Nfts
Served by a cartoon monkey? Summons via NFT are here
Serving a complaint and summons on a defendant is one of the first steps in a legal proceeding. Identifying who the defendant is and where they are can be a challenge in itself, especially when the alleged illicit acts occurred in cyberspace under the guise of anonymous accounts.
Courts routinely permit service by email and other digital messaging platforms when personal service is not possible. Now, jurisdictions across the country are allowing “service on blockchain” as a new method for notifying defendants of claims against them.
The cultural relevance of non-fungible tokens (NFTs) may be at an all-time low, as evidenced by the recent performance of Bored Monkeys Yacht Club. But alternative uses of technology persist in the litigation arena.
Blockchain service extends to federal courts
In 2022, the New York County Supreme Court became the first court in the nation to to agree a motion from a cryptocurrency exchange platform for an alternative process service. The court allowed the platform to send a court summons directly to crypto wallets associated with an alleged crypto heist. The identities of the people associated with the wallet were completely unknown and the named defendant in the suit was “1.274 million US dollars coin”. The court held that, although this particular method of service was a matter of first impression, it was authorized by section 308 of the New York Civil Practice Laws and Rules.
Since then, federal district courts in Fifth, NinthAnd Eleventh the circuits have all authorized service via blockchain in cases of cryptocurrency fraud. It is reasonable to assume that this form of service could be implemented in all cases where defendants trade cryptocurrencies and traditional service methods are inadequate.
How it works?
Logistically, the service via blockchain is carried out by sending a small amount of cryptocurrency to wallets associated with the defendant. For blockchains supporting NFTs like Ethereum, summons documents can be sent as NFT directly to wallets associated with suspected illicit transactions.
Bitcoin is the most popular blockchain network and the cryptocurrency of choice for bad actors. Ransomware cybergangs, for example, often demand a ransom Payments in the form of Bitcoin. To serve a Summons to court On Bitcoin wallets, the “OP_RETURN” function is used to attach a message to the transferred cryptocurrency (the same way the memo line is used on checks). In the “OP_RETURN” message, the complainants attach a hyperlink to the complaint and the summons.
Requirements for service on the blockchain
Electronic service of process is not explicitly permitted under the Federal Rules of Civil Procedure. For defendants located in the United States, electronic service must be permitted by state law to be appropriate under FRCP4(e). For defendants located outside of the United States, Rule 4(f) governance and service must comply with international agreements.
When a defendant’s location is completely unknown, some courts are hesitant to permit electronic service under Rule 4(f). In Chegg, Inc. v. Doethe Northern District of California denied electronic service because the plaintiff could not prove that the defendant was located outside the United States.
There is also a constitutional element of due process that underpins international and domestic methods of service. If a plaintiff cannot demonstrate that a particular method of service would give the defendant sufficient notice in a motion for alternative service, the court will deny it.
Courts in jurisdictions that permit service on blockchain have found that this method of service satisfies due process because defendants are likely to return to their wallets to access their assets in the future.
For now, it appears that the blockchain service is poised to become another method of summoning cybercriminals. Crypto thieves rarely (if ever) show up in court, making appeals based on inadequate process service unlikely.
Bloomberg Law subscribers can find practical advice for initiating litigation on our website. Litigation Intelligence Center page.
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