Washington Court Rules on Crypto Fraud Case: Discovery Granted, New Defendant Added

On Tuesday, September 24, 2024, the United States District Court for the Western District of Washington issued a ruling in the case of Clayton v. Does, involving allegations of cryptocurrency fraud. The court’s decision addressed multiple motions filed by plaintiffs Stephen John Clayton and Christopher Stephen Clayton, who are representing themselves in the legal proceedings.

The case centers around claims that the plaintiffs were defrauded by unknown individuals who created a fraudulent cryptocurrency exchange website, identifiable by the domain vip.biitflyeir.com. The plaintiffs allege that one of them deposited 51.355 units of Ethereum (ETH) into the fake exchange, which functioned similarly to legitimate trading platforms. After believing they were making gains, the plaintiffs discovered that nearly all of the deposited ETH had been transferred out without their consent.

In the latest ruling, the court granted the plaintiffs’ motion for third-party discovery from Domains by Proxy, LLC, a service believed to hold information about the individuals who registered the fraudulent website. The court found sufficient cause to allow the plaintiffs to subpoena documents that could reveal the names and contact details of those associated with the domain.

Additionally, the court granted a request to join Guotao Yang as a defendant based on evidence linking him to the alleged fraudulent transactions. This information was provided by CEX.IO, a cryptocurrency exchange that had cooperated with the court by supplying details regarding Yang’s involvement. However, the court denied the plaintiffs’ requests for alternative means of service and for an injunction to freeze Yang’s cryptocurrency assets. The court concluded that there was insufficient evidence to establish personal jurisdiction over Yang or CEX.IO.

The court also addressed motions concerning Binance Holdings Limited and OKG Technology Holdings Limited, which the plaintiffs sought to hold in contempt for failing to comply with subpoenas. The court denied these motions, reiterating its earlier stance that it would not compel compliance from the exchanges without a demonstration of personal jurisdiction. The plaintiffs had not provided adequate justification for jurisdiction in their filings, prompting the court’s decision.

In summary, the court’s ruling included the following outcomes: it granted the motion for third-party discovery from Domains by Proxy, permitted the addition of Guotao Yang as a defendant, and denied the motions for contempt against Binance and OKG. The court directed its clerk to officially add Yang to the case.

Please contact BlockTribune for access to a copy of this filing.