USA Trends and Developments Contributed by: John Curley and Milan Sova, Hoguet Newman Regal & Kenney
expedited discovery for the purpose of identifying the unknown hacker before formal service of process had occurred. In addition to expedited discovery, courts at the fed - eral and state levels have also embraced temporary restraining orders and preliminary injunctions to pre - vent assets from being dissipated during an action. At the federal level, for example, in the Jacobo case discussed above, the court issued a temporary restraining order based on a specific showing that the crypto holdings in question “pose[d] a heightened risk of asset dissipation”. 2022 WL 2052637 (E.D. Cal. June 7, 2022) (quoting Fed. Trade Comm’n v Dluca , 2018 WL 1830800 (S.D. Fla. Feb. 28, 2018), report and recommendation adopted, 2018 WL 1811904 (S.D. Fla. Mar. 12, 2018)). The court explained: “[C]ryptocurrencies are circulated through a decen - tralised computer network, without relying on tradi - tional banking institutions or other clearinghouses. This independence from traditional custodians makes it difficult for law enforcement to trace or freeze cryp - tocurrencies in the event of fraud or theft. If defend - ant were provided notice of this action, it would be a simple matter for him to transfer the Tether to unidenti - fied recipients outside the traditional banking system, including contacts in foreign countries, and effectively put it beyond the reach of this court.” Id. (quoting Dlu - ca, 2018 WL 1830800 (S.D. Fla. Feb. 28, 2018)). Similarly, in Licht v Ling , a federal court in Texas granted injunctive relief to freeze wallets identified by a blockchain forensics and cybercrime investigative firm and allow for expedited discovery after finding the “[d]efendants could continue to launder away [the plaintiff’s] money to further thwart traceability and prevent potential recovery, which would inflict irrepa - rable harm”. The court also ordered that “all move - ment, alteration, or destruction of books, records, and accounts related to the above-listed wallets is prohib - ited”, and it granted “expedited discovery to speedily identify the Defendants, as well as to promote efficient and just resolution of this dispute”. 2023 WL 4504585 (N.D. Tex. June 20, 2023).
It is worth noting that in Licht , the plaintiff supported his application with evidence from a blockchain foren - sics company, including report from a forensics inves - tigator that detailed the “rationale behind freezing the specific twenty wallets in question”. This appears to have helped convince the court that freezing the wal - lets was appropriate at an early stage in the case. Similar to federal law, state law provides its own tools to prevent the dissipation of assets. For example, New York’s procedural law, the Civil Practice Law and Rules (CPLR), permits parties to take steps to protect a future judgment. Under CPLR § 5229, courts may restrain asset transfers before judgment where there is a demonstrated risk to enforcement. In Morozov v ICOBOX Hub , the court invoked this authority to enjoin a defendant from transferring any property, including Bitcoin, based on findings that the defend - ant operated entirely in digital currency and that cryp - to’s anonymity increased the risk of evasion. 2020 WL 5665639, at *11 (S.D.N.Y. May 5, 2020) (applying New York law), report and recommendation adopted, 2020 WL 5665563 (S.D.N.Y. Aug. 18, 2020). Other provisions of New York law – CPLR § 6201 and § 6211 – provide for the attachment of assets. In Trebco Specialty Prods. Inc. v Schedule A Defendants , the court ordered financial institutions to locate and restrain any accounts associated with the defendants, including cryptocurrency wallets and funds. Trebco Specialty Prods. Inc. v Individuals, Corps., Ltd. Liab. Companies, Partnerships, & Unincorporated Associa- tions Identified on Schedule A to Complaint , 2022 WL 19520884 (E.D.N.Y. May 11, 2022). Similarly, in Win- klevoss Capital Fund v Shrem , the court authorised the attachment of 5,000 Bitcoin or their equivalent value, freezing the assets to preserve those assets pend - ing outcome of the case. Winklevoss Capital Fund v Charles Shrem (S.D.N.Y. Oct. 26, 2018) (No. 18-cv- 08250-JSR, ECF No. 30). Identifying and using crypto to satisfy judgments The pre-judgment tools discussed above are helpful for plaintiffs who commence litigation in the United States. But what about creditors with a foreign judg - ment seeking to enforce that judgment through US courts? Both federal and state law have provisions for broad post-judgment discovery of assets.
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