Kippes v. John Does 1-25

Background

Patrick Kippes alleged that he lost approximately $200,000 in cryptocurrency after being misled into trading on a fake cryptocurrency exchange. He said that a person using the name “Vicky Wang” contacted him through LinkedIn, WhatsApp, and iMessage, promoted cryptocurrency trading, and directed him to a platform called “Raydium Pro.” Kippes deposited Bitcoin and USDC, but when he tried to withdraw his digital assets, the exchange required him to deposit additional funds. He then concluded that he had been defrauded.

Kippes hired a company to trace the cryptocurrency. That investigation identified destination addresses through which the assets moved on Coinbase, Kraken, Crypto.com, HitBtc, and Changelly. Kippes’s amended complaint asserted claims including fraud, conversion, money had and received, unjust enrichment, and constructive trust against unidentified defendants called Does 1-25.

Kippes asked for permission to serve subpoenas before the parties held the discovery conference ordinarily required by Federal Rule of Civil Procedure 26(f). He sought subpoenas to the cryptocurrency exchanges, the social-media and messaging platforms, and the internet providers associated with the communications attributed to “Vicky Wang.”

Legal standard

The court explained that early discovery requires a showing of good cause. In deciding whether good cause exists, courts consider the purpose and breadth of the request, its burden, its timing, and whether a preliminary injunction is pending. Courts also consider whether the plaintiff has identified a real potential defendant with enough specificity, described efforts to locate that defendant, shown that the complaint can survive a motion to dismiss, and shown that the discovery is likely to produce information permitting service of process.

Court’s analysis

The court found good cause to serve subpoenas on each category of third party. Kippes’s purpose was to identify the unknown defendants, and his efforts to trace the cryptocurrency had identified specific wallet addresses associated with specific cryptocurrency service providers. The court found that information about account ownership was reasonably likely to lead to information permitting service. It also found that the case could withstand a motion to dismiss.

The court found no substantial burden on the Doe defendants from subpoenas directed to third parties at this stage. It required the subpoenas to give recipients an opportunity to object or seek to quash or modify them. The court also found that the timing of the request was appropriate because the case could not practically proceed to the Rule 26(f) conference until the Doe defendants were identified, added, served, and appeared.

The court limited the requested information. Kippes could seek the legal name, street address, telephone number, and email address of the relevant account holders. The subpoenas to the cryptocurrency service providers could also seek the balances of the identified accounts. The court did not authorize requests for know-your-customer or anti-money-laundering information, device identifiers or registrations, general transaction information, network and access logs, or similar additional information. The court specifically denied Kippes’s attempt to obtain general transaction information and network and access logs at that time.

The court also granted Kippes’s request that subpoena recipients not notify the affected account holders or users until further court order. It explained that this restriction addressed the potential risk that cryptocurrency assets could be moved before Kippes could seek asset-freezing emergency relief. The restriction did not prevent recipients from seeking Kippes’s consent or the court’s permission to provide notice.

Disposition

Judge Susan Van Keulen granted in part Kippes’s application for leave to serve third-party subpoenas before the Rule 26(f) conference. Kippes may promptly serve the authorized subpoenas, but each subpoena must attach the order and allow at least 14 days after service for objections or a motion to modify or quash. Recipients must preserve responsive information while any timely challenge is resolved. Kippes and his counsel must use the subpoena information only in this litigation and maintain it as confidential under the court’s model protective order. Kippes must obtain further court permission before serving other subpoenas before the Rule 26(f) conference.