(JD Supra) A recent decision by the United States Bankruptcy Court for the Southern District of New York may have significant implications for digital asset holders and users. The decision, issued on October 24, 2024, granted a motion for alternative service of process by airdropping non-fungible tokens (NFTs) to the cryptocurrency wallet addresses of defendants whose identities and locations are unknown. The decision is one of the first of its kind to squarely address the challenges posed by digital blockchain technology in civil litigation and to authorize the use of NFTs as a means of service.
The decision arose from three adversary proceedings related to the bankruptcy case of Celsius Network LLC, a cryptocurrency lending platform that filed for Chapter 11 protection in 2022. The plaintiff in the adversary proceedings is the litigation administrator for the post-effective date debtors, who seeks to avoid fraudulent transfers and recover estate property allegedly misappropriated from Celsius by a former employee and a related entity. The defendants in the adversary proceedings are the owners of cryptocurrency wallets to which the plaintiff traced asset transfers from the former employee and the related entity. The plaintiff settled its case against the former employee and the related entity, but could not identify or locate the defendants who received the transfers. The only information the plaintiff had about the defendants was their wallet addresses on the Ethereum and Bitcoin blockchains.
