New York judge pauses dormant Bitcoin wallet lawsuit

A New York Supreme Court judge has halted proceedings in a high-stakes lawsuit seeking control over tens of thousands of dormant Bitcoin wallets, pausing the case as the court weighs a direct challenge to its legal foundation.

Court pauses case over dormant Bitcoin wallets

Justice Kathy J. King on June 4 ordered a stay on all activity in the case, which targets 39,069 Bitcoin wallets holding millions of tokens. The pause comes ahead of a July 14 hearing that will determine whether to admit an amicus brief arguing the lawsuit is legally flawed.

The ruling blocks further action in the declaratory judgment case, preventing the plaintiffs from advancing their request for a default judgment until the court reviews the opposing arguments.

Filed under the title ABC Company, XYZ Company, and Noah Doe v. John Does 1–39,069, the lawsuit attempts to claim ownership of unresponsive Bitcoin wallets using New York’s lost-and-found statute—an approach not previously tested in court.

Massive Bitcoin holdings at stake

Estimates from Galaxy Research suggest the targeted wallets contain roughly 3.8 million BTC. That stash was valued at around $293.5 billion at the time of the report and करीब $234 billion at current market prices.

Some of the wallets trace back to early Bitcoin history, including addresses linked to the 2011 Mt. Gox hack and patterns associated with early mining activity tied to Bitcoin’s pseudonymous creator.

Legal challenge questions core premise

Attorney Ian R. Cohen filed a motion on May 29 seeking to join the case as amicus curiae. His 26-page brief argues that New York law governing lost property does not apply to blockchain-based assets.

Cohen maintains that the statute was designed for tangible items that can be physically recovered, not digital wallets that remain visible on a public blockchain but require private keys for access. He also argued that identifying wallets through an algorithm constitutes data analysis rather than the discovery of lost property.

The brief further disputes the claim that dormant wallets imply abandonment. According to Cohen, inactivity does not prove owners relinquished control, particularly if access is preserved through securely stored private keys.

On-chain activity undermines abandonment claims

Recent blockchain data appears to support that argument. Several wallets named in the lawsuit have shown signs of activity since the case was filed.

On June 6, one long-dormant address transferred 47.26 BTC, worth nearly $3 million, while another moved 35.55 BTC valued at حوالي $2.2 million. These transactions suggest that at least some wallet owners retain full control of their holdings.

Conflict with existing law and global cases

Cohen’s filing also points to potential conflicts with existing legal frameworks. Amendments to New York’s Abandoned Property Law in 2022 already outline how unclaimed digital assets should be handled, directing them to the state comptroller rather than private claimants.

He also warned that some wallets in the lawsuit are tied to ongoing international proceedings, including cases in Japan, raising the risk of jurisdictional clashes if a state court asserts ownership.

Another key argument is practical enforcement. Without access to private keys, any court-ordered transfer of Bitcoin would be effectively impossible due to the decentralized structure of the network.

“Great Bitcoin dusting” and notification efforts

The plaintiffs claim they identified the wallets using a proprietary algorithm and attempted to contact owners through blockchain messages known as OP_RETURN notifications. These messages directed recipients to a website asserting an abandonment claim.

Galaxy Research described the effort as the “Great Bitcoin Dusting,” covering about 41,000 wallets linked to roughly 2.3 million BTC. Wallets that did not respond within 90 days were deemed forfeited by the plaintiffs.

Next steps ahead of July hearing

The upcoming July 14 hearing is now the central focus of the case. If the court accepts Cohen’s amicus brief, it would introduce formal opposition into proceedings where defendants have only been notified via blockchain messages and public postings.

The plaintiffs have until July 7 to respond. The judge’s decision on whether to admit the brief could signal whether the lawsuit moves forward or faces significant legal hurdles.

For market watchers, the case highlights both the enormous value locked in dormant Bitcoin wallets and the unresolved legal questions surrounding ownership in decentralized systems.

For deeper context on Bitcoin’s legal and market dynamics, explore our guide here today.

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