Dormant whales forced to surface: Reversal in the case of "legal claim" to 3.8 million BTC

Original by Odaily Planet Daily (@OdailyChina)

Author: Golem (@web3_golem)

Remember the lawsuit widely discussed in June this year, attempting to "legally claim" Bitcoin from Satoshi's addresses?

A plaintiff under the pseudonym Noah Doe sought to legally claim ownership of approximately 3.799 million Bitcoin (worth about $239.3 billion), linked to 39,069 dormant Bitcoin addresses—including 21,744 addresses belonging to Satoshi Nakamoto, totaling roughly 1.09 million Bitcoin (worth about $68.6 billion)—under New York's lost property law. This absurd lawsuit is noteworthy not only for its unprecedented scale but also because its ruling could impact U.S. legal protections for digital asset holders' ownership rights. (Related reading: Satoshi Facing a Lawsuit? BTC Worth $83.7 Billion Up for 'Legal Claim')

Fortunately, the case has been stayed, with the next hearing scheduled for September 8. But since June, the case hasn't stalled; developments have been "entertaining." More importantly, whether the CLARITY Act, currently being debated in the Senate, will succeed could play a crucial role in the case's direction.

Case Progress: Large Amounts of Dormant Bitcoin Moved, Address Owners Forced to Surface

Under New York law, if the defendant address owners fail to appear 30 days after the finder files an affidavit of service, a default judgment could occur, granting Noah Doe ownership of the 39,069 dormant Bitcoins. However, on June 4, Judge Kathy J. King issued a stay order halting all further proceedings and scheduled an oral argument on July 14 to discuss whether lost property law applies to blockchain assets.

Over $2.1 Billion in Dormant Bitcoin Transferred

Meanwhile, as the case spread on social media, Bitcoin whales who rarely "surf the web" learned that someone was eyeing their addresses and began transferring their Bitcoin.

On June 2, the first transfer occurred from a defendant Bitcoin address. A dormant address, inactive since March 2011, moved 35.55 BTC, worth about $2.2 million. Then, on June 6, defendant address #37923 transferred 47.26 BTC, worth nearly $3 million. On June 19, defendant address #1504 transferred 199.216 BTC, an address dormant since 2012.

According to Galaxy Research, since the lawsuit was filed, 52 defendant addresses have moved 34,335 Bitcoin (approximately $2.163 billion) on-chain, with 29 addresses transferring 12,302 Bitcoin after being "served."

Seeing the trend, plaintiff attorney David D. Lin filed a motion on June 18 to lift the stay, eager to move proceedings forward, fearing the assets in the defendant addresses would be drained.

Owner of Defendant Address #33 Appears in Court

But before the court could decide, unexpectedly, a defendant who had previously avoided appearing voluntarily submitted a court appearance request.

On June 30, the owner of defendant Bitcoin address #33 filed a notice of appearance and a motion to dismiss with the New York Supreme Court, becoming the first actual owner to challenge Noah Doe's lawsuit. The filing by Defendant #33 not only refuted the theory of Bitcoin address ownership but also attacked the structural basis of the lawsuit.

First, they argued that Bitcoin addresses are not natural or legal persons, thus cannot be subject to the court's jurisdiction as defendants; the true holder is a "natural person protected by the Constitution with property rights." Second, according to Article 7-B of the Personal Property Law, publicly visible on-chain addresses cannot be "found," as the provision is designed for tangible items with physical locations held by police. Noah Doe's algorithmic interaction with Bitcoin's public ledger does not equate to finding property.

Additionally, "Defendant #33" pointed out that the case is unfair to defendants because the plaintiff can remain anonymous, but defendants must reveal their identity to appear, and publicly holding large amounts of Bitcoin could pose significant personal safety risks.

Case Stayed After Hearing, Focus on September 8 Hearing

Seeing the unfavorable situation, on July 7, plaintiff Noah Doe voluntarily withdrew the lawsuit against 44 addresses that had become active. These addresses held about 21,443 Bitcoin when the case was filed but later transferred over 46,000 Bitcoin, worth over $2.9 billion. This leaves only 39,025 defendant addresses.

Among the 44 removed addresses, the one holding the most Bitcoin was #106, which held about 2,100 Bitcoin at the start of the case but transferred over 20,000 Bitcoin through multiple transactions between March and July.

After the July 14 hearing, the court issued multiple "Orders to Show Cause" on July 16, scheduling the next hearing for September 8, while imposing a full stay on case proceedings, barring the plaintiff from pursuing any default judgment applications.

Key Provisions of the Latest CLARITY Draft

Since the case was filed in March, the core debate has long moved beyond whether Satoshi's Bitcoin addresses can be legally claimed. It now involves how U.S. law understands digital property, and whether ownership is proven by holding private keys or by holding assets at designated intermediaries.

The U.S. Chamber of Digital Commerce has even expanded concerns beyond the crypto market: if courts treat prolonged inactivity as abandonment of ownership, holders of other tokenized assets or blockchain-based real-world assets could face uncertainty over whether "quiet ownership" is protected without active engagement.

In the U.S., which prides itself on "private property is inviolable," if this case is mishandled, it could have a massive negative impact on America's future crypto economy.

Fundamentally, Noah Doe could file this lawsuit by exploiting a loophole in U.S. law. To prevent such incidents fundamentally, the law must evolve to provide clear legal grounds for court rulings.

The latest CLARITY draft released on July 22 addresses this need.

Section 20216 of the latest CLARITY draft defines self-custodied digital assets as those where the owner maintains exclusive control over the private keys needed to authorize transactions. It also stipulates that digital assets held lawfully in self-custody shall not be deemed abandoned, unclaimed, or subject to forfeiture, escheat, adverse possession, finder's ownership, or any similar property claims solely due to inactivity, dormancy, or the owner's failure to show continued interest. This provision overrides any state or local political subdivision law or regulation.

If applied under the latest CLARITY Act, Noah Doe's lawsuit would directly collapse, as its entire premise is that these Bitcoin addresses' dormancy equals abandonment or being unclaimed. Noah Doe would lose outright.

However, the provision also states that courts must distinguish two types of digital assets: one is cryptocurrencies individuals control directly via private keys, and the other is cryptocurrencies held on exchanges or custodians. The new CLARITY Act protects the first type, while state unclaimed property rules still apply to the second type.

In short, this means if users deposit digital assets on an exchange or with a custodian, and those addresses become long-term inactive or the entity goes bankrupt and dormant, a finder could claim those addresses and assets under lost property law.

From a U.S. legal perspective, for those wanting to hold a digital asset long-term, the best option remains transferring it to a self-custodied wallet where they control the private keys.

In summary, if the new CLARITY Act is ultimately passed, such lawsuits will have clear legal basis in the future, meaning the U.S. will formally establish legal protection for ownership rights over dormant address asset holders. However, the issue is that due to bipartisan disagreements over ethical clauses, the CLARITY Act's progress in the Senate seems bumpy (Related reading: So Close to the Goal Line, Where Exactly is the CLARITY Act Stuck?)

And if the CLARITY Act cannot pass before the Congressional summer recess, the final ruling in this case remains highly uncertain…