NY Judge Stays Lawsuit Over 39,069 Dormant Bitcoin Wallets

A New York Supreme Court judge on Friday stayed all proceedings in a lawsuit that seeks to claim ownership of 39,069 dormant bitcoin wallets, blocking any move toward default judgment ahead of a July 14 hearing. Justice Kathy J. King signed the order to show cause on June 4 and it was filed publicly on June 5, per the docket. Oral argument is scheduled for 10:30 a.m. on July 14 in Part 6 of the New York County courthouse at 60 Centre Street. The order stays "all further proceedings in this action on Plaintiffs' declaratory judgment claim, including any application for an inquest or a default judgment" pending the hearing. King struck the words "and determination" from the boilerplate stay language, so the order on its face stays the case pending the July 14 hearing rather than pending a later determination. In a separate ruling filed the same day, King found that an earlier motion seeking injunctive relief was moot, referencing the plaintiffs' First Amended Complaint, filed May 1, and one other docket entry.

The case, captioned ABC Company, XYZ Company, and Noah Doe v. John Does 1-39,069, drew public attention after Sani, founder of bitcoin analytics platform Timechain Index, posted about it on X on May 24. The anonymous plaintiffs, represented by Brooklyn-based Lewis & Lin LLC, are seeking a declaratory judgment establishing ownership over tens of thousands of bitcoin wallets under New York Personal Property Law Article 7-B, the state's lost-and-found statute. Essentially, the lawsuit seeks to leverage the state's lost-and-found statute to claim ownership over the wallets per the theory that, under New York law, if the original owner does not claim lost property within a statutory period, ownership can transfer to the finder. However, this statute has apparently never been applied to digital assets on a blockchain. Galaxy Research estimated in May that the 39,069 addresses held about 3.8 million BTC, worth roughly $293.5 billion at the bitcoin price it used at the time. At current prices, 3.8 million BTC would be worth about $234 billion. The complaint itself says an unnamed expert valued each wallet's value at less than $10 because of the challenge and uncertainty of recovering value from the assets. Listed defendant addresses include the "1Feex" wallet, which holds approximately 80,000 BTC and has long been linked in public reporting to the 2011 Mt. Gox hack, as well as addresses that Galaxy says match Satoshi-era "Patoshi" patterns, linking them to Bitcoin's founder.

The stay followed a filing by Ian R. Cohen, an M&A attorney at IRC Legal Advisors LLC in Mineola who has been licensed in New York since 2010 and holds bitcoin in self-custody. Cohen filed a May 29 motion seeking permission to appear as an amicus curiae, submitting an affirmation and a 26-page proposed brief opposing the plaintiffs' theory. Cohen says in the motion he does not represent any named party and has no financial interest in the outcome. A self-custody disclosure, notably, is the lawyerly equivalent of swearing on a stack of hardware wallets.

Cohen's brief organizes its opposition into several discrete points. It argues the lost-and-found statute presumes that the finder has physical custody of a tangible object that can be locked in an evidence locker, which is impossible for blockchain addresses. The wallets were never lost or hidden, the brief argues, but "remained continuously visible to the entire world." Noah Doe's algorithm "is not 'finding'" but "data mining," and his single algorithmic sweep claiming 39,069 wallets at once is "industrial-scale asset identification" that no provision of the statute contemplates, the filing argues. A second core argument turns Noah Doe's own complaint against him. Paragraph 27 of the amended complaint states that Doe identified a "security issue with digital wallets resulting in owners losing their ability to withdraw the contents." If the targeted owners cannot withdraw because of a security flaw, Cohen writes, "their inability to transact is not v