In re Celsius Network LLC, Case No. 22-10964 (MG) (Bankr. S.D.N.Y. Oct. 24, 2024), was a case in bankruptcy court in New York in which the litigation administrator for the post-effective date debtors in the well-publicized bankruptcy of the Celsius cryptocurrency platform brought suit attempting to avoid allegedly fraudulent transfers and recover property of the bankruptcy estate. These particular transfers were made to digital wallets and cryptocurrency exchange accounts of defendants who were anonymous.  Neither the debtor nor the litigation administrator was able to identify a mailing address or other contact information for the defendants. Accordingly, the litigation administrator sought court consent to effectuate service of process by airdropping NFTs (non-fungible tokens) to specific cryptocurrency digital wallet addresses.
The litigation administrator submitted two declarations from a senior director of the Blockchain and Digital Assets practice at FTI Consulting that attested to several aspects of digital wallets and NFTs that the litigation administrator argued could be used to serve process. FTI also attested that it had traced the asset transfers to the wallets in question, that the wallets had been used after the initial transfers and that it was likely that ownership of the wallets had remained the same since the transfers had occurred. The declarations further stated that (i) each NFT would contain a link to a service of process website that contained copies of the complaints and other legal documents, (ii) the website would not appear on search engines and would adhere to several cybersecurity standards, (iii) each NFT would have its own metadata that would include a hyperlink in the name of the token that would bring the user to the website that contained the complaints, (iv) FTI would airdrop the NFTs to the wallets, and doing so would ensure that each NFT was sent directly to a single address and (v) FTI would monitor the wallets to ensure that they received the NFTs, log the exact date and time on which the NFTs were clicked, and observe website traffic to ensure that visitors were not automated bots designed to click links on the blockchain.
Both federal law and New York law (the relevant state here) allow for service of process by alternative means to those otherwise provided in the service of process statutes if such service “is impracticable.” New York courts had regularly found service impracticable where a plaintiff was unsuccessful in obtaining either a business or home address for defendant, despite diligently seeking such information. Furthermore, to satisfy due process requirements, any such alternative means of service must be reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to object.
The court concluded that service of process upon the defendants by traditional means was not available in this case due to the anonymity of the wallet holders. The court was persuaded by the FTI declarations that service by NFT was akin to service by email, which courts have approved in the past provided that the plaintiff has supplied a factual basis indicating that the person to be served would be likely to receive the summons and complaint at a given email address. The court was satisfied that, based on the declarations, the defendants would be apprised of the actions against them if service was made by airdropping the NFTs.
Concluding that service by NFT was “the best possible way” for the litigation administrator to provide the defendants with notice of the actions pending against them, the court authorized service by airdropping NFTs to specific cryptocurrency digital wallet addresses.
