Dubai Appeals Court Upholds Compensatory Damages for Cryptocurrency Embezzlement

April 4, 2024

Brief

In Dubai Appeals Court appeal no. 27/2024, the appeals court upheld a decision awarding punitive damages in a case of cryptocurrency embezzlement. The case highlights the judiciary’s stance on financial crimes in the digital currency space, detailing the interaction between criminal and civil liabilities.

Facts

The plaintiff initiated a lawsuit claiming the defendant embezzled AED 200,000 intended for cryptocurrency transactions. The defendant had previously faced criminal proceedings for the same act, resulting in a fine. Despite this, the plaintiff sought compensation for the financial loss incurred.

Procedures of Different Courts

Criminal Court Proceedings: The defendant was tried in a criminal court for embezzling AED 200,000 from the plaintiff. The court found the defendant guilty, imposing a fine of AED 20,000 and ordering the defendant to pay the embezzled amount of AED 200,000 as restitution.

Civil Court Proceedings: Subsequently, the plaintiff pursued civil litigation to recover the financial loss. The Court of First Instance ruled in favor of the plaintiff, ordering the defendant to pay AED 200,000 with a 5% annual interest from the date of demand until full payment. Additionally, the defendant was ordered to cover legal expenses and attorney fees.

Appeal Court Proceedings: The defendant appealed the civil court’s decision, challenging it on several grounds, including double jeopardy, lack of jurisdiction, and insufficient evidence. The Dubai Appeals Court heard the appeal, examining the arguments presented by both parties.

Arguments, Defenses, and Court Ruling

Defendant’s Arguments: The defendant argued that the criminal court’s judgment, which included a directive to pay the embezzled amount, precluded further civil liability on the same grounds, invoking the principle of ne bis in idem (not being judged twice for the same act). The defendant also contested the civil court’s jurisdiction and argued that the plaintiff’s evidence was insufficient to warrant the claimed damages.

Plaintiff’s Defense: The plaintiff maintained that the criminal penalty did not negate the right to civil compensation for the loss suffered. The plaintiff also highlighted the jurisdiction of civil courts to adjudicate financial disputes and presented the criminal court’s judgment as evidence of the defendant’s liability.

Court Ruling: The Dubai Appeals Court rejected the defendant’s arguments and upheld the Civil Court of First Instance’s judgment. It clarified that the criminal court’s ruling imposed a penalty for the criminal act, while the civil court’s judgment aimed at compensating the plaintiff for the financial loss. The court found the civil lawsuit valid, emphasizing that the punitive damages awarded were distinct from the criminal fines and served to compensate the plaintiff adequately.

Significance on Cryptocurrency Scams

This ruling underscores the Dubai judiciary’s serious approach to financial crimes, particularly in the emerging field of cryptocurrencies. By distinguishing between criminal penalties and civil compensations, the court affirms that victims of cryptocurrency scams have a clear path to recovery beyond criminal proceedings. This case sets a precedent for handling similar disputes in the future, indicating that the legal system is equipped to address the complexities associated with digital currency fraud. It sends a strong message about the consequences of engaging in cryptocurrency embezzlement, reinforcing the importance of integrity in digital financial transactions.