Blab Crypto
DIFC Court Dismisses 300-Bitcoin Loss Claim, Clarifies Custody Contract Rules
The Dubai International Financial Centre’s Digital Economy Court has thrown out a high‑profile claim by Gate MENA DMCC (formerly Huobi OTC DMCC) and Huobi MENA FZE against Tabarak Investment Capital Limited. The dispute centered on 300 Bitcoin that vanished during an over‑the‑counter (OTC) trade that began in 2022 and reached a retrial in February 2026.
At the heart of the case, Huobi sold the BTC to a buyer introduced by Tabarak. Tabarak was supposed to hold the coins until payment arrived, then release them to the buyer or return them if payment failed. During the process the parties switched to a new Trezor wallet set up by the buyer. A flaw in the wallet’s configuration was later exploited by fraudsters, causing the loss of the BTC before payment was made.
Initially the court found no binding contract had formed because a required condition precedent – the payment of an account‑opening fee – was never satisfied. The judge also ruled that Tabarak had acted reasonably in holding the BTC and was not under a separate duty to advise on the wallet’s security. The claim was dismissed.
The Court of Appeal flagged an unresolved question: even if the original agreement never took effect, what was the legal effect of the parties proceeding with the transaction, altering its structure, and agreeing an increased commission immediately before the BTC was transferred? The appellate court agreed the issue was undecided and ordered a retrial.
During the retrial, the court considered whether a fresh contract arose as the transaction progressed. The claimants argued that Tabarak had assumed a custodial role that required absolute return of the coins if payment was not received. Justice Black accepted that a new contract had indeed emerged. The parties intended to create legal relations, Tabarak was acting for reward, and the transaction proceeded on a newly agreed commercial basis.
The court then examined the content of that contract. It rejected the claim that Tabarak bore strict liability for the loss. Instead, it held that Tabarak’s obligation was limited to exercising reasonable care in maintaining control of the assets and performing the role it had agreed to. Because the earlier findings that Tabarak had acted reasonably were binding, the court found no breach and dismissed the claim.
The decision demonstrates the DIFC Courts’ willingness to apply established contract law to the evolving digital‑asset sector. It recognises that contractual relationships can arise through conduct during a transaction, treats crypto assets as property capable of custody arrangements, distinguishes between strict liability and reasonable‑care obligations, and rejects attempts to impose absolute liability for third‑party fraud when the intermediary is not at fault.
For market participants, the ruling confirms that intermediaries who act in good faith and exercise reasonable care are not automatically liable for losses caused by external fraud. It also signals that courts will scrutinise the conduct of parties during a transaction to determine whether a binding contract has emerged, even when the original framework collapses. The judgment is likely to serve as a reference point in future disputes involving digital‑asset custody and risk allocation.
The case concludes with Tabarak cleared of liability. The court’s stance reinforces the application of common‑law principles to crypto‑related transactions and underscores the importance of clear contractual terms and prudent risk management in the digital‑asset marketplace.
At the heart of the case, Huobi sold the BTC to a buyer introduced by Tabarak. Tabarak was supposed to hold the coins until payment arrived, then release them to the buyer or return them if payment failed. During the process the parties switched to a new Trezor wallet set up by the buyer. A flaw in the wallet’s configuration was later exploited by fraudsters, causing the loss of the BTC before payment was made.
Initially the court found no binding contract had formed because a required condition precedent – the payment of an account‑opening fee – was never satisfied. The judge also ruled that Tabarak had acted reasonably in holding the BTC and was not under a separate duty to advise on the wallet’s security. The claim was dismissed.
The Court of Appeal flagged an unresolved question: even if the original agreement never took effect, what was the legal effect of the parties proceeding with the transaction, altering its structure, and agreeing an increased commission immediately before the BTC was transferred? The appellate court agreed the issue was undecided and ordered a retrial.
During the retrial, the court considered whether a fresh contract arose as the transaction progressed. The claimants argued that Tabarak had assumed a custodial role that required absolute return of the coins if payment was not received. Justice Black accepted that a new contract had indeed emerged. The parties intended to create legal relations, Tabarak was acting for reward, and the transaction proceeded on a newly agreed commercial basis.
The court then examined the content of that contract. It rejected the claim that Tabarak bore strict liability for the loss. Instead, it held that Tabarak’s obligation was limited to exercising reasonable care in maintaining control of the assets and performing the role it had agreed to. Because the earlier findings that Tabarak had acted reasonably were binding, the court found no breach and dismissed the claim.
The decision demonstrates the DIFC Courts’ willingness to apply established contract law to the evolving digital‑asset sector. It recognises that contractual relationships can arise through conduct during a transaction, treats crypto assets as property capable of custody arrangements, distinguishes between strict liability and reasonable‑care obligations, and rejects attempts to impose absolute liability for third‑party fraud when the intermediary is not at fault.
For market participants, the ruling confirms that intermediaries who act in good faith and exercise reasonable care are not automatically liable for losses caused by external fraud. It also signals that courts will scrutinise the conduct of parties during a transaction to determine whether a binding contract has emerged, even when the original framework collapses. The judgment is likely to serve as a reference point in future disputes involving digital‑asset custody and risk allocation.
The case concludes with Tabarak cleared of liability. The court’s stance reinforces the application of common‑law principles to crypto‑related transactions and underscores the importance of clear contractual terms and prudent risk management in the digital‑asset marketplace.
