The Micro Tellers Network Ltd and others v Cheng Yi Han and others

• Jurisdiction: Singapore
• Judge: Simon Thorley IJ
• Judgment Date: 06 September 2023
• Neutral Citation: [2023] SGHC(I) 13
• Court: International Commercial Court (Singapore)
• Docket Number: Suit No 5 of 2020
• Hearing Date: 16 May 2023,17 May 2023,01 February 2023,02 February 2023,03 February 2023,30 January 2023,31 January 2023
• Citation: [2023] SGHC(I) 13
• Year: 2023
• Plaintiff Counsel: Tan Gim Hai Adrian, Ong Pei Ching, Chin Yen Bing Arthur, S Lingesh Kumar and Siah Jiayi Vivian (TSMP Law Corporation)
• Defendant Counsel: The fourth defendant in person,Koh Junxiang and Ng Pi Wei (Clasis LLC)
• Subject Matter: Agency,Third party and principal's relations,Contract,Misrepresentation,Fraudulent,Implied contracts,Implied retainer,Equity,Fiduciary relationships,Duties,Dishonest assistance,Tort,Conspiracy,Negligence
• Published date: 26 September 2023

Simon Thorley IJ: Introduction

This action was commenced in the High Court (HC/S 916/2019) on 13 September 2019 and was transferred to the Singapore International Commercial Court (“SICC”) as SIC/S 5/2020 (“Suit 5”) on 27 July 2020.

The first plaintiff (“Micro Tellers”) is a company incorporated in Hong Kong whose sole director and shareholder is Charles Cuong Tan-Thatch (“Charles”). Charles is a successful businessman who initially worked for Societe Generale in New York and Hong Kong and who, since 2016, has pursued business ventures on his own behalf including various cryptocurrency projects. One of the major projects in which he was involved in his capacity as the chief cryptocurrency officer of Asia Innovations Group (“AIG”) was an Initial Coin Offering (“ICO”) of a cryptocurrency token called “Gifto”.

As Charles explained in his second affidavit of evidence-in-chief (“AEIC”):¹

An ICO is different from a traditional Initial Public Offering (“IPO”). In an ICO, entrepreneurs seeking to raise funds for their products and services create a cryptocurrency token and offer that token to members of the public to purchase. The purchasers of the tokens can then use the tokens either to pay for the products and services offered by the company in question, or wait to see if the token increases in popularity and gains value.

The second, third and fourth plaintiffs are Singaporean citizens each of whom is also a successful businessman. They met in 2014 or 2015 through a network called Entrepreneurs’ Organisation and together became interested in cryptocurrency investments, more specifically in ICOs, and pooled their resources for such investments. During the trial, the second plaintiff was referred to as “Michael”, the third as “Rio” and the fourth as “Clement”. Together they were referred to as “the Regional Group”. I shall do the same.

Until 16 September 2020, the plaintiffs’ claims were made only against the first three Defendants, Cheng Yi Han (“Yi Han”), Ling Hui Andrew (“Andrew”) and Providence Asset Management (“PAM”), a company incorporated in the Cayman Islands, of which Andrew is a director and shareholder. I shall refer to these three defendants together as “the Initial Defendants”.

Yi Han did not give evidence. His relationship with Micro Tellers was described by Charles after they had first met in late 2017 in Charles’ second AEIC:² 25 After this meeting, I stayed in touch with Yi Han. Subsequently, Yi Han informed me that he could help with over-the-counter (“OTC”) trading of cryptocurrencies. OTC trading of cryptocurrencies refers to the process where one purchases or sells a large amount of cryptocurrency directly to a counterparty trading desk. Yi Han informed me that he had a business partner, Andrew, and together they carried out OTC trades using the entity PAM. 26 Yi Han stated that Yi Han and Andrew had a special bank account that could be used for trades involving large amounts of foreign currency, since personal bank accounts could not be used for such trades. This special bank account was PAM’s bank account in Singapore DBS Bank Ltd (“PAM DBS Account”). 27 After speaking to Yi Han, I asked Yi Han if he could help me with OTC transactions for AIG. From on or around 14 January 2018 until June 2018, Yi Han and PAM helped encash more than US$12 million worth of cryptocurrencies for AIG. The process through which these transactions were carried out was smooth and straightforward. Yi Han would send me a cryptocurrency address, to which I would transfer the relevant amount of cryptocurrency. Yi Han would then arrange for this cryptocurrency to be traded for traditional fiat currency. The fiat currency would be placed in the PAM DBS Account, and then transferred to AIG.

Clement also met Yi Han in late 2017 and together with the other Regional Group members supported Yi Han in various ICOs in late 2017 and early 2018 which were successful.³ Clement stated that by February 2017 “[he] enjoyed working with Yi Han and considered him a friend who could be trusted” and that “[o]verall, I was impressed with Yi Han”.⁴

Andrew did give evidence. He explained his relationship with Yi Han as follows in his second AEIC:⁵ 7 I was introduced to Yi Han in early 2017. I got to know him through my friend Shawn Lin, who was Yi Han’s primary school classmate. Yi Han became my business partner in various business ventures. 8 Since I knew him, Yi Han had been very interested in cryptocurrency. His technical knowledge of blockchain technology and cryptocurrencies was quite extensive and far surpassed mine. He also possessed cryptocurrency Wallets. 9 I knew that Yi Han had many contacts in the cryptocurrency space. In early 2018, Yi Han told me that he had investors who held Bitcoin and other cryptocurrencies and wanted him to trade cryptocurrencies on their behalves i.e. he would hold the cryptocurrencies and buy and sell them for a profit. As it turned out, the Plaintiffs were some of these investors of Yi Han. However, I did not know their identities at the time. 10 Yi Han asked me if he could use PAM in the trades in the following manner: (a) Yi Han would receive cryptocurrency from these third parties in his own cryptocurrency wallet; and (b) He would liquidate these into fiat currency by transferring the cryptocurrency to a US entity called Cumberland Mining Materials LLC (“Cumberland”). (c) Cumberland would transfer fiat currency to PAM. 11 I agreed. I allowed him to use PAM to do so as he would split the commission he made off these trades with PAM and me. However, the actual trades were always carried out by him as he owned and controlled the cryptocurrency wallet. However, I did not myself contact these third-party investors, neither did I tell Yi Han to do so on my behalf.

Background The plaintiffs’ claims against the Initial Defendants

The plaintiffs’ claims against the Initial Defendants arose out of two incidents referred to in these proceedings as “the Europe Transaction” and “the Private Bank Acquisition”. I shall have to go into greater detail in relation to these incidents later.

In simple terms, however, the Europe Transaction occurred in April 2018. It involved a proposed trade of Bitcoin (“BTC”) purchased by the Initial Defendants with the authority of the Regional Group using funds supplied by them which were held in PAM’s bank account. The intention was that those BTC should be sold to buyers in Europe (“the Buyers”) at a profit, the consideration being €5m which was to be paid in cash. In the event, it turned out that the banknotes supplied (“the Banknotes”) were forgeries. The Regional Group claimed that the Initial Defendants were liable to them in deceit, breach of duty and/or trust, unjust enrichment, conspiracy and negligence. Micro Tellers was not involved in the Europe Transaction.

The Private Bank Acquisition involved both sets of plaintiffs. In the case of the Regional Group, following the failure of the Europe Transaction, there were some US$2m of the Regional Group’s funds remaining in PAM’s bank account which the Group asked to be returned. This was not done and it was asserted that the Initial Defendants had misappropriated the funds by using them without the Group’s authority as part of the Private Bank Acquisition. Again, relief was sought based on deceit and other related claims.

In the case of Micro Tellers, it did authorise the Regional Group to use some US$2.7m of the funds deposited by it in the PAM bank account as part of the Private Bank Acquisition but, it was asserted, this was done following various false representations made by the Initial Defendants to Charles. Once again, claims were made in deceit and other related claims.

In their Defence, again in very simple terms, the Initial Defendants sought to place the blame for any misdoings upon Then Feng (“Feng”), now the fourth defendant.

Suit 8 – the action between the Initial Defendants and Then Feng

Unbeknown to the plaintiffs, on 2 July 2019, PAM (and a related company 5 and 2 Pte Ltd (“5&2”)) had brought proceedings in the High Court (HC/S 653/2019) against Feng and his wife, Lee Moon Young (“Moon”). On 29 September 2020 the plaintiffs in that action discontinued the claim against Moon. Thereafter that action was transferred to the SICC on 13 October 2020 as SIC/S 8/2020 (“Suit 8”).

In Suit 8, the plaintiffs (“the Suit 8 Plaintiffs”) contended that they had been induced to provide funds for the purpose of the Private Bank Acquisition by certain false representations made to them by Feng. Some of the funds advanced were monies deposited in the PAM bank account by the plaintiffs in this action and which are the subject of the claims in relation to the Private Bank Acquisition incident.

Although the plaintiffs in this action became aware of the fact that the Initial Defendants were seeking to place the blame on Feng, prior to transfer to the SICC they did not seek to join Feng as a defendant nor did the Initial Defendants seek to join him as a third party.

Once the two Suits were transferred, since it was apparent that similar causes of action based on facts which overlapped arose, a joint CMC was heard at which it was ordered that the two cases should be tried together and thereafter the plaintiffs in this action were given leave to join Feng as a defendant.

The two actions came for trial before me on 14 June 2021. The subsequent history of the trial is set out in [1]–[13] of the judgment subsequently given in Suit 8 on 22 September 2021 – The Micro Tellers Network Ltd and others v Cheng Yi Han and others and another suit [2021] 5 SLR 328: 1 These two actions, SIC/S 5/2020 and SIC/S 8/2020 (“Suit 5” and “Suit 8” respectively), raise similar causes of action based on facts which, to a certain extent, overlap. They were therefore ordered to be tried together. The trial commenced on 14 June 2021 and was scheduled to last...