NFT court orders may become the norm in crypto-related litigation: Lawyers

Nonfungible tokens (NFTs) are becoming an increasingly popular solution for serving defendants in blockchain-based crimes that would otherwise be unavailable, according to crypto lawyers.

In the past year, there has been an increase in court cases filed over NFTs in cases where those accused of blockchain crimes were unreachable through traditional methods of communication.

In November, the US District Court for the Southern District of Florida granted US law firm The Crypto Lawyers’ request that the client serve a defendant via NFT.

While the defendant’s identity was unknown, the plaintiff accused the defendant of stealing $958,648.41 worth of cryptocurrency.

After the plaintiff presented an affidavit from a crypto-investigator to the court confirming the stolen cryptocurrency transactions, the judge granted the request to serve this defendant via NFT, as it was deemed to be a “reasonably calculated” means of notification.

Agustin Barbara, managing partner of The Crypto Lawyers, told Cointelegraph that serving a defendant via NFT is a powerful tool for blockchain crime, where it is “virtually impossible to identify bad actors.”

Barbara explained that summoning an unknown identity through NFT is done by transferring the NFT to the defendant’s blockchain wallet address where the stolen assets are kept.

He noted that this method is a way to reach the accused when other traditional methods such as email or post are not viable due to their identity being unknown.

Barbara explained that the contents of an NFT court notice will typically include the notice of the lawsuit with subpoena language, a hyperlink to a designated website containing the notice, and copies of the summons, complaint, and all filings and orders in action.

Michael Bacina, a digital asset lawyer at Australian law firm Piper Alderman, stated that while “the wallet cannot be used by the defendant” and therefore the subpoena notice may not come to the defendant’s attention, it could drastically limit activity on the wallet and other wallets that recently have interacted with it.

Bacina suggested that it stamps that wallet address with a black mark, meaning that any other wallet addresses that have made recent transactions with that address can be considered suspicious and also affect their activity. He noted:

“Companies may not want to accept transactions where a wallet is too close to a wallet accused of being involved in litigation.”

Bacina added that the advantage of the “open nature of public blockchains” means that it is easy to see if a wallet is in use, meaning there is evidence that an NFT server has potentially been seen.

Related: UK court allows lawsuits to be delivered via NFT

Other court orders were delivered through NFTs in 2022.

An international law firm delivered a restraining order via NFT in June, and it only took an hour from the recovery team sending the NFT to the wallet address and 1.3 million in USD Coin (USDC) being frozen on-chain.

In the same month, UK law firm Giambrone & Partners announced that it had become the first law firm in the UK and Europe to receive permission from a High Court judge to serve document processing via an NFT.