s (Court’s) recent decision in Cheong Jun Yoong v Three Arrows Capital Ltd and others [2024] SGHC 21 (Cheong v 3AC) offers some guidance at first blush. The Court found in Cheong v 3AC that the situs of a cryptoasset is to be determined based on the residence (not domicile) of the person who controls the private key for that cryptoasset. But is the answer in Cheong v 3AC limited to the specific circumstances there?

We examine the key takeaways and, perhaps more importantly, the possible limits of Court’s decision in Cheong v 3AC. In particular, we highlight the fact that Cheong v 3AC concerned (i) a claim in trust, i.e., relating to the property in the relevant cryptoassets and (ii) an application to set aside service, which addresses only if there is a good arguable case of nexus to Singapore. Aside from discussing this specific context, we briefly discuss how the answers in Cheong v 3AC may have limitations when applied in the context of the wider crypto world.

II. Background

The Claimant in Cheong v 3AC, Cheong Jun Yong (Cheong), was the portfolio manager of assets for the First Defendant, Three Arrows Capital Ltd (3AC). Cheong’s claim was that the portfolio of assets he managed was a standalone fund held on trust by 3AC for himself and other investors (DC Investors) under the brand “DeFiance Capital” (DC Fund, with the assets therein being referred to as the DC Assets).

3AC was a company incorporated in the British Virgin Islands (BVI) and an investment fund in the business of trading and dealing with cryptocurrency and other digital assets. 3AC was placed under liquidation in the BVI in 2022. The Second and Third Defendants were the appointed liquidators of 3AC. On the application of the liquidators to the Singapore Courts, the liquidation proceedings in the BVI had been recognised as a “foreign main proceeding” under the UNCITRAL Model Law on Cross Border Insolvency (Model Law) as adopted in Singapore pursuant to the Insolvency, Restructuring and Dissolution Act 2018.

3AC was part of the larger 3AC Group, which consisted of:

• Three Arrows Capital Pte Ltd (TACPL), a Singapore incorporated company which was the investment manager of 3AC until September 2021;
• ThreeAC Ltd (3ACL), a BVI incorporated company which took over from TACPL as 3AC’s investment manager from September 2021;
• The BVI-incorporated company Three Arrows Fund Ltd (TAF Ltd) and Delaware limited partnership Three Arrows Fund, LP (TAF LP). TAF Ltd and TAF LP served as the offshore and onshore feeder funds respectively – this meant that investors invested in the master fund via subscription of shares in TAF Ltd or limited partner interest in TAF LP, while TAF Ltd and TAF LP in turn would subscribe to shares at the 3AC level. As of 31 December 2021, 99% of equity in 3AC was held by TAF Ltd, while 1% was held by TAF LP.

Cheong contended that pursuant to an arrangement (Independent Fund Arrangement) discussed in 2019 and 2020 with the founders of 3AC, he was to launch an independent and standalone fund on the 3AC Group platform. According to Cheong, pursuant to this arrangement, he and the other DC Investors had paid for their subscriptions to certain shares in TAF Ltd and partnership interests in TAF LP through the transfer of a mix of cryptocurrency (including around USDT 22.3m, i.e., Tether) and fiat currencies. Cheong’s case was that the DC Assets consisted of the aforementioned mix of cryptocurrency and fiat currencies, along with further other assets these were used to acquire (including simple agreements for future equities (SAFEs) and simple agreements for future tokens (SAFTs)).

In October 2021, 3AC entered into a licence agreement with Fireblocks Ltd, which provided the platform for 3AC to set up a workspace (DC FB Workspace) solely for Cheong to use to store the cryptocurrency tokens which formed part of the DC Assets. All rights and interests in the DC FB Workspace (among other things) had been transferred by 3AC to DeFiance Capital Pte Ltd (DCPL), a Singapore entity incorporated by Cheong. The DC FB Workspace was later novated to DeFiance Ventures Pte Ltd (DVPL), another Singapore entity incorporated by Cheong.

Following the liquidation of 3AC in the BVI, the liquidators filed an application in the BVI for orders that the DC Assets were beneficially owned by 3AC (Parallel BVI Proceedings). Cheong then applied to set aside the BVI court order granting the liquidators permission to serve the Parallel BVI Proceedings on him in Singapore, with judgment in the BVI reserved at the time of the Court’s decision in Cheong v 3AC.

In light of the recognition of the BVI insolvency proceedings, Cheong had obtained permission from the Singapore Court to pursue the proceedings in Cheong v 3AC. Cheong’s claim in Singapore was that 3AC was a trustee over the DC Assets pursuant to the Independent Fund Arrangement, as well as the trustee over certain assets under an express trust, resulting trust, Quistclose trust and/or common intention constructive trust for the DC Investors. It is therefore clear that these claims assert proprietary rights and not contractual rights.

III. The application to set aside service out of jurisdiction order

Cheong had been granted permission to serve the Originating Claim in Cheong v 3AC out of jurisdiction on 3AC and the liquidators in the BVI. 3AC and its liquidators applied to then set aside the order granting permission for service out of jurisdiction – this application was the focus of Cheong v 3AC.

Following the civil procedure reform which culminated in the Rules of Court 2021 (ROC 2021), the relevant provision concerning service of originating process out of Singapore is Order 8, rule 1(1) of the ROC 2021, i.e., “An originating process … may be served out of Singapore with the Court’s approval if it can be shown that the Court has the jurisdiction or is the appropriate court to hear the action”. The Supreme Court Practice Directions 2021 (SCPD 2021) provides how to demonstrate that the Singapore Court “is the appropriate court to hear the action” at paragraph 63(2), i.e.:

• (a) there is a good arguable case that there is sufficient nexus to Singapore; sufficient nexus may be shown by reference to any of the non-exhaustive list of factors set out in paragraph 63(3) of the SCPD 2021;
• (b) Singapore is the forum conveniens (i.e., the forum with which the dispute has the most real and substantial connection); and
• (c) there is a serious question to be tried on the merits of the claim.

It is worth highlighting that the test for service out of jurisdiction has not substantially changed from pre-ROC 2021 rules, save for one key aspect: as the Court noted at [39], the factors set out in paragraph 63(3) of the SCPD 2021 are non-exhaustive (whereas an applicant must have come within one of the “jurisdictional gateways” previously set out in Order 11, rule 1 of the predecessor Rules of Court 2014 (Cap. 322, R 5, 2014 Ed)).

Cheong relied on three alternative factors to establish a sufficient nexus to Singapore:

• First, that relief was sought against 3AC which was “ordinarily resident or carrying on business in Singapore” per paragraph 63(3)(a) of the SCPD 2021 (Resident / Business in Singapore Factor);
• Second, that “the claim was made to assert, declare or determine property rights in or over movable property, or to obtain authority to dispose of movable property, situated in Singapore” per paragraph 63(3)(i) of the SCPD 2021 (Property in Singapore Factor); and/or
• Third, the “claim was founded on a cause of action arising in Singapore” per paragraph 63(3)(p) of the SCPD 2021 (Cause of Action Factor).

IV. The Court’s decision and analysis

The Court ultimately dismissed the Defendants’ application to set aside service out of jurisdiction. In doing so, the Court disagreed with Cheong’s reliance on the Resident / Business in Singapore Factor but agreed with Cheong on the Property in Singapore Factor and Cause of Action Factor. The Court also ultimately agreed with Cheong that the dispute had the most real and substantial connection to Singapore as a forum and that there were serious issues to be tried, thus fulfilling the test for obtaining the Court’s approval for service out of jurisdiction.

For present purposes, we focus on the Court’s analysis of the Resident / Business in Singapore Factor and the Property in Singapore Factor because they in our view required the Court to confront relatively novel issues regarding cryptocurrency.

A. The Resident / Business in Singapore Factor

Cheong contended that 3AC should be considered ordinarily resident and/or carrying out business in Singapore since Singapore was where it had carried out its operations and conducted its trading activities, ceasing to do so only after 3AC was placed under liquidation. The Defendants, on the other hand, argued that (i) 3AC was ordinarily resident in the BVI, a fact the Singapore Court had itself acknowledged through its recognition of the BVI liquidation proceedings as a “foreign main proceeding” (which requires a finding that the BVI was the centre of 3AC’s main interests, per the Model Law) and (ii) that 3AC had ceased to carry on business in Singapore since its liquidation.

This was an important and novel point since, as noted by Cheong (at [46]), there appeared to be no prior reported decision explaining when the relevant time is to assess the residency of a company undergoing liquidation. According to Cheong (at [46]), the residency of an insolvent company ought “to be assessed by reference to when it was alive and flourishing”; Cheong further argued that “otherwise, a Singapore court would never be able to find jurisdiction in a claim against an insolvent foreign company even where, at all material times prior to its insolvency, the company was resident in Singapore”.

The Court ultimately disagreed. In coming to this conclusion, the Court considered that its jurisdiction was “primarily territorial in nature” (at [47]) and, thus, the requirement of showing the counterparty was ordinarily resident or carrying on business in Singapore ought to be satisfied “at the time when the application is filed or heard”. The Court relied on an English decision, Chellaram and another v Chellaram and other (No 2) [2002] 3 All ER 17 (a case endorsing that proof that “trusts ought to be executed according to English law” must be fulfilled “when permission to serve out is sought”) as well as commentary on the Resident / Business in Singapore Factor (at [48]) directly in support of its conclusion.

As Cheong had applied for service out of jurisdiction after 3AC was already placed under liquidation, the Court found that 3AC no longer “carr[ied] on business and the central management and control of the Company was no longer being exercised in Singapore” (at [49]). Cheong thus could not rely on the Resident / Business in Singapore Factor.

B. Property in Singapore Factor

To rely on the Property in Singapore Factor in relation to movable property under paragraph 63(3)(i) of the SCPD 2021, an applicant must show that their claim “is made to assert, declare or determine proprietary or possessory rights, or rights of security, in or over movable property, or to obtain authority to dispose of movable property, situated in Singapore”.

Cheong argued that in his claim, he had asserted a proprietary interest over the DC Assets which comprised, among other things, the cryptoassets stored in the DC FB Workspace under a licence now owned by DVPL (following the transfer of the licence from 3AC to DCPL, and the subsequent novation of the licence to DVPL, as described above). Cheong argued that the DC Fund’s cryptoassets were thus situated in Singapore since DVPL (and therefore Cheong himself) controlled the private key to the assets.

The Defendants argued, on the other hand, that all moneys held by 3AC had been repatriated to the BVI following 3AC’s liquidation, and its premises in Singapore had been repossessed in 2022 – in other words, 3AC no longer had any property in Singapore. In response to Cheong’s arguments, the Defendants contended that there was “significant uncertainty on how the location of digital assets is to be determined” (at [55]), citing ByBit Fintech Ltd v Ho Kai Xin [2023] SGHC 199 (ByBit) for the proposition that cryptocurrency ought to be “treated as being located in the country where the right to redeem it could be enforced”, as well as English High Court decisions holding that the location of cryptocurrency was variously the place where the owner is domiciled or in the jurisdiction where wallets linked with the owner’s account were located. The Defendants argued that in the absence of a physical location, the location of the person controlling the keys should only matter “when considering the enforceability of any orders made” (at [56]).

The Court ultimately found for Cheong on this ground. The premises relied on by the Court were as follows:

• The Court first affirmed that “[i]t cannot be seriously disputed that cryptoassets constitute property” (at [58]), but “cannot be determined by its physical presence” given its lack of physical identity or association with any physical object (at [59]).
• The Court agreed with Cheong that the location of a cryptoasset is best determined “by looking at where it is controlled” since “it best manifests itself through the exercise of control over it” (at [60]). The Court fortified this conclusion through an examination of the nature of control over a cryptoasset, holding that it “is with the person who controls the private key to the crypto asset linked to that key”.
• Given the case law raised by the Defendant, the Court went on to examine if it should be the residence or the domicile of a person which should determine the situs of the cryptocurrency (at [62]). The Court found “residence [to be] the more appropriate test” given that, in the Court’s view, the controller’s residence is the superior indicator of where control is actually exercised over the relevant cryptoasset and the fact that the place of residence is “normally where [the person in question] can be sued”.

Accordingly, the Court found that Cheong’s claim was to assert, declare or determine property rights over property situated in Singapore.

V. Key takeaways and concluding remarks

Cheong v 3AC provides clarity on certain key points:

• Connection to Singapore for service out of jurisdiction to be determined at time of application: The Court has now clarified that where an applicant for service out of jurisdiction relies on the factor under SCPD 2021 paragraph 63(3)(a), i.e., that relief was being sought against a party ordinarily resident in or carrying on a business in Singapore, such connection must be established at the time that the application is filed and/or heard. This is particularly significant in the context of insolvent companies which, as a result of the liquidation or related process, no longer have a presence in Singapore (as was the case in Cheong v 3AC). The tenor of the Court’s decision suggests that the need to establish the nexus to Singapore at the time of seeking permission to serve out of jurisdiction is not limited to the Resident / Business in Singapore Factor; indeed, the Court had relied on an English decision relating to proof of the governing law of a trust (which has little relation to residency / where a party carries on business).
• Location of cryptocurrency for the purpose of paragraph 63(3)(i) of the SCPD 2021 – residence of controller of private key: The location of cryptoassets is now to be determined by the place of residence of the controller of the private key for those cryptoassets, or at the very least, to be given significant weight given the tenor of the Court’s reasoning. It is unclear from the decision why the controversy arose as to why residence as opposed to domicile was used given that there is no indication in the judgment that either DVPL and/or Cheong were not domiciled in Singapore; nevertheless, the Court expressly observed that residence would prevail over domicile given “the uncertainties around identification of domicile in difficult cases” (at [63]). That said, the Court did highlight that the question as to location of the cryptoassets in Bybit did not arise, and that in any event, treating cryptoassets as choses in action would lead the analysis to focus on the person who controls the private key.

Doubtless, the most significant finding of the Court has been in respect of the Property in Singapore Factor. However, it is open to future disputants to contend that Cheong v 3AC ought to be limited to its unique facts. In particular, we highlight the following:

• Decision on “good arguable case”, not full merits: As noted above, Cheong v 3AC concerned a decision on an application to set aside a service out of jurisdiction order. At this stage, a party need only show a “good arguable case” of sufficient nexus to Singapore. Although this is something more than a mere prima facie case, this is a standard lower than a balance of probabilities and the standard applicable at trial.² It remains to be seen how a Court will treat the rules laid down in Cheong v 3AC in a full-merits setting.
• Cause of action fundamentally important: It is important to recognise that Cheong only prevailed on the Property in Singapore Factor for demonstrating a good arguable case of sufficient nexus to Singapore because his claim was framed as one in trust, asserting equitable proprietary rights. Cheong v 3AC should not be read in such a way that claims over cryptoassets are amenable to the jurisdiction of the Singapore Courts simply because of the residence of the controller of the cryptoassets being in Singapore. If claims are premised on a non-proprietary cause of action (e.g., for contractual breach, simple debt or non-proprietary relief sought in unjust enrichment), then it should not be assumed that the residence of the controller will fulfil the requirement of proving a sufficient nexus to Singapore.
• Developments in crypto – “Multisig” wallets and other issues: It also remains to be seen how the rule in Cheong v 3AC will be applied to the following situations:
  • Multi-signature wallets (or Multisig wallets) are certainly not new but have gained prevalence even among retail investors. In brief, Multisig wallets are types of crypto wallets which requires two or more private keys to effect transactions and are favoured for increased security (although at the expense of requiring more time, depending on permutations of how many signatures are required). Further, Multisig wallets can, in theory, be configured to permit a transaction when there is a threshold, but not unanimous, number of “signatures”. The obvious question arises – how will the rules in Cheong v 3AC apply to a situation where the controller of the “key” is not one person with one place of residence, but possibly multiple people, possibly in different jurisdictions? What if a Multisig wallet is configured to be accessible when signed off on by a simple majority – do the respective places of residences of the dissenting minority for the particular transaction matter? In Cheong v 3AC, both DVPL and Cheong were Singaporean, so to speak. But what if Cheong was a Ukrainian who fled to Poland and then to England after Russia invaded Ukraine? Would it make a difference since the Court considered residence, and not domicile?
  • Another interesting dimension which may complicate the application of the rule in Cheong v 3AC is how the situs of cryptoassets will be treated if there is a custodial wallet involved. A popular adage in the crypto space is “Not Your Keys, Not Your Crypto” – typically, a warning that investors do not truly “own” their cryptoassets unless they possess the private keys to them. Custodial wallets are an example of where users do not have the private keys to what they think are “their” cryptoassets, since the cryptoassets in these custodial wallets are controlled by a third party. Their use is sometimes inevitable (for example, when using a centralised exchange for cryptocurrency which typically involves use of a custodial wallet). If the dispute arises over the cryptoasset while it is stored in the custodial wallet controlled by a crypto exchange, does this mean that the “controller” is the exchange? Where, then, is the residence of an exchange? These are not merely academic questions especially given concrete incidents of fraud and misuse of customer assets perpetrated by cryptocurrency exchanges (see, for example, the FTX saga). What then of cryptocurrency escrow services – does the “controller” change while the cryptocurrency is being held in escrow?
  • A rule for all types of cryptoassets?: In a previous update, we discussed the Singapore High Court’s decision in ByBit, where it was found that cryptoassets are things in action capable of being held on trust. In that discussion, we noted that it remains to be seen how the rules laid down there would be applied to all other types of cryptoassets (including convertible virtual currency products, and even digital capital markets products like digital debentures and crypto derivatives) given that the cryptoassets in Bybit was specifically United States Dollar Tether or USDT. The same uncertainty exists in respect of Cheong v 3AC which, though in addition to conventional cryptocurrency and non-fungible tokens, also concerned SAFEs and SAFTs, did not concern less conventional cryptoassets which may not follow a traditional “wallet and key” structure. The market and products in the crypto space are complex and rapidly evolving; the continued growth of the jurisprudence dealing with these areas is an exciting space to watch.

While it is important to understand the potential limits of the Court’s decision in Cheong v 3AC, this should not downplay the significance of the decision and its addition to Singapore’s already robust crypto-related jurisprudence. Aside from ByBit, the Singapore Courts’ rapidly growing jurisprudence is well-demonstrated in Quoine Pte Ltd v B2C2 Ltd [2020] 2 SLR 20 (where the Court of Appeal affirmed that cryptocurrency could have the fundamental characteristics of intangible property), and CLM v CLN [2022] 5 SLR 273 (where the High Court held that cryptocurrency satisfied the definition of a property right well-recognised in law, over which a proprietary injunction could be ordered). These developments are especially timely in light of possible uncertainty over precisely how cryptoassets are treated in other jurisdictions – see for example the 2023 UK Law Commission’s Digital Assets: Final Report, which had found that digital assets could not be force-fit into traditional views of property as either “things in possession” or “things in action”, and instead proposed that such assets be recognised under a “third” category of property.³ The Singapore cases mentioned above (and the future cases which will no doubt come) are a prime opportunity for Singapore law to contribute to the global discourse on the treatment of cryptoassets in law.

Senior Partner Koh Kia Jeng is Co-Head of the Construction and Restructuring, Insolvency & Bankruptcy Practice Groups, Senior Partner Hsu Li Chuan is Co-Head of the Fintech/Blockchain Practice Group and Senior Associate Alexander Kamsany Lee is part of the Litigation and Dispute Resolution Practice Group. Dentons is a global law firm operating across over 80 countries, and we are well placed to assist you on all aspects of your cryptoasset or digital asset concerns or disputes in Singapore and elsewhere. If you would like to discuss how we may assist you, please reach out to us.

1. Kelvin F.K. Low & Ernie G.S. Teo, “Bitcoins and other cryptocurrencies as property?” (2017) Law, Innovation and Technology, 9, (2), 235-268.
2. Vinmar Overseas (Singapore) Pte Ltd v PTT International Trading Pte Ltd [2018] 2 SLR 1271 at [45]; Bradley Lomas Electrolok Ltd v Colt Ventilation East Asia Pte Ltd [1999] 3 SLR(R) 1156 at [15]–[17].
3. United Kingdom, Law Commission, Digital Assets: Final Report (Law Com No 412, 2023) at [3.1]–[3.16]; [3.49].