Can’t Locate The “John Doe” Who Stole Your Crypto Asset? Serve Papers on Him Via NFT!
In a first, a New York judge recently allowed plaintiff’s counsel to serve papers on “John Doe” defendants via a non-fungible “service” token. This new strategy allows those aggrieved by anonymous actors to effect service of process without having to find out the anonymous party’s name, physical address, email, or other identifying information.
The Case
On June 1, 2022, LCX AG, which operates a cryptocurrency exchange, filed a lawsuit in New York state court against 25 “John Doe” defendants, alleging the hacker defendants accessed the private key controlling one of the plaintiff’s primary exchange wallets and stole nearly $8 million worth of various virtual assets based on the Ethereum blockchain. The plaintiff alleged that the defendants took numerous measures to obscure the blockchain trail, including exchanging the stolen assets for other forms of virtual assets and using virtual asset services designed to foil tracing investigations. The plaintiff’s investigation revealed that much of the stolen crypto assets ended up being stored in USD Coin in a wallet at non-party Centre Consortium, and that, while some of these assets already had been sold, the address still had over $1 million in USD Coin at the time the lawsuit was filed.
The plaintiff also filed an accompanying order to show cause for a temporary restraining order restraining the defendants and Centre Consortium from disposing of any of the USD Coin held at the traced wallet address and directing Centre Consortium to prevent the address from transacting in USD Coin pending a hearing on the plaintiff’s motion for a preliminary injunction.
On June 2, 2022, Justice Andrea Masley signed the plaintiff’s order to show cause. Included in the order to show cause was a provision allowing the plaintiff’s attorneys to serve a copy of the order to show cause upon the person (s) controlling the address via a special-purpose Ethereum-based token delivered – airdropped – into the wallet address. The “service token” contained a hyperlink to a website in which the plaintiff’s attorneys published the order to show cause and related documents, and the hyperlink contained a mechanism to track when a person clicks on the hyperlink.
Take-Away Point
Normally, at the outset of a case, a plaintiff must serve the defendant with court papers via certain means, such as personal service, “nail and mail,” or sometimes, with court approval, email. With anonymous actors, plaintiffs cannot do this unless they are able to obtain identifying information such as a physical address or e-mail address. This case is an example of how blockchain technology can facilitate service of process and force anonymous defendants to come into court.
