International law firm Holland & Knight served a defendant in a hacking case with an NFT created and submitted by their asset recovery team.
The law firms Holland & Knight and Bluestone have served a defendant in a hacking case with a non-fungible token (NFT) temporary restraining order, the first known legal process to be facilitated by a digital asset.
The so-called “service token” or “service NFT” was given to an unnamed defendant in a hack case involving LCX, a Liechtenstein-based cryptocurrency exchange that was hacked in January for nearly $8 million. As Cointelegraph reported at the time, the attack compromised the platform’s online wallets, resulting in the loss of Ether (ETH), USD Coin (USDC), and other crypto assets.
Events Unfolded
On Twitter, Holland & Knight announced that their firm “has become the first law firm to serve a defendant by #NFT, which was created and airdropped by our #AssetRecovery Team.”
LCX reported on June 7 that approximately 60% of the stolen funds are now frozen with open investigations in Liechtenstein, Ireland, Spain, and the United States. Approximately $1.3 million in USDC was frozen by the Center Consortium, an organization founded by USDC issuer Circle and Coinbase, based on an injunction from the New York Supreme Court.
LCX identified in recent days the compromise of one of its hot wallets after temporarily suspending all deposits and withdrawals on the platform.
The hack was first identified by PeckShield, a Blockchain security company, based on the suspicious transfer of ERC-20 tokens from LXC to an unknown Ethereum wallet.
LCX said the funds were laundered through cryptocurrency mixer Tornado Cash, but were later traced through “forensic algorithmic analysis.” The analysis also allowed the company to identify the attacker’s wallets.
Monty Metzger, CEO and Founder at LCX posted on Twitter that, “You’ve been served! #subpoena. About 1 hour ago, @LCX’s lawyers served a “Service NFT” to a subject address. Approx. 1.3M $USDC frozen on chain. Additional details and statement by LCX will be published within 24h.”
In light of these findings, Holland & Knight and Bluestone, the law firms representing LCX, sent the anonymous defendant a temporary restraining order that was issued on-chain using an NFT. This method “was approved by the New York Supreme Court and is an example of how innovation can provide legitimacy and transparency to a market that some believe is ungovernable,” LCX said.
Further Actions towards Security Concerns
LCX has confirmed that it will take security measures to protect other wallets and assets, claiming that, “during this difficult period, we greatly appreciate the support of our customers, other exchanges, security experts, and the broader crypto community.”
A recent report by security platform ImmuneFi found that cryptocurrency companies incurred losses of more than $10.2 billion in 2021 due to hacks, scams, and other malicious activities. This points to the need to take action against hackers so that their illicit operations are stopped, or at least, reduced.
By Audy Castaneda
