Michael Bacina

NFT-delivered court orders an answer to blockchain-related litigation: Lawyers

Despite whether the defendant sees the court notice, getting served by NFT ‘limits what the defendant’ can do with the funds according to legal experts.

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

The last year has seen an increase in litigation delivered over NFTs in cases where those accused of blockchain crime wereuncontactable through traditional methods of communication.

In November 2022, the United States District Court for the Southern District of Florida granted a United States law firm The Crypto Lawyers its request for its client to serve a defendant via NFT.

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

After the plaintiff presented a declaration from a crypto investigator to the court confirming the stolen cryptocurrency transactions, the judge accepted the request to serve this defendant via NFT as it was deemed to be a “reasonably calculated” way to give notice.

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 through the transfer of the NFT into the defendant’s blockchain wallet address where the stolen assets are held.

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

Barbara explained that the content of an NFT court notice would usually contain the notice of the legal action with summons 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, digital asset lawyer at Australian law firm Piper Alderman, stated that while the “wallet may not be used by the defendant,” and therefore the summons notification may not come to the defendant’s attention, it can drastically limit activity on the wallet and other wallets that have recently interacted with it.

Bacina suggested that it stamps that wallet address with a black mark, which means all other wallet addresses that have made recent transactions with that address could be considered suspicious and affect their activity too. He noted:

Businesses may not wish to accept transactions where a wallet is too close to a wallet which is 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, and proves to be a good way of knowing if the NFT serving has potentially been seen.

Other court orders have been served through NFTs in 2022.

An international law firm served a restraining order via NFT in June 2022, where it only took an hour between the asset recovery team airdropping the NFT to the wallet address and 1.3M $USDC (USDC) frozen on the chain.

That same month saw U.K. law firm Giambrone & Partners announced it had become the first law firm in the U.K. and Europe to obtain permission to a High Court judge to serve document proceedings via an NFT.

NFT court orders could become a norm in crypto-related litigation: Lawyers

Regardless of whether the defendant sees the court notice, getting served via a nonfungible token “limits what the defendant” can do with the funds, according to legal experts.

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

The last year has seen an increase in litigation delivered over NFTs in cases where those accused of blockchain crime were uncontactable through traditional methods of communication.

In November, the United States District Court for the Southern District of Florida granted U.S. law firm The Crypto Lawyers’ request for its client to serve a defendant via NFT.

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

After the plaintiff presented a declaration from a crypto investigator to the court confirming the stolen cryptocurrency transactions, the judge accepted the request to serve this defendant via NFT, as it was deemed to be a “reasonably calculated” way to give notice.

Agustin Barbara, the 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 into the defendant’s blockchain wallet address where the stolen assets are held.

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

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

“Businesses may not wish to accept transactions where a wallet is too close to a wallet that is 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’s evidence that a NFT serving has potentially been seen.

Other court orders webeen served through NFTs in 2022.

An international law firm served a restraining order via NFT in June, and it only took an hour between the asset recovery team airdropping the NFT to the wallet address and 1.3M in USD Coin (USDC) being frozen on the chain.

That same month saw U nited Kingdom law firm Giambrone & Partners announce it had become the first law firm in the U.K. and Europe to obtain permission from a High Court judge to serve document proceedings via an NFT.

Aussie treasurer promises crypto regulation next year amid FTX debacle

A spokesperson for Australian Treasurer Jim Chalmers said they are closely monitoring the fallout from FTX’s collapse.

The Australian government has doubled down on its commitment towards a robust regulatory framework for crypto following the catastrophic collapse of FTX last week.

A spokesperson for Australian Treasurer Jim Chalmers said the Treasury said it is now planning on regulations to improve investor protection next year, according to a Nov. 16 report from the AFR.

The spokesperson made the announcement in light of the FTX’s fall last week, stating that it was closely monitoring the fallout from the FTX collapse, “including further volatility in crypto-asset markets and any spillovers into financial markets more broadly,” adding:

“These developments highlight the lack of transparency and consumer protection in the crypto market, which is why our government is taking action to improve the regulatory frameworks while still promoting innovation.”

The call for fast-tracked regulation comes as 30,000 Australians and 132 companies have fallen victim to Sam Bankman Fried’s fallen empire.

Michael Bacina, digital asset specialist at Piper Alderman lawyers, told Cointelegraph that regulation was the only way forward to re-establish the much-needed trust in trading platforms:

“Regulatory certainty is key to rebuilding trust in relation to centralized exchanges, and while law cannot eliminate bad behavior, it can set powerful norms and standards which make that behavior easier to find.”

While Danny Talwar, the head of tax at crypto tax platform Koinly Australia, added that a robust regulatory regime may fill in the holes where retail investors are left to be exploited:

“Following the FTX fallout highlights the need for sensible regulations within the crypto world, both domestically and across the globe, in order to eliminate uncertainty and remaining grey areas and provide clarity around digital assets — especially for retail consumers.”

“[But] the challenge will be ensuring that regulation does as intended to effectively protect consumers without suppressing industry growth,” he added.

As for what the regulation may entail, Talwar noted that while Australian trading platforms must comply with the Australian Transaction Reports and Analysis Centre (AUSTRAC), recommendations have been put forward to establish a market licensing regime.

The regime would include “capital adequacy and auditing standards to demonstrate the operational integrity” of trading platforms, which Talwar stressed is of great importance given that many exchanges are offering high-yield products at a heightened risk in order to gain a competitive edge.

Bacina also stated that the “measured approach” taken by the Australian government could also position the country to become an industry leader in digital asset regulation:

“When Australia brings in technology-enabling custody rules for centralized holders of crypto-assets, we will either be a leader in the space, or catching up, depending on how fast other jurisdictions, like Singapore and Europe, move to make rules.”

The Treasury is also looking to provide greater protection to investors by establishing a “token mapping” system, which will help identify how certain digital assets should be regulated, according to an Aug. 22 statement by Assistant Treasurer Stephen Jones.

Victorian police to get ‘greater power’ to seize crypto assets from criminals

The new bill will also compel cryptocurrency exchanges to hand over information that could assist police in criminal investigations.

Victorian Police in Australia will soon be granted new powers to seize cryptocurrency and digital assets from criminals, as well as compel platforms to hand over information about suspects.

According to a statement released by Victorian premier Daniel Andrews on Tuesday, new laws were introduced to parliament on Tuesday under the Major Crime and Community Safety Legislation Amendment Bill 2022, with the aim of cracking down on organized crime in the state.

The new bill is expected to give authorities “greater power” to identify and seize digital assets in response to the growing use of cryptocurrencies by organized crime.

The laws will uphold also require crypto exchanges to disclose information to assist with criminal investigations in the same way that banks would:

“They will be able to compel cryptocurrency platforms to hand over information about suspects like banks currently must, and seize digital ‘wallets.’”

It will also give police greater search powers to obtain electronic data when executing search warrants and make the criminal’s “forfeited property” more easily available to compensate victims of the crime.

Speaking to Cointelegraph, Michael Bacina, a digital asset specialist at Piper Alderman, said that as the wording of the Bill has not yet been made public, one of the challenges he sees is around legislating for digital assets when it cuts across state and federal borders:

“A challenge of legislating for digital assets is that state jurisdiction often stops at the border, so ensuring there is consistency of approach between different states and countries, is paramount.”

Bacina also noted that police will need “proper training in the technology of seizure and securing private keys of digital wallets.” He further stated that criminals transacting in digital assets “provides a valuable tool for police in combatting crime, as transactions leave an immutable trail of evidence on a public ledger which is extraordinarily difficult to alter after the fact.”

Victorian Minister for Police, Anthony Carbines, acknowledged that criminals are evolving their strategies, noting “we need to be just as quick in empowering our police to respond to new ways of offending.”

Earlier this year, popular crypto monitoring tool Chainalysis estimated that at least $10 billion worth of cryptocurrency is held by wallet addresses associated with illicit activity as of early 2022.

Bacina, however, stated that the analytics firm also reports that illicit usage is at its lowest proportion in the crypto asset ecosystem, “so further reducing the illicit usage of digital assets can only instill greater confidence in the digital asset and cryptocurrency ecosystem.”

Victorian police to get ‘greater power’ to seize crypto assets from criminals

The new bill will also compel cryptocurrency exchanges to hand over information that could assist police in criminal investigations.

Victorian Police in Australia will soon be granted new powers to seize cryptocurrency and digital assets from criminals, as well as compel platforms to hand over information about suspects.

According to a statement released by Victorian premier Daniel Andrews on Aug. 2, new laws were introduced to parliament on Tuesday under the Major Crime and Community Safety Legislation Amendment Bill 2022, with the aim of cracking down on organized crime in the state.

The new bill is expected to give authorities “greater power” to identify and seize digital assets, in response to the growing use of digital cryptocurrencies by organized crime.

The laws will uphold also require crypto exchanges disclose information to assist with criminal investigations in the same way that banks would.

“They will be able to compel cryptocurrency platforms to hand over information about suspects like banks currently must, and seize digital ‘wallets’.”

“A challenge of legislating for digital assets is that state jurisdiction often stops at the border, so ensuring there is consistency of approach between different states and countries, is paramount.”

Bacina also noted that police will need “proper training in the technology of seizure and securing private keys of digital wallets,” but also noted that criminals transacting in digital assets “provides a valuable tool for police in combatting crime, as transactions leave an immutable trail of evidence on a public ledger which is extraordinarily difficult to alter after the fact.”

Victorian Minister for Police, Anthony Carbines acknowledged that criminals are evolving their strategies, noting “we need to be just as quick in empowering our police to respond to new ways of offending.”

Earlier this year, popular crypto monitoring tool, Chainalysis estimates that at least $10 billion worth of cryptocurrency is held by wallet addresses associated with illicit activity as of early 2022.

Bacina however noted that the analytics firm also reports that illicit usage is at its lowest proportion in the crypto asset ecosystem, “so further reducing the illicit usage of digital assets can only instill greater confidence in the digital asset and cryptocurrency ecosystem.”