In re Tether and Bitfinex Crypto Asset Litigation

Background

The court considered a letter motion by the B/T Defendants seeking production of portions of the plaintiffs’ tax returns. The B/T Defendants argued that the documents were needed to examine the plaintiffs’ damages and confirm relevant transactions, and that the information was not available from other sources.

The plaintiffs argued that the tax documents would show gains or losses but would not list the relevant transactions. They also argued that the B/T Defendants had not met the heightened standard for obtaining tax returns because the plaintiffs had already provided the requested information through other sources. The plaintiffs had provided transaction summaries, including summaries for exchanges they could no longer access and summaries of transactions provided to their accountants. The plaintiffs also represented that they were working to address gaps through requests to third parties.

Court’s Analysis

The court stated that a party seeking tax returns must establish both relevance and a compelling need. The court found that the relevance of the requested documents was not disputed at a high level, even though the plaintiffs questioned whether the documents would reflect every cryptocurrency transaction. The court also recognized that the request was narrowly tailored because it sought only portions of the tax returns.

The court nevertheless found that the B/T Defendants had not shown a compelling need. At that stage, they could not meaningfully represent that the requested information was unavailable from sources the plaintiffs had already produced. The court credited the plaintiffs’ counsel’s statements that information covering all transactions had been produced and saw no reason to depart from its practice of relying on representations by the parties.

The court rejected the argument that tax returns were needed for verification because they contain sworn, contemporaneous statements. It noted that the B/T Defendants could cross-check the plaintiffs’ transaction records against public blockchain activity and could explore transaction-related issues in depositions. The court also stated that parties are not ordinarily entitled to sworn statements about documents outside deposition testimony.

Disposition

The court DENIED the B/T Defendants’ motion to compel production of the plaintiffs’ tax records. It directed the clerk to terminate the pending motions at docket entries 392 and 393.