A B.C. judge has ruled on what she described as an “old-fashioned” dispute with a “modern twist,” settling a dispute over $1.2 million in cryptocurrency.
Justice Shelley C. Fitzpatrick handed down her decision in Vancouver Supreme Court Monday, ending a years-long conflict over whether 22 Bitcoin were or were not a loan.
Hung Nguyen, the court heard, said he advanced the Bitcoin to Daniel Tambosso with the expectation it would be repaid “only days later.”
The two met in 2021, through a mutual friend when Nguyen was beginning to ramp up his investments in Bitcoin after the end of the so-called “crypto winter.”
Tambosso told Nguyen he had “substantial crypto holdings” that were vulnerable to ” hackers and other ‘bad actors'” and that he needed Bitcoin quickly to pay for software to protect his digital wallet, according to the decision. The software, Tambosso said, was designed by Satoshi Nakamoto who the court heard is “famously rumoured to have founded Bitcoin.”
To obtain the security software, Tambosso told Nguyen he had to undergo a multi-stage “bypass procedure” which required payment in Bitcoin at each stage. In order to advance, Tambosso said he needed 18 Bitcoin.
“Mr. Tambosso told Mr. Nguyen that the payoff could be huge: if the bypass procedure was successful, Mr. Nguyen would receive 1,750 Bitcoins as compensation for the loan,” the decision said, adding that Tambosso said the procedure would be complete within 48 hours.
Nguyen agreed to transfer the Bitcoin, and the judgment outlines some of the reasons why.
“Despite his own experience and knowledge in the crypto market, Mr. Nguyen gained some confidence about the substance of the proposed transaction because Mr. Tambosso spoke eloquently and competently about crypto. In addition, Mr. Tambosso’s mention of Mr. Nakamoto, who apparently has achieved cult-like status in the crypto world, gave Mr. Tambosso’s proposition additional credibility,” Fitzpatrick wrote.
In addition, Tambosso provided a formal, written agreement and encouraged Nguyen to seek legal advice. The two entered into a contract, which was submitted as evidence, and the Bitcoin was transferred.
“Almost immediately after the transfer, Mr. Tambosso contacted Mr. Nguyen requesting further Bitcoins,” the decision said.
The pair drew up a second contract and Nguyen advanced four more Bitcoin.
“Over the next few months, Mr. Nguyen continued to demand updates from Mr. Tambosso. Mr. Tambosso provided occasional updates but no Bitcoin emerged to repay the loans,” the judgment said.
Five months after the Bitcoin was advanced, Nguyen took legal action.
Tambosso did not dispute that Nguyen had transferred the Bitcoin and that it was never returned. He also did not contest the existence of the contracts.
Rather, he argued the contracts were not enforceable on multiple grounds.
“Mr. Tambosso suggested that Mr. Nguyen was simply an investor in a high-risk venture,” the decision said, describing one of the reasons Tambosso argued his “non-compliance” with the contract was justified.
The judge rejected this, saying any risk associated with the bypass procedure was assumed by Tambasso alone. The contracts made it clear the repayment of the loan was not contingent on the success of the bypass procedure, Fitzpatrick said.
“Although it appears to be, in hindsight, that Mr. Tambosso was either scammed or has otherwise become involved in some kind of broader nefarious scheme, neither absolve him of his obligations to repay Mr. Nguyen,” the judge wrote.
Tambosso was ordered to pay Nguyen $1,240,106.22 in damages for breach of contract, which is equivalent to the value of the Bitcoin at the time of the loan. Nguyen was also awarded interest on the damages dating back to the 2021 loan date and court costs.
