When Non-Competes Meet Crypto: Hong Kong Court Refuses to Enforce 12-Month Restraint Against Departing Portfolio Manager

When Non-Competes Meet Crypto: Hong Kong Court Refuses to Enforce 12-Month Restraint Against Departing Portfolio Manager

A recent Hong Kong Court of First Instance decision offers a timely reminder that restrictive covenants drafted too broadly, supported too thinly, and enforced too slowly will not survive judicial scrutiny — even in the fast-moving world of virtual assets.

Background: A Departure into the Crypto ETF Market

In Pando Finance Limited v Ng Ean Kiam [HCA 1567/2025], the plaintiff was a licensed virtual asset management firm. It had engaged the defendant, an experienced fund manager holding multiple professional qualifications, as its Portfolio Manager under an employment contract dated May 2024. The contract contained a 12-month post-termination non-compete covenant.

The defendant resigned in January 2025 and, after serving a three-month notice period, joined MicroBit Capital Management Limited — a competitor operating in the cryptocurrency ETF space — in mid-April 2025.

Pando commenced legal proceedings some months later seeking an interlocutory injunction to restrain the defendant from working with MicroBit for the remainder of his restriction period, which was due to expire in April 2026.

A Higher Hurdle From the Outset

Before examining the substance of the clause, the Court addressed a threshold issue that proved decisive to the entire analysis.

The 12-month restriction was set to expire in April 2026. Given that no trial could realistically conclude before that date, the Court recognised that granting an interlocutory injunction would be tantamount to granting final relief. Accordingly, the usual American Cyanamid test — requiring only a serious issue to be tried and a favourable balance of convenience — did not apply. Pando was instead required to demonstrate that it had good prospects of success at trial, a materially higher standard. That framing coloured everything that followed.

The Clause Did Not Survive Scrutiny

The Court identified several independent grounds on which the non-compete was unlikely to be upheld.

Worldwide territorial scope. The clause contained no geographical limitation whatsoever, purporting to bind the defendant on a worldwide basis. Pando argued that the defendant's knowledge of SFC regulatory requirements gave it a legitimate interest worthy of global protection. The Court rejected this. Even accepting that SFC-related know-how was confidential, its relevance was inherently tied to Hong Kong's regulatory framework. A worldwide restraint was simply not justified by the nature of the business interest being protected.

No evidential foundation for a 12-month duration. Post-termination restraints must be proportionate in time. Proportionality requires evidence: specifically, some basis for concluding that the confidential information the employer seeks to protect retains commercial value for the duration of the restriction. Pando adduced no such evidence. There was nothing to suggest that the defendant's knowledge of client strategies, investment methodologies, or regulatory positioning would remain competitively useful for a full year after his departure.

Scope extending beyond virtual assets. The clause was drafted to cover "any other business or entity" in competition with the Pando group. On its face, this would have prevented the defendant from joining not only rival crypto ETF managers, but conventional asset managers with no connection to virtual assets at all. The Court found this an unreasonably broad restriction given the specific sector in which Pando operated.

Reliance on regulatory know-how. Pando placed particular weight on the defendant's familiarity with the SFC's licensing and regulatory regime for virtual asset managers. The Court was not persuaded. Regulatory competence acquired through professional licensing is not, in itself, proprietary to any particular employer. Where an employer relies on regulatory know-how as the basis for a non-compete, it must identify precisely what is confidential beyond the general professional expertise of a licensed practitioner.

Delay in seeking relief. Pando's decision to commence proceedings several months after the defendant joined MicroBit also weighed against it. Courts expect prompt action when seeking injunctive relief — delay signals an absence of genuine irreparable harm. An unexplained gap of weeks between becoming aware of the alleged breach and applying to court weakens an employer's position regardless of the merits of the underlying clause.

Balance of Convenience: The Scales Tipped Clearly

Even had Pando cleared the initial hurdle on the clause's validity, the balance of convenience would have favoured the defendant. Working professionals in licensed, highly specialised roles suffer real and lasting prejudice from injunctions: loss of income, reputational uncertainty, and disruption to career trajectory. These are not losses that damages can easily compensate. Against this, Pando had not demonstrated that it would suffer irreparable harm if the injunction were refused.

What This Means for Employers

The principles the Court applied are not new, but this decision matters for any business in Hong Kong that relies on restrictive covenants. For employers reviewing or drafting non-competes, the case points to several practical requirements.

Be specific about territory. If the business interest being protected is regulated by the SFC and primarily operative in Hong Kong, a worldwide restraint is unlikely to hold. Match territorial scope to where the confidential information actually has commercial value.

Evidence your duration. A 12-month restriction is not self-evidently reasonable. Be prepared to explain, with reference to the nature of your confidential information, why that period is appropriate — and consider documenting this reasoning at the time the contract is negotiated.

Tailor the scope to your business. Non-competes drafted to catch every conceivable competitor, including those in adjacent or unrelated sectors, will be read as unreasonable. Identify the specific activities you are seeking to restrain and limit the clause accordingly.

Distinguish protectable interests from general expertise. Regulatory knowledge, industry experience, and professional qualifications belong to the employee. If relying on something more specific — proprietary methodologies, client relationships, genuinely confidential strategic information — be prepared to identify it clearly.

Act promptly. If a former employee joins a competitor in apparent breach, the decision to seek injunctive relief must be made quickly. An enforcement strategy should be considered before a departure occurs, not after one has been discovered.

Conclusion

Pando Finance v Ng Ean Kiam is a useful reference point for employers in Hong Kong's virtual asset sector and, more broadly, for any business that relies on restrictive covenants as part of its talent and confidentiality strategy. Non-competes that are broadly drafted, evidentially unsupported, or enforced with delay leave very little margin for error in Hong Kong courts.

With hiring activity picking up across financial services and the virtual asset industry, this is an appropriate moment to review whether existing template non-competes would withstand challenge.

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This article is for general information purposes only and does not constitute legal advice. If you would like to discuss your restrictive covenant provisions or any employment matter, please contact our team.