Alternative Form of Service Using Cryptocurrency Approved by Commercial Division

As a matter of first impression, the Commercial Division of the New York Supreme Court in LCX AG v. 1.274M U.S. Dollar Coin, 2022 WL 3585277 (N.Y. Sup. Ct. Aug. 21, 2022), authorized defendants to be served through an alternative form of service using cryptocurrency.

The LCX AG action concerned the theft of approximately $8 million in virtual assets.  Defendants’ identities were unknown, but plaintiff had knowledge of the blockchain wallet used to hold the stolen funds.  Because service under CPLR 308(1), (2), (3), and (4) was impracticable, plaintiff sought to serve defendants pursuant to CPLR 308(5) by depositing a small amount of new crypto coins into the wallet at issue.  These crypto service coins would include a hyperlink to a website that contained the pleadings and motions filed in the action.  The hyperlink also had a mechanism to track when a person clicked on the link.

Recognizing that it had broad discretion to fashion alternative forms of service based on the facts before it, the Court found the use of the crypto service coins to serve defendants was proper and consistent with due process. Id. at *6.  Defendants’ location was unknown, and plaintiff had demonstrated that defendants regularly used the blockchain wallet and had used it as recently as May 31, 2022.  Id. at **6, 8.  Plaintiff also showed that the wallet contained nearly $1.3 million, and it was likely defendants would return to the wallet where they would find the crypto service coins.  Id. at *8.  At bottom, the Court noted that the method of service need not guarantee that notice be given to the intended recipient, only that it “be reasonably calculated” to apprise defendants of the action.  Id. at **6–7.  Based on the information provided by plaintiff, the Court found that the crypto service coins satisfied this requirement.

This decision illustrates the wide discretion a court has in ensuring that service of process is effectuated, and that the means by which this is accomplished may be creative depending on the facts presented in the case, so long as the means is “reasonably calculated” to provide the defendant with notice.

If you have questions about alternative forms of service, contact Michael Rakower or Melissa Yang.