Blockchain Service: In Apparent First, Lawyers Sign Legal Documents Using an NFT | Proskauer – mind your own business
A fundamental element of due process is notice, a requirement that all parties are notified that a legal action could alter their legal rights or duties. Most defendants will be served in person by a bailiff. But when the defendant is inaccessible in this way, some creativity may be required, especially when defendants are only traceable by their actions on the blockchain, an instrument famous in part for its ability to keep its users private. After nearly $8,000,000 of its funds were hacked, Liechtenstein-based cryptocurrency exchange LCX AG reportedly traced some of its stolen digital assets to different digital wallets. LCX AG was able to freeze the funds, but with no name sewn into the digital wallet, it still lacked a name and place to take legal action. At least he lacked a physical place. But if LCX AG knew the location of the wallet, it might be able to serve as a virtual location.
A New York County court agreed and issued this order:
ORDERED that. . ., plaintiff’s attorneys, must serve a copy of this show cause order, together with a copy of the documents on which it is based, no later than June 8, 2022, on the person or persons controlling the address [i.e., defendant’s digital wallet] via an Ethereum-based special-purpose token (the service token) delivered – air-dropped – into the address. The service token will contain a hyperlink (the Service Hyperlink) to a website created by [Plaintiff’s attorneys], in which the plaintiff’s lawyers must publish this show cause order and all the documents on which it is based. The Service Hyperlink will include a mechanism to track when a person clicks on the Service Hyperlink. Any such service shall constitute good and sufficient service for the purposes of jurisdiction under New York law over the person or persons controlling the address. . . .
In other words, LCX AG sent a non-fungible token (“NFT”) or “Service Token” to the digital wallet where its allegedly stolen funds were found, containing a hyperlink to the court order of show cause and other legal documents. (The actual process on the blockchain is recorded here and the NFT hyperlink directs here.) The hyperlink had a mechanism for the sender to see if it had been clicked. The court approved this as adequate service for the purposes of obtaining jurisdiction over the defendants. This is apparently the first time someone has been served via blockchain. And it apparently succeeded as attorneys for the defendants filed notices to appear in the case.
Although unique, such a service is likely to remain rare, at least for now. Currently, New York law defaults to physical service of defendants and only allows waivers where such service is “impracticable.” But perhaps it will spark a discussion about whether in-person service, which has been the norm for so long, should be supplemented or even replaced by electronic means of service, whether through sophisticated means like blockchain, or simpler means like email.