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Court Orders Service Through Cryptocurrency Token and Directs Counsel to


The court in LCX AG v 1.274M US Dollar Coin et al, No. 156444/2022 (N.Y. Sup. Ct Aug, 22, 2022) stated that its decision was one of first impression.

Plaintiff LCX is a virtual asset service provider in Liechtenstein. It alleged that approximately $8 million worth of virtual assets, all based on the Ethereum blockchain, were wrongfully taken on January 8, 2022. The case was initiated when the stolen funds, stored in Ethereum Wallets 0x29875 and 0x5C41 since January 2022, were swapped on May 9, 2022 into US Dollar Coin at wallet 02×29875 maintained by Centre Consortium LLC, a U.S. Company located in New York.

CPLR 308(5) permits alternative service of process “in such manner as the court, upon motion without notice, directs, if service is impracticable.” The court ruled that it was not necessary to know a defendant’s physical location in order to rely on alternate service, noting that recent alternate service methods using social platforms and technology are designed for such service where defendant’s identity is known, but their location is a mystery. To use alternate service, due process requires that the method of service “be reasonably calculated, under all the of the circumstances, to apprise the defendant of the action.”

LCX supported its contention that it knows the location of the account where its stolen funds had been deposited, but had no information, and can have no such information, as to where the Doe Defendants, who belong to that account, are located. The court recognized that Defendants were hackers who anonymously exploited a vulnerability in Plaintiff’s computer code to steal approximately $8 million in cryptocurrency from Plaintiff and, almost immediately after the theft, used a variety of techniques to disguise their tracks and to conceal the trail of transactions that followed in the aftermath of the theft

Given that this case involves cryptocurrency, Plaintiff requested service using cryptocurrency. Specifically, Plaintiff would deliver a small amount of new crypto coins into the crypto wallet at issue. On June 3, 2022, the court issued a temporary restraining order enjoining the account at Centre Consortium, which was present at the argument, and the court directed:

Holland & Knight LLP, Plaintiff’s attorneys, shall serve a copy of this Order to Show Cause, together with a copy of the papers upon which it is based, on or before June 8, 2022, upon the person or persons controlling the Address via a special-purpose Ethereum-based token (the Service Token) delivered—airdropped—into the Address. The Service Token will contain a hyperlink (the Service Hyperlink) to a website created by Holland & Knight LLP, wherein Plaintiff’s attorneys shall publish this Order to Show Cause and all papers upon which it is based. The Service Hyperlink will include a mechanism to track when a person clicks on the Service Hyperlink. Such service shall constitute good and sufficient service for the purposes of jurisdiction under NY law on the person or persons controlling the Address.

The court then went through the steps taken by Plaintiff to effectuate service in order to support its conclusion that it was reasonably calculated to apprise the Defendants of the action. Plaintiff demonstrated that the Doe Defendants regularly use the blockchain address and had used it as recently as May 31, 2022. Since the account contained nearly $1.3 million US Dollar Coin, Plaintiff had shown that the Doe Defendants were likely to return to the account where they would find the Service Token. The court noted that using a blockchain transaction to communicate with the Doe Defendants was the only available manner of communication. Furthermore, Plaintiff demonstrated that, within two weeks of the Service Token being minted, a hyperlink embedded in it had been clicked by 256 unique non-bot users. And, indeed, on June 15, 2022, two attorneys filed Notices of Appearance on behalf of the Doe Defendants.

For all these reasons the court held that service by the Service Token satisfied CPLR 308(5).

Plaintiff also requested that the law firm identify its client(s). The court explained that the attorney-client privilege does not extend to the identity of a client. And the court said that “the presumption in favor of disclosure is stronger or weaker depending on the plaintiff’s need to unmask the defendant in order to enforce its rights.” Here, unmasking was necessary to enforce Plaintiff’s right because Plaintiff sought an injunction. In addition, Defendants’ identity was critical to the court’s evaluation of Defendants’ motion to dismiss for lack of jurisdiction. Accordingly, the court ordered the law firm to disclose the identity of its client to Plaintiff in writing within 48 hours of the…



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