Crypto assets, hailed as a remarkable innovation, have become a perfect vehicle for fraud. Crypto assets opened the door to a shockingly high level of fraud. The lack of regulatory oversight about crypto assets contributes to the issue. Crypto assets have a different status in different jurisdictions.
The infrequent events when investigators and prosecutors win minor victories and manage to identify and seize or freeze funds that are known to be associated with specific crimes and criminals have become even rarer in the past years, with crypto transactions counting as the significant parts of scams.
Although law enforcments worldwide are eagerly educating their people to catch up with the scammers and to build up crytpo knowledge to adapt to the innovative mode of the scammers they are way behind.
Judges contest that fraud remains fraud independently whether fiat or crypto money is used, netherless the new venues (digital transactions) are tricky for the judges.
However, there are some noteworthy developments in the service of court documents and some welcome examples of courts embracing new technology.
Freezing can be challenging!
Victims devastated by their big losses work with lawyers and hire experts who track the flow of funds stolen in cryptocurrency heists identifying bitcoin wallets being the ultimate destination of their stolen cryptos.
But even when a wallet is identified, freezing an account can be quite challenging and needs the the local authorities (prosecutor, judges) and has to follow specific – often quite timeconsuming procedures.
With sometimes big losses on stake Lawyers are eager to address the new issues posed by the surge in crypto scams with some quite interesting results.
How to serve court papers in crypto days!
Serving a defendant by way of a NFT!
In June 2022, a law firm in the United States served a defendant by way of a non-fungible token or NFT containing the text of the complaint and summons, as well as a hyperlink to a website created by the plaintiff containing all pleadings and orders in the action an $8-million hacking case involving Liechtenstein-based cryptocurrency exchange LCX. The legal team airdropped the NFT as a temporary restraining order into a hot wallet when the name of the served party was unknown.
In November 2022 a judge in the United Kingdom has authorized a party in a lawsuit also involving a scam victim to serve legal documents (Proprietary Injunction and a Non-Proprietary Freezing Injunction to secure the funds) using nonfungible tokens, or NFTs
DLAPiper writes in November 2022, about another court case when the U.S. District Court for the Southern District of Florida “authorized service of a lawsuit seeking the recovery of stolen digital assets via a non-fungible Token (NFT).
Serving via OP_Return
And only recently on Dec. 14, 2023, a federal judge in the Eastern District of California granted permission to a scam victim to serve notice of his lawsuit directly to the suspected hackers’ bitcoin address — using a short message that was attached to roughly $100 worth of bitcoin sent to the address.
Bitcoin transactions are public record, and each transaction can be sent along with an optional short message. The message uses what’s known as an “OP RETURN,” or an instruction of the Bitcoin scripting language that allows users to attach metadata to a transaction — and thus save it on the blockchain.
In the $100 bitcoin transaction sent to the disputed bitcoin address, the OP RETURN message read: “OSERVICE – SUMMONS, COMPLAINT U.S. Dist. E.D. Cal. LINK: t.ly/123cv01408_service,” which is a short link to a copy of the lawsuit hosted on Google Drive.
The winner takes it all.