If a friend invests money of a friend with the friend’s consent in different cryptocurrencies and exchange losses occur during conversions between the currencies (Ethereum/Bitcoin), the defendant friend is not liable for lost profits, ruled the Higher Regional Court of Frankfurt am Main (OLG). It dismissed the action for the transfer of Ethereum shares, amending the predominantly favorable judgment of the Regional Court.

The plaintiff agreed with the defendant, who was a close friend at the time, that the defendant would assist him in investing in cryptocurrencies. The defendant had both experience in investing in cryptocurrencies and the technical know-how required for this. The plaintiff paid him just under €85,000 for this. Defendant hereby acquired for Plaintiff, in part, Ethereum Shares and, in part, Bitcoin Shares. Subsequently, the defendant also exchanged the initially acquired Bitcoin for Ethereum via the Kraken.com platform. From Plaintiff’s funds, there were thus 309.01954785 Ethereum Shares in Defendant’s Kraken account as of October 2017.

In November, the defendant exchanged some of the Ethereum back into Bitcoin, speculating on an increase in value. This increase in value failed to materialize.

During the subsequent “switch back” of these Bitcoin into Ethereum, the defendant therefore – and due to the price increase of Ethereum in the meantime – no longer received the Ethereum shares back in full. The plaintiff now claims the defendant for loss of profit for transfer of Ethereum units in the amount of this difference (116.5191785 units). The district court had granted the claim for the most part. The defendant’s appeal against this was successful before the OLG.

The application for “transfer” of the Ethereum shares was admissible, in particular sufficiently determined, the OLG explained Since crypto tokens such as Ethereum and Bitcoin are virtual, i.e. incorporeal objects, no transfer can be claimed under property law provisions. It is solely a digital representation of a value that is not issued by any central bank or public body. Consequently, the only remaining option is to assert a claim for transfer.

However, the plaintiff was not entitled to damages in the form of lost profits due to the defendant’s conversion of parts of Ethereum into Bitcoin. It is true that the defendant conducted a third-party business for the plaintiff as a “friendly service”. However, the conversion from one cryptocurrency (Ethereum) to another (Bitcoin) was not contrary to the plaintiff’s real or, in the alternative, presumed will in this case. The plaintiff itself does not claim to have expressly or impliedly expressed an intention contrary to the conversion. There were also no indications of a presumed will to the contrary. In any case, the defendant had not been able to recognize such an intention. There had been agreement between the parties that the defendant should invest for the plaintiff in the “high-risk area of cryptocurrencies.” The fact that something specific was to happen with the money was not agreed at any time. Rather, the plaintiff had given the defendant a “free hand” and had insight into and access to the accounts at all times. During the joint barbecue, the parties also discussed splitting the accounts into different currencies. The initial investment in both Ethereum and Bitcoin was made with Plaintiff’s knowledge and consent. Thus, it is already not evident “why, in the further course of the investments, a further exchange carried out by the defendant should have contradicted the presumed will of the plaintiff, especially since, according to the undisputed submissions in this respect, the exchange appeared to the defendant to be promising”. Rather, the transfer of the purchased Bitcoins to the Kraken account had been done precisely to enable the possibility of exchanges between the individual cryptocurrencies, which would not have been possible on the simple LitBit account. The plaintiff’s aim was precisely to make high-risk investments and profits through the “trading” carried out by the defendant, which he ultimately succeeded in doing. This is because the plaintiff had almost quadrupled his invested capital – according to the market value of the acquired and still existing Ethereum shares at the time of the decision of the Court of Appeal – through the investments made for him by the defendant.

The decision is not final. The complaint of non-admission can be used to seek permission to appeal.