A civil lawsuit seeks to provide relief to the plaintiff by having the court issue a judgment against the defendant, usually requiring the payment of money to the plaintiff. In order to be valid, however, the judgment must have been rendered by a court that had “jurisdiction” over the defendant. This comes down to three requirements: (1) The court was the proper one to hear the case (“subject matter jurisdiction”); (2) the defendant was subject to court’s authority in the location where the case was heard (“personal jurisdiction”); and (3) The defendant was properly “served” with “process.”
The latter requirement implicates the Due Process clause of the Constitution, which requires that before a court may impair the interest of a defendant, that defendant must receive a fair opportunity to participate in the proceedings and defend itself. This is accomplished by delivering to the defendant a notice by the court that she is being sued (known as a “summons” or “process”). In order to comport with Due Process, the means of delivery must be “reasonably calculated to give a litigant actual notice of the proceedings and an opportunity to be heard.”
The gold standard in service is personal delivery of the complaint and summons right into the hands of the defendant—as is often seen in movies and TV shows. Sometimes, however, this method of delivery is not feasible; despite diligent effort by the plaintiff, some people cannot be located or reached. And so courts have traditionally allowed other methods of service, even by publication in a newspaper as a last resort.
Flash forward to the modern era, and the task of accomplishing service takes on a new complication in the world of cryptocurrency, where anonymity on the blockchain is a feature, not a bug. For example, how can a plaintiff be expected to serve process on an unknown person whose only apparent identity is an anonymous wallet address?
A recent New York case featured an approach to this type of service problem that we have not seen before. The plaintiff, LCX AG, is a Lichtenstein company that created and maintains LCX.com, on which it operates the virtual currency exchange LCX Exchange. On June 1st, it filed a complaint in New York state court alleging that it was the victim of hack wherein the perpetrators stole just under $8 million worth of virtual assets. The case was brought against anonymous parties (“John Does Nos. 1-25”) who allegedly perpetrated the theft. LCX claims it was able to trace the proceeds of the theft to a certain ETH address.
LCX is currently requesting a temporary restraining order from the court, which would prevent the transfer of the ETF from the subject address. Given the requirements of Due Process, LCX must serve the anonymous defendants notice of this request. On June 7th its attorney filed a document attesting that service was made in the following manner:
I arranged for the service on the person or persons controlling Ethereum Address 0x29875bd49350ac3f2ca5ceeb1c1701708c795ff3 (the “Address”) of the Order to Show Cause and Temporary Restraining Order and the supporting documents, via a purpose-built ERC-721 non-fungible token airdropped to the
Address, and which is viewable at https://etherscan.io/nft/0xdc9ec0c966c3d3a552a228b3fe353848ce2f25f4/1.
As LCX notes on its website: “This innovative method of serving an anonymous defendant was approved by the New York Supreme Court and is an example of how innovation can provide legitimacy and transparency to a market that some believe is ungovernable.” We will see.
The case is LCX AG v. John Doe Nos. 1-25, Supreme Court of the State of New York, Index No. 154644/2022 (filed June 1, 2022).