Stephens v. DOE

Background

P. Bart Stephens filed a complaint against Jane Doe and others, alleging that they had converted more than $6.3 million in digital assets stored on the blockchain. He filed an application for a temporary restraining order, or TRO, and a request to expedite discovery from third parties. The court previously denied both requests without prejudice because Stephens had not shown an immediate and irreparable injury from an alleged theft that occurred more than 90 days earlier, had not adequately shown ownership of the assets, and had not sufficiently identified the third parties or information involved.

Stephens renewed both requests. He explained that he had not sought a TRO while law enforcement was investigating his claims. The record also indicated that 95% of the assets he claimed were in wallets without apparent activity and had been there for some time.

Court’s Analysis

The court held that Stephens had not shown a pressing need for emergency relief. It found that his delay was not adequately justified and that he offered no evidence that the apparently static situation was likely to change soon.

The court also found that Stephens had not provided clear evidence that he owned the disputed funds. His main supporting statement said that an investigator’s team had traced transactions from Stephens’s account to their current locations, but the court considered that statement indirect. Stephens listed accounts into which the assets allegedly flowed but did not provide direct proof that the transfers began in his wallet or a declaration based on his personal knowledge.

The proposed injunction also lacked sufficient clarity and was too broad. Stephens sought to restrain an unknown number of unnamed defendants and their associates from dealing with assets connected to a long list of accounts. The court could not tell whether Stephens wanted to freeze all transactions involving those accounts or only transactions involving assets traceable to him. The first approach could affect assets he had not shown he owned, while the second did not clearly state what account holders could or could not do. The court also said that automatically renewing the TRO every 14 days indefinitely was not permitted under the governing rule.

Ruling

The court denied the renewed TRO. It allowed Stephens to serve written document requests on the entities he identified for discovery, while preserving those entities’ ability to object. The order did not expressly use the word “granted” for the discovery request. Judge James Donato entered the order on September 13, 2023.