Alabama Federal Court Rejects Bid to Dismiss Crypto Mining Code Theft Case
On Monday, July 8, 2024, the United States District Court for the Middle District of Alabama, Eastern Division denied motions to dismiss a case regarding the alleged theft of cryptocurrency mining code.
The case involves plaintiff Mark Grams, a resident of Alabama, who created optimized code for cryptocurrency mining machines. This “firmware” code, called WAO2, improves the speed and profitability of mining on certain machines. Grams worked with multiple defendants beginning in 2020 to install and test his code on their mining machines, in exchange for compensation in the form of “developer fees” paid in cryptocurrency.
Grams brought suit in May 2023 against nine defendants, including Treis Blockchain LLC, Cevon Technologies LLC, Stronghold Digital Mining LLC, and several individuals. His claims center on allegations that the defendants misappropriated his WAO2 code and associated trade secrets without permission or payment.
The defendants filed motions arguing the court lacks personal jurisdiction over some defendants, the venue is improper, and the case should be transferred to federal court in South Carolina. However, in its ruling on Monday, the Alabama federal court denied all these motions.
Regarding jurisdiction, the court found Grams established sufficient minimum contacts between the defendants and Alabama to satisfy due process. It pointed to Grams’ and the defendants’ extensive communications and work from Grams’ home in Alabama as part of testing and installing the WAO2 code on the defendants’ machines. The court also noted the alleged financial harm from lost developer fees would be felt by Grams in Alabama.
On the issue of venue, the court concluded Grams met his burden to show the alleged misappropriation of his Alabama-developed code and related damages were substantially linked to the Middle District. The court further determined the interests of justice did not warrant transferring the case out of state.
The effect of the ruling is all defendants must continue defending against Grams’ claims in the Alabama federal court, where litigation will now move forward. With no other pending motions, the case appears poised for further proceedings addressing the underlying facts and merits of the dispute. The court’s denial of the motions to dismiss ensures Grams will have his day in court on the matter in his home district.
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