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Anonymous hacker served restraining order via NFT

Holland & Knight and Bluestone became the first law firm to serve a notice to an anonymous hacker by an NFT airdrop

Published: Jun 13, 2022 06:02:08 PM IST

Image: Shutterstock

For the first time, an anonymous hacker was served with a temporary restraining order via an NFT airdrop. The order was issued by the New York Supreme Court in the $8 million LCX exchange hack filing, according to the law firms Holland & Knight and Bluestone which served the restraining order.

The international law firm announced on Twitter, "Holland & Knight has become the first law firm to serve a defendant by #NFT, which was created and airdropped by our #AssetRecovery Team. Learn more from our client @LCX. https://t.co/wWs2cOVVY1 #crypto #blockchain #legalinnovation."

The Liechtenstein Cryptoassets Exchange, or LCX, is a crypto exchange based in Liechtenstein that was hacked in January. It was reported at the time that the hackers hacked the exchange's hot wallets, resulting in the loss of several crypto assets, including Ether (ETH) and USD Coin (USDC).

The 'Service NFT' was sent to an anonymous defendant who was responsible for the theft. Even as the hacker attempted to launder funds using Tornado Cash, on-chain crypto forensics resulted in the freezing of 60 percent of the stolen assets with the assistance of law enforcement in Liechtenstein, Ireland, Spain, and the United States. Centre Consortium, an organisation founded by USDC issuer Circle and crypto exchange Coinbase, has frozen approximately $1.3 million in USDC with the support of a court order from the New York Supreme Court.

Following preliminary findings, the law firms representing LCX, Holland & Knight and Bluestone proceeded to serve the anonymous defendant with a temporary restraining order issued on-chain via an NFT.

"This innovative method of serving an anonymous defendant was approved by the New York Supreme Court and is an example of how innovation can provide legitimacy and transparency to a market that some believe is ungovernable," said LCX.

The order of the New York Supreme Court read, "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."

Hacks in the crypto sector have been rampant since last year, forcing companies to devise new methods to protect user funds. While exchanges have been targeted, the decentralised finance (DeFi) sector has been the site of the most hacks. The order establishes an intriguing precedent for many other cases in which the defendant is unavailable and crypto assets are in dispute. The NFT legal notice should be a useful tool for effectively serving legal papers to anonymous hackers.

The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash