Authors: Dominique Ménard et Nicholas Daudelin

The Ontario Superior Court’s recent decision to order the freezing of the cryptocurrency wallets (Bitcoin, Ethereum, Litecoin, etc.)[1] of several individuals linked to the so-called “Freedom Convoy” is a reminder of both the value of Mareva orders over traditional pre-judgment seizure orders, as well as the challenges that crypto-currencies and other digital assets present to maintaining the authority of the courts.

A Mareva injunction is a court order directly targeting a person which prohibits them, from the moment of its issuance, from diminishing the value of their assets. The goal is simple: to effectively protect a creditor’s right to execute on a judgment granting their claim until a decision on the merits of the claim is made. This right may justify the granting of a Mareva injunction when there is a reasonable apprehension that the debtor will otherwise dissipate their assets. It is therefore generally requested at the outset of the proceedings and is intended to remain in place throughout the proceedings and until execution of the judgment rendered on the merits.

For several years, the Mareva injunction has been used in conjunction with seizures before judgment. Its use has become widespread, in particular because of the flexibility it provides in terms of enforcement. While a seizure before judgment requires that the seized property be precisely identified, there is no such requirement with the Mareva injunction, which is directed at the person of the debtor. Thus, from the moment of its issuance, it can be applied against any new asset that a creditor may subsequently discover without the need to file a new seizure proceeding.  A financial institution served with a Mareva injunction will thus be required to freeze the debtor’s account just as if it had been seized. The same is now true for immovable property following a decision of the Court of Appeal recognizing that the rights arising from a Mareva injunction are publishable in the land register and thus enforceable against third parties[2].

If the Mareva injunction has proven to be a formidable protection tool for creditors, it is now entering a new era where its enforcement will become more complex. This is because more and more debtors hold digital assets, including cryptocurrencies. These do not represent marginal amounts or a fleeting trend, but a fundamental movement in asset holding that creditors must now take into account when seeking a Mareva injunction.

Issued in the context of the class action lawsuit brought by Ottawa residents against certain organizers of the “Freedom Convoy,” the February 17 decision of the Ontario Superior Court[3] is an illustration of this. Justice MacLeod issued a Mareva injunction against several individuals who allegedly participated in these events and ordered the freezing of assets held in cryptocurrencies (Bitcoins, Ethereum, Litecoin, etc.). A similar order has never been issued in Quebec. However, some digital asset portfolios have already reacted to this order by claiming that it is unenforceable due to the technical impossibility of identifying the holders of cryptocurrency accounts held on their platforms, an impossibility that is in fact built “by design” into these platforms. The only information these platform operators would have would thus be the email address of the individuals making the transactions in the asset portfolio. The platforms also argue that they cannot technically “freeze” these assets since they do not hold the “keys” thereof, i.e. the codes that confirm the holding of a cryptocurrency.

Regardless of the merits of these arguments, which will soon be argued before the Ontario Superior Court, the reaction of these digital platforms highlights the importance of now identifying digital assets as property to be covered by a Mareva injunction and devoting requesting that specific conclusions be issued by the Court in this regard.

Perhaps these conclusions could be modeled on the ancillary orders issued in the context of Anton Piller orders to prevent a person from using their electronic devices until they have first disclosed the passwords to access the platforms and servers on which could be stored information that may be used as evidence in the proceedings. The Mareva order could include a requirement that the individual immediately disclose their cryptocurrency “keys” to the bailiff, and prohibit them from using electronic devices and accessing any digital wallet until the operator thereof has confirmed that the assets cannot now be traded. There should also be requirement that the individual be required to promptly disclose all digital wallets held by him or her, as well as the email addresses used to transact in them.

The decision rendered by the Ontario Superior Court of Justice demonstrates that the Mareva injunction is now entering a new era, that of digital assets. While the criteria for issuing this remedy remain the same, the parameters of its enforcement diverge greatly, and it will be essential to find solutions so that this universe of assets does not escape the authority of the courts.

[1] Li et al. v. Barber et al., CV-22-00088514-00CP.

[2] Desjardins assurances générales inc. c. Malo, 2020 QCCA 462.

[3] Li et al. v. Barber et al., CV-22-00088514-00CP.