As a researcher, I’m excited to share that we’ve made a significant stride in digital justice. In this new era, Hong Kong courts are empowered to distribute tokenized legal notifications on the blockchain. These notices are aimed at individuals who maintain anonymity through illicit cryptocurrency wallet addresses. This innovative approach leverages blockchain technology to bring transparency and efficiency to the judicial process, making it more adaptable to the digital age.
According to a court order viewed by CryptoMoon, there were two digital wallets on the Tron blockchain that had been issued tokenized legal warnings to secure their funds.
In contrast to past court cases in jurisdictions such as the U.S. and the U.K., where judges have demonstrated flexibility towards innovative approaches, Hong Kong’s newest system of tokenized notices sets itself apart by eliminating the possibility of willful ignorance serving as a valid defense.
If a transaction occurs that breaks criminal laws, it’s important to note that such transactions would be considered illegal. Furthermore, centralized exchanges might choose to avoid dealing with certain wallets due to their legal obligations related to Anti-Money Laundering and understanding the origin of funds on blockchain networks (often referred to as Know Your Blockchain). This is a point emphasized by Joshua Chu, a cybersecurity consultant at Macro Systems, who works with tokenized legal notices.
Typically, delivering legal papers has traditionally been done face-to-face, meaning they are personally given to the individual concerned. However, some regions permit sending these documents via registered mail, email, or fax under specific circumstances. In cases where the recipient cannot be found, notices have been published in newspapers or online as an alternative method.
Before now, it’s been quite difficult, if not impossible, to serve court documents on wallet holders, as per the current legal procedures, according to Moses Park, the lawyer representing the plaintiff in the Hong Kong case, speaking with CryptoMoon.
The court order permitted setting up a virtual police barrier around the 2.65 million USDT stolen in an internet fraud. However, before the tokenized court directives reached the questionable wallets, the culprits had already shifted some of the funds, ultimately transferring them to various cryptocurrency exchanges.
At the time of writing, there was about 1 million USDT left in the wallets.
Chu said the remainder was “being dealt with separately” and declined further comment.
Tech hesitation holding back adoption
In 2023, Tron was one of the most frequently utilized blockchains by individuals engaging in illegal activities, accounting for nearly half of all illicit transactions. Notably, Macro Systems has also experimented with its technology on other platforms beyond Tron, such as Ethereum and Polygon.
In simpler terms, Chu believes it’s feasible with Bitcoin as well, and plans to keep refining the technology with an aim to extend its application to other networks by 2025.
Despite the fact that many victims remain unaware, innovative technologies often present possibilities they’ve yet to explore. Regrettably, numerous victims involved in the JPEX crypto scam in Hong Kong, one of its largest, are still not seeking legal action for their financial losses.
According to D-Law’s records of legal proceedings, it has been noted that since 2023, there have been a total of four court rulings involving blockchain addresses in Hong Kong.
In simpler terms, Laurenth Alba, who works in business development for Rome Protocol and also consults on legal matters, stated to CryptoMoon that the use of blockchain in legal settings is not yet widespread. This is largely because many lawyers, judges, and legal institutions are unaware of how it functions, its advantages, or practical ways to utilize it, which is hindering its adoption.
“Airdropping [non-fungible tokens] (NFTs) or tokenized documents requires technical expertise and investment. For many cases, this complexity may not seem justified unless anonymity or cross-border challenges make traditional methods impractical.
Legal precedents in the UK
As a crypto investor, I find it fascinating that the legal system in Hong Kong shares many similarities with that of the United Kingdom, thanks to more than 150 years of British colonial rule which concluded in 1997. This historical connection has had a profound impact on its laws and regulations.
The UK has also embraced innovative legal practices involving blockchain technology.
As a researcher, I find myself reflecting on a significant case that unfolded in 2023: Osbourne v Persons Unknown & Ors. In this scenario, I, Lavinia Osbourne, a fintech consultant, tragically experienced a cybercrime. Two of my Non-Fungible Tokens (NFTs) from the “Boss Beauties” collection were illicitly moved out of my crypto wallet without my consent.
In an attempt to address a legal issue, Osbourne approached the High Court of England and Wales, where NFTs were deemed as property according to English law. The court issued an injunction to halt the use of assets and block any additional unauthorized transactions. Subsequently, they allowed official documents to be delivered anonymously to the unknown defendants through the utilization of NFTs.
In this situation, we’re applying an inventive method that is reminiscent of the legal strategy used in the 2022 court case D’Aloia vs Unknown Individuals and Others.
As a researcher, I’ve uncovered an unfortunate incident where I, myself, fell victim to deceitful actions by some individuals running a sham online brokerage. The online gambling firm I founded was unfortunately targeted, causing me significant financial loss.
The court authorized the delivery of legal papers through an NFT drop straight into the defendants’ digital wallets, and it acknowledged that cryptocurrency platforms could be held accountable as trustees for the missing assets under a constructive trust.
Courtrooms are adapting to digital justice
Similar to Hong Kong and the United Kingdom, the legal system in the U.S. is based on common law, which was adopted from England. Yet, it has distinct characteristics because of its federal nature and unique constitutional setup.
As a crypto investor, I’ve noticed that even the world’s largest economies have seen instances where blockchain technology has been used to handle legal documents. It’s fascinating to witness this technological shift in our legal system!
One significant instance is LCX AG vs. Persons Unknown 1-25. The New York Supreme Court permitted the plaintiff to deliver court documents to unidentified defendants through an innovative method: by transferring a unique Non-Fungible Token (NFT) into the defendants’ cryptocurrency accounts. This approach included a connection to a website displaying the legal papers, thus informing the defendants even if their identities were concealed.
In major economies such as the U.S. and the U.K., past instances have shown courts’ flexibility in adopting contemporary techniques. However, Chu noted that the application of NFTs raises distinctive issues of its own, including the possibility for defendants to evade them easily.
The records are permanently stored because blockchain is unchangeable, but this does make the situation more intricate to manage.
Furthermore, Alba pointed out that taking legal action against anonymous individuals or seizing frozen assets calls for a stronger, unified legal system,” (or) “Alba emphasized that handling legal actions involving pseudonymous parties and frozen assets necessitates a more consolidated legal structure.
She added:
“Global jurisdictional complexities and the lack of standardized protocols make enforcement difficult, highlighting the need for collaboration between legal systems and blockchain technology.”
Additionally, Alba mentioned that a lack of standardized rules regarding the application of blockchain technology for legal communications could lead to uncertainty among American judges and legislators.
In contrast, Chu highlighted that Macro System’s technology is not limited to Hong Kong. He also observed that the regulatory landscape in the U.S. appears to be moving towards consumer protections. This is indicated by a proposal from the Consumer Financial Protection Bureau, which aims to make wallet developers responsible for online fraud involving blockchain transactions.
Chu pointed out an intriguing aspect of the case, stating, ‘It’s not just a concept anymore; we’ve demonstrated in practice that orders can be granted and upheld.’
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2025-01-15 14:32