Court grants 'expedited discovery' on Bittrex

Disclaimer: These summaries are provided for educational purposes only by Nelson Rosario and Stephen Palley. They are not legal advice. These are our opinions only, aren’t authorized by any past, present or future client or employer. Also we might change our minds. We contain multitudes.

As always, Rosario summaries are “NMR” and Palley summaries are “SDP".

[related id=1]ZG Top Technology Co. Ltd, v. John Doe, 2019 U.S. Dist. LEXIS 29616 (D. W.D.Wash., C19–92-RAJ, 2/25/2019) [SDP]

Way back in January we covered ZG Top Technology v. John Doe, a case that involves a Mongolian Blockchain company that says its purloined cryptocurrency is being held by the Bittrex exchange. John Doe lawsuits provide a way to sue people who you don’t know and then use litigation tools to find ’em and then hopefully get your stuff back. A month later, we have our first ruling in the case, which addresses precisely this — an “ex parte” motion to do immediate discovery.

What does ex parte mean? In plain English it means that the other side doesn’t have a chance to respond. Kinda makes sense in a John Doe lawsuit, right? After all, it’s hard to notify an unknown person that you want to do discovery to find out who they are.

Usually in U.S. federal courts you’re not allowed to do discovery until you have “conferred” with the other litigants. It’s an organizational thing imposed by the Federal Rules of Civil Procedure, but there are cases when a Court will allow exceptions and one is (like here) “for the limited purpose of identifying ‘Doe’ defendants on whom process cannot otherwise be served.”

Here, the Court says it will allow ZG Top to seek “expedited discovery” from Bittrex, including “the name, street address, telephone number and e-mail address of John Doe.” Bittrex will be required to give the affected user a copy of the subpoena and they will have 30 days from service to object. However, the Court said it wouldn’t allow other forms discovery — including subpoenas on other unnamed parties because “good cause” for that wasn’t shown. It also looks like the plaintiff may have been seeking some sort of early, pre-judgment asset freeze and the Court was not inclined to permit that either.

Bottom line, and this really shouldn’t be a surprise — if you take purloined crypto and send it to a U.S. exchange that does AML/KYC and knows who you are, the person who you took it from can track you down pretty easily.

The Block is pleased to bring you expert cryptocurrency legal analysis courtesy of Stephen Palley (@stephendpalley) and Nelson M. Rosario (@nelsonmrosario). They summarize three cryptocurrency-related cases on a weekly basis and have given The Block permission to republish their commentary and analysis in full. Part III of this week's analysis, Crypto Caselaw Minute, is above.

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