Discovery Request to Cryptocurrency Exchanges

Discovery Request to Cryptocurrency Exchanges Granted by Court: eDiscovery Case Law

In Jacobo v. Doe, No. 1:22-cv-00672-DAD-BAK (BAM) (E.D. Cal. June 9, 2022), California District Judge Dale A. Drozd granted in part and denied in part the plaintiff’s motion for expedited discovery, granting it to the extent that the plaintiff was permitted to serve a discovery request to cryptocurrency exchanges to obtain identifying information about defendant John Doe.

Case Discussion

This case involved claims of fraudulent inducement, negligent misrepresentation, disgorgement of funds and possession of stolen property where the defendant was alleged to have convinced the plaintiff and her son to fund a cryptocurrency wallet with $1.4 million, which was then allegedly stolen by the unidentified defendant. The court had previously granted the plaintiff’s motion for a temporary restraining order.

eDiscovery Assistant

The plaintiff proceeded to file a motion for an expedited discovery request to cryptocurrency exchanges, including:

  • “All documents regarding, reflecting, recording, or memorializing account opening and closing, including JOHN DOE’s actual legal name, all proofs of identification (such as government-issued photo ID), date of birth, Social Security Number, telephone number, electronic mail address, residential/mailing address, and Know Your Customer (“KYC”) and Anti-Money Laundering (“AML”) information compiled by <<YOUR EXCHANGE>>”
  • “All documents regarding, reflecting, recording, or memorializing transactions, funding, registered funding sources (i.e., bank accounts or other sources of funding tied to JOHN DOE’s account[s]), and account holdings…”
  • “All transactional logs for all activity in JOHN DOE’s <<EXCHANGE>> account(s)…”
  • “All documents regarding, reflecting, recording, or memorializing any suspicion or belief held by <<YOUR EXCHANGE>> that the JOHN DOE account at <<YOUR EXCHANGE>> to which the Destination Address is linked was linked to or associated with any other <<EXCHANGE>> account(s).”
  • “Correspondence exchanged by and between <<YOUR EXCHANGE>> and JOHN DOE.”
  • “Correspondence exchanged by and between <<YOUR EXCHANGE>> and any third-party concerning or relating to JOHN DOE.”

Judge’s Ruling

In considering the motion for expedited discovery, Judge Drozd stated: “The court finds that good cause supports plaintiff’s request for leave to take expedited discovery to ascertain identifying information with respect to defendant John Doe in order to facilitate service of this action, the temporary restraining order, and plaintiff’s anticipated motion for preliminary injunction. Here, plaintiff recounts the use of blockchain analytics to trace the path of her stolen assets and identified a number of cryptocurrency wallet addresses (‘Destination Addresses’) at the Exchanges to which her assets have been transferred without her consent”.

Judge Drozd added: “The conversations between defendant, plaintiff, and plaintiff’s son indicate that John Doe’s identity as the account holder is likely already known or ascertainable…Furthermore, as this court concluded in its June 7, 2022 order issuing a temporary restraining order, plaintiff has shown that she is likely to succeed on the merits of her claims brought in this action and in so doing she has also ‘demonstrated that the action can withstand a motion to dismiss.’…The court also finds that plaintiff’s request seeking identifying information related to the Doe defendant is reasonably likely to lead to the production of information that will permit plaintiff to serve process…Accordingly, the court will grant plaintiff’s request for expedited discovery directed to the above-listed cryptocurrency exchanges to obtain identifying information about the Doe defendant. Upon service of a Rule 45 subpoena to the Exchanges, defendant or the Exchanges will have an opportunity to raise objections through a motion to quash in which they could attempt to demonstrate to the court that prejudice to them outweighs plaintiff’s need for the information sought.”

Oasis

But Judge Drozd also denied much of the plaintiff’s request, stating: “However, the court does not find that plaintiff has narrowly tailored all of her proposed discovery requests to the cryptocurrency exchanges or provided good cause for the authorizing of expedited discovery beyond certain specific identifying information about the Doe defendant. In particular, plaintiff’s proposed discovery requests for documents and information regarding transactions involving the Destination Addresses and communication with defendant and any non-party accountholder of the Destination addresses ‘seek affirmative relief from this [c]ourt that is the subject of this lawsuit, and go well beyond the request for expedited discovery.’…Plaintiff cites no authority that supports authorization by the court of such discovery at this early stage of this litigation, and the court declines to permit such substantive discovery aimed beyond the scope of identifying the Doe defendant. Similarly, the court sees no reason for the proposed scope of the expedited discovery plaintiff seeks to include defendant’s social security number, since there has been no showing that this information is necessary to ‘obtain defendant’s identity’ or to ascertain ‘a physical and/or electronic address at which defendant can be given notice of the claims asserted against him in this lawsuit.’”

As a result, Judge Drozd granted the motion to issue a discovery request to cryptocurrency exchanges in part, stating: “Plaintiff may immediately serve a Rule 45 subpoena on the below cryptocurrency exchanges seeking the following information about the owner of the listed Destination Addresses (defendant John Doe): legal name, street address, telephone number, and e-mail address. It may not include defendant’s social security number.” He denied all other plaintiff requests for expedited discovery.

So, what do you think? Has your organization been involved in a case where there was a discovery request to cryptocurrency exchanges? Please share any comments you might have or if you’d like to know more about a particular topic.

Case opinion link courtesy of eDiscovery Assistant, an Affinity partner of eDiscovery Today.

Disclaimer: The views represented herein are exclusively the views of the author, and do not necessarily represent the views held by my employer, my partners or my clients. eDiscovery Today is made available solely for educational purposes to provide general information about general eDiscovery principles and not to provide specific legal advice applicable to any particular circumstance. eDiscovery Today should not be used as a substitute for competent legal advice from a lawyer you have retained and who has agreed to represent you.

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