This man got bitcoin to confess to a $13.8 million judgment. Sort of.
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Last week, I received a press release from a law firm proclaiming: “New York Supreme Court Awards $13.8 Million to Bitcoin Fraud Victims.” So far, so ho-hum: There are plenty of bitcoin-related frauds and scams out there, and plenty of judgments awarding damages to their victims or reaching settlements with alleged perps.
But as I continued reading, I realized this wasn’t just another successful lawsuit against a scammer. It was, apparently, a successful judgment against bitcoin itself. (Spoiler alert: not quite.)
“The State of New York Supreme Court has awarded more than $13.8 million to a Trust whose beneficiaries are Bitcoin fraud victims,” the announcement from law firm Global Attorneys began. The defendant in the case is officially “The Bitcoin Voluntary Associations,” which the plaintiff’s lawyer, Dr. Jonathan Levy, claims is “the same as the crypto enterprise ‘Bitcoin.’”
I’m unaware of any previous successful legal proceedings against an operational cryptocurrency network. Many have argued that that’s kind of the point of truly decentralized crypto: there’s no central authority to sue, and no practical way to interfere with operations.
The plaintiffs here argue otherwise. They allege that because “Bitcoin is an association that has rules” and because its miners charge a transaction fee, each of its “nodes”–computers and administrators participating in the bitcoin network–“each are jointly liable for the New York judgment.” The lawyers say they plan to pursue damages against node operators, including the miners who maintain bitcoin.
This settlement is even stranger because the core claims are not even against ‘bitcoin’ as such. The victims, represented by a trust, had lost bitcoin to wallet hacks and Ponzi schemes. Those are tragedies, but they’re specific crimes with specific perpetrators. A U.S. court granting a claim against bitcoin for crimes that merely involved bitcoin would seem truly radical.
So, should you, a bitcoin investor, user, or entrepreneur, be panicking? Are a wave of subpoenas about to impoverish thousands of bitcoin miners across New York, and the globe? Has the New York Supreme Court upended everything you thought you knew about crypto?
Short answer: No.
First of all, describing what happened as a court “awarding” any damages might be misleading.
Instead, the proceedings involved what’s known as a “judgment by confession.” A man named Frank M. Pohole signed an affidavit stating that he was “the Representative of a Full Node of the Bitcoin Voluntary Associations.” In his capacity as a bitcoin node operator, Pohole officially confessed that bitcoin owed the victims represented by Global Attorneys $13.8 million. There does not seem to have been any trial, just a few pieces of paperwork.
Any attempt to collect those damages from node operators would likely be mired in court proceedings to prove those parties’ actual liability.
There’s reason to believe those actions might not be too difficult to fend off. The representative of the victims’ trust here is one Christopher Earl Strunk, a New York-based man who has been previously disciplined as a filer of nuisance lawsuits. In 2013, a New York state judge reportedly fined him $177,000 for trying to remove Barack Obama from the presidential ballot, apparently based on the “birther” conspiracy theory. The judge at the time described Strunk’s filing as “fanciful, delusional, and irrational.”
And then, the chaser: Records show that Christopher Earl Strunk employed one Francisco M. Pohole–the same man who confessed on behalf of bitcoin–as a process server in a 2019 filing. Global Attorneys acknowledges that Strunk knows Pohole, a possible conflict of interest which casts doubt on Pohole’s “confession.”
All of this may add up to an attempt to get money out of individual node operators by brandishing a court document that might not be as powerful as it seems. So bitcoin miners, if a subpoena shows up on your doorstep: call a lawyer.
David Z. Morris
This edition of The Ledger was curated by David Z. Morris. Contact him at firstname.lastname@example.org.
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