Pro Bono Legal Opinion for Victims of Steem HF23 & Bittrex

in #hf236 days ago (edited)

I have already posted an initial report on the extraordinary events surrounding the so called hard fork 0.23 (HF23) of the Steem blockchain on 20 May 2020 at 1400 UTC.

I have now prepared a more detailed legal opinion below regarding these events on a pro bono basis.

This pro bono legal opinion is designed to assist the holders of the following 65 Steem accounts whose Steem & SBD assets were expropriated by HF23 ("Targeted Accounts"): @abusereports, @berniesanders, @kingdong, @nextgencrypto, @ngc, @ozchartart, @sirvotesalot, @sockpuppet, @thecyclist, @xx0xx, @xxxxxxxxxx, @z8teyb289qav9z", @agent14, @curatorhulk, @dhenz, @drbanner, @gokuisreal, @johnmadden, @realself, @theycallmedan, @arsahk, @blocktrades, @darthknight, @kevtorin, @kriborin, @lessys, @acidyo, @ats-david, @ausbitbank, @bittrix, @clappy, @drakos, @fefemz, @freedom, @gtg, @howo, @jawnz, @klobu, @likwid, @liondani, @neoxian, @netuoso, @ocd-witness, @pfunk, @pharesim, @roelandp, @roundbeargames, @sooty, @steempress, @themarkymark, @therealwolf, @timetickertickin, @transisto, @znnuksfe, @mottler, @mottler-1, @smooth, @smooth.witness, @smooth-a, @smooth-b, @smooth-c, @smooth-d, @smooth-e, @smooth-f, @safari

This pro bono legal opinion is also designed to help Bittrex (@bittrex) resolve, in accordance with the law, the difficult situation in which it has been placed.

As I am a lawyer admitted in Australia, I cannot give definitive advice about the law of every jurisdiction, but as will be seen below, the legal principles involved in this case are fairly universal.

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Legal Opinion

Facts

On 19 May 2020 the Steem Witnesses published Steem Consensus Witness Statement announcing HF23 which stated that HF23 would:

III. Seize some user accounts ...

The actual effect of HF23 was not to seize the accounts themselves, but instead to:

  • immediately power down the Steem Power held in the Targeted Accounts into Steem; and
  • to involuntarily transfer the Steem & SBD held in the Targeted Accounts to a new Steem account called @community321.

The amount of Steem involved was 23.6M Steem, worth about US$7 million at the time of HF23.
Coin Gecko records the Steem price as being US$0.298 at 1327 UTC immediately before HF23.

Importantly, HF23, did not actually fork the Steem blockchain into two separate chains, it simply changed the operating code of the existing Steem blockchain.

Details of the code of HF23 is at: https://github.com/steemhardfork/steemhf/commit/66321e06f862a28b53e5268f0d67db0fd65b3bcf#diff-5f5356c18939f3b2ce7f3e74ab944614R14

Details of the involuntary transfers implemented by HF23 from the Targeted Accounts into @community321 can be viewed directly on the Steem blockchain using the Steemd block explorer.

Immediately subsequent to HF23, @community321 transferred all the expropriated Steem and SBD to @bittrex, Bittrex Global Exchange's main account on the Steem blockchain. The transfers included a memo which stated:

“These are funds stolen by the Steem witnesses using HF23 May 20th 2020 - please return them to their original owners prior to the fork :)”

The relevant Steem blockchain transactions can be viewed on the Steemd block explorer

Legal Analysis

While we in the cryptocurrency industry like to use terms such as “code is law” and the “sanctity of the blockchain”, we must also acknowledge that the law of the land takes precedence over the law of the code.

In most cases, the law of the land has nothing to say about the operations of a blockchain, but when it comes to the involuntary transfer of assets, the law of the land becomes relevant.

The starting point in determining whether the law of the land is triggered is examining whether the implementation of HF23 was theft, as legally defined in relevant jurisdictions.

The legal prohibition on theft is one of the oldest in human history, going right back to law 22 of The Code of Hammurabi and the Eighth Commandment: "Thou shalt not steal" of the Ten Commandments.

As a result, it is a fairly consistently defined law across most legal jurisdictions in the world.

Law of Texas, USA

Lets look at Texas, USA, where Steemit Inc is based.

The Texas Penal Code, Title 7, Chapter 31 states (emphasis added):

Sec. 31.03. THEFT.
(a) A person commits an offense if he unlawfully appropriates property with intent to deprive the owner of property.

(b) Appropriation of property is unlawful if:

(1) it is without the owner's effective consent;
(2) the property is stolen and the actor appropriates the property knowing it was stolen by another; or
(3) property in the custody of any law enforcement agency was explicitly represented by any law enforcement agent to the actor as being stolen and the actor appropriates the property believing it was stolen by another.

From the definitions section 31.01:

(4) "Appropriate" means:

(A) to bring about a transfer or purported transfer of title to or other nonpossessory interest in property, whether to the actor or another; or
(B) to acquire or otherwise exercise control over property other than real property.

(5) "Property" means:

(A) real property;
(B) tangible or intangible personal property including anything severed from land; or
(C) a document, including money, that represents or embodies anything of value.

(2) "Deprive" means:

(A) to withhold property from the owner permanently or for so extended a period of time that a major portion of the value or enjoyment of the property is lost to the owner;
(B) to restore property only upon payment of reward or other compensation; or
(C) to dispose of property in a manner that makes recovery of the property by the owner unlikely.

Application of Texas law to Facts

The purpose and effect of HF23 on the Targeted Accounts clearly meets the above definition of theft.

  1. Unlawfully - without the consent of the owners of the Affected Accounts - indeed over their strong objections;
  2. Appropriates -
    a) brings about the transfer of a nonpossessory interest in property - transfer of Steem & SBD cryptocurrency meets this definition; or
    b) otherwise exercises control over property other than real property - the code of HF23 exercises control over property (Steem, SBD and the Steem blockchain itself)
  3. Property -
    a) Steem and SBD is intangible personal property - this is the general classification of cryptocurrency in most jurisdictions;
    b) the Steem blockchain is also property as it is a document representing or embodying things of value, including Steem and SBD
  4. With intent to Deprive - the purpose of HF23 is to permanently withhold the Steem & SBD from the owners of the Targeted Accounts. This is evident from the statements of the Steem Witnesses regarding HF23 and the code itself.

Law of United Kingdom

In the UK the definition of theft is very similar:

Basic definition of theft.
(1)A person is guilty of theft if he dishonestly appropriates property belonging to another with the intention of permanently depriving the other of it; and “thief” and “steal” shall be construed accordingly.
UK Theft Act 1968
https://www.legislation.gov.uk/ukpga/1968/60/crossheading/definition-of-theft

The only difference between UK and Texas law is the use of the word "dishonestly" rather than "unlawfully".
However the effect is similar because for the act not to be dishonest it has to be based on legitimate belief that the owner gave consent or there is "in law the right to deprive the other of it." Neither is the case in relation to HF23.

Other definitions of Theft

Other similar definitions of theft are:

"Knowingly obtains or exerts unauthorized control over the property of another, with intent to deprive the owner of his or her property"
https://definitions.uslegal.com/t/theft/

"the generic term for all crimes in which a person intentionally and fraudulently takes personal property of another without permission or consent and with the intent to convert it to the taker's use (including potential sale)"
https://legal-dictionary.thefreedictionary.com/theft

Legal Opinion

Thus in my considered legal opinion, based on the analysis above, the implementation of HF23 meets the definition of theft under the criminal law of relevant jurisdictions.

Persons criminally liable for HF23 Theft

Criminal laws don't apply directly to code, they apply to people.

So the next step is to examine which people are criminally liable for the theft implemented by HF23.

The first and most obvious group of people are those Steem witnesses which actually implemented HF23.

Here is an archived screenshot of the Steem Witnesses at the time of HF23. https://archive.is/sEiHH

While witnesses accounts such as @justyy @steemchiller and @dlike are controlled by real people, active participants on the Steem blockchain, many other witness accounts were newly created or only became witnesses shortly before HF23.The were voted into top 20 witness status with the immense voting power of @dev365.

There is substantial evidence that such accounts were directly controlled by Justin Sun.

I will not examine this evidence in detail here because it is sufficient to demonstrate that Justin Sun controls @dev365.

Control of @dev365

@dev365 was created on 27 Feb 2020, shortly after Justin Sun's acquisition of Steemit Inc.

On 2 Mar 2020 @dev365 was nominated as proxy by the large cryptocurrency exchange accounts @poloniex (owned by Justin Sun) @huobi-withdrawal & @binance-hot. This provided sufficient Steem Power for @dev365 to singlehandedly vote 20 brand new witnesses with no previous participation on the Steem blockchain into the Top 20 witness positions which control the Steem blockchain.

It was by these actions that Justin Sun took singlehanded control of the Steem blockchain and reversed the soft fork which had temporarily suspended witness voting rights of accounts owned by Steemit Inc (which had never previously voted on witnesses).

Later on 2 Mar 2020 a series of accounts with immense voting power owned by Steemit Inc (@steem @steemit & @misterdelegation) also set @dev365 as their witness voting proxy.

These transactions can all be seen in the Steem Block explorer. Archived here.

Justin Sun and his controlled entities (Steemit Inc, Tron Foundation and the Steem Witness after the Hive hard fork) have posted on the Steem blockchain and on other social media claiming these actions by @dev365 as the actions of Justin Sun or Steemit Inc.

See 7 Mar 2020 Medium post by Tron Foundation (controlled by Justin Sun) which states:

"The only thing we do when we take control of the network is to take back our funds. We are willing to give all the witnesses and control back to the community once we are 100% sure that our fund and exchanges assets are safe."

The Steem Witness (appointed by @dev365) in late March 2020 (shortly after the Hive blockchain was created) stated that the above actions of @dev365 were done by Steemit Inc, which Justin Sun owns and controls.

See: https://steempeak.com/witness-category/@softfork22888/steem-consensus-witness-statement-softfork-0-22-8888

History Review based on facts
...
"02nd Mar. 2020 - With the help of the exchange's stake, Steemit Inc. executes Softfork 0.22.5 to reverse 0.22.2 and place 20 witnesses of their own. Exchanges withdraw their votes shortly after."

It is also quite clear from this analysis of the votes for the Top 20 Steem Witnesses that @dev365's vote completely determines which witnesses are the Top 20 witnesses which control the Steem blockchain.

Legal Opinion

In my legal opinion:

  • Justin Sun controls @dev365, either directly or via Steemit Inc, which in turn controls Steem's top 20 witness list, which in turn operates and controls the code of the Steem blockchain.

  • Justin Sun, Steemit Inc and the persons controlling witnesses @justyy, @steemchiller & @dlike are the persons responsible for implementing HF23.

Based on my analysis above, in my considered legal opinion, Justin Sun, Steemit Inc and the persons controlling the Steem accounts @justyy, @steemchiller & @dlike have committed the criminal offence of THEFT in relevant jurisdictions.

Criminal Conspiracy

When a group of persons works together to commit a crime this is called a criminal conspiracy.

Texas Penal Code § 15.02. Criminal Conspiracy

(a) A person commits criminal conspiracy if, with intent that a felony be committed:
(1) he agrees with one or more persons that they or one or more of them engage in conduct that would constitute the offense;  and
(2) he or one or more of them performs an overt act in pursuance of the agreement.
(b) An agreement constituting a conspiracy may be inferred from acts of the parties.

See https://codes.findlaw.com/tx/penal-code/penal-sect-15-02.html

In the UK conspiracy is both a statutory offence and a common law offence.

Section 1(1) of the Criminal Law Act 1977 provides:

if a person agrees with any other person or persons that a course of conduct shall be pursued which, if the agreement is carried out in accordance with their intentions, either –

(a) will necessarily amount to or involve the commission of any offence or offences by one or more of the parties to the agreement, or
(b) would do so but for the existence of facts which render the commission of the offence or any of the offences impossible,

he is guilty of conspiracy to commit the offence or offences in question.

See: https://en.wikipedia.org/wiki/Conspiracy_(criminal)#Conspiracy_in_English_law

The common law offence of conspiracy to defraud, including theft, is preserved by the statutory regime. See https://lawi.org.uk/conspiracy/

Legal Opinion

The code of HF23 constitutes the terms of an agreement to carry out a theft, as outlined above.

The decisions of Justin Sun and his controlled entity Steemit Inc. to use @dev365 to vote for Top 20 witnesses that would implement HF23, including replacing Top 20 witnesses in the hours before HF23, constitute their agreement to HF23 and thus to carry out the theft of Steem and SBD from the Targeted Accounts.

The decision of each of the persons controlling Top 20 witnesses to change the version of the Steem blockchain computer code which their witness server computers was running to the HF23 code constitutes their agreement to HF23 and thus to carry out the theft.

Thus there was an agreement between Justin Sun, Steemit Inc and the persons controlling the Steem accounts @justyy, @steemchiller & @dlike to implement HF23, which necessarily involved committing a felony - theft. That agreement was carried out and the felony theft committed.

Based on my analysis above, in my considered legal opinion, Justin Sun, Steemit Inc and the persons controlling the Steem accounts @justyy, @steemchiller & @dlike have individually and jointly committed the criminal offence of CRIMINAL CONSPIRACY in relevant jurisdictions.

Situation of Bittrex

Legally, the situation which Bittrex faces is that a theft has taken place and the initial recipient of the stolen property (@community321) has immediately transferred it to the control of Bittrex with instructions to return the stolen property to its original owners.

Through no fault of its own, Bittrex is the recipient of stolen property and has a legal obligation to return that property to its original owners. These are also the clear instructions of the party that transferred the stolen property to Bittrex.

The likely reason that @community321 transferred the stolen Steem to @bittrex rather than directly back to the affected accounts on the Steem blockchain is that with the Steem blockchain under the centralised control of Justin Sun, a second hard fork to steal the Steem again was a real risk. Instead, Bittrex was seen as an honest custodian that could both distribute the stolen Steem back to its original owners on its exchange platform, and was less likely to be targeted by another hard fork.

Indeed as of a short time ago, the Steem Witnesses have implemented another "soft fork" to limit activity of @community321. See https://steempeak.com/witness-category/@softfork22888/steem-consensus-witness-statement-softfork-0-23-1

About the Author

Andrew Hamilton is a lawyer with over 25 years experience who has worked at Herbert Smith Freehills (Sydney), Sidley & Austin LLP (Washington DC) and has been General Counsel numerous companies in the technology sector.

He was instrumental in winning two landmark cases in the High Court of Australia.

He is currently CEO of JPB Liberty (@jpbliberty) a litigation funding company which prepares and arranges funding of legal claims related to and supporting the cryptocurrency industry.

JPB Liberty’s main activity is preparing a class action lawsuit against Facebook, Google and Twitter for banning the advertisements of the cryptocurrency industry in early 2018. Most cryptocurrency investors and projects have claims in this lawsuit. More details at https://www.jpbliberty.com/

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I'm going to say a huge thank you to @apshamilton for this work. This kind of legal work would ordinarily cost somebody a fair amount so I want to suggest to the community if you are grateful that this level of detail and legal work is up on Hive you can support Andrew in a couple of ways:

  1. You can sign up for free on a no win no fee basis for the legal action being brought to recover damages following the 2018 Crypto Advertising Ban. Read all about that here and sign up if you held crypto or had a crypto business in 2018.
  2. If you like the case you can talk to us about directly investing to help bring the case to court and for a chance at recovering a sizeable return on investment. We have more more information we have shared: @jpbliberty has the latest updates.
  3. Finally you can send value for value to @apshamilton directly.

We also have a proposal in the HPS that would have Hive directly pay some of the costs of our case: we know it is an unusual use of HPS funds but this could provide huge value back to Hive. Give that your consideration.

This kind of legal work would ordinarily cost somebody a fair amount

The payout is currently at 162.284 Hive Rewards, so if about ~$80 equivalent goes to @apshamilton, that may be one of the lowest hourly rates I've seen. In fact, one could say this is almost pro bono. Haha.

But if @apshamilton HODLs, there's a chance he can convert these rewards into one of the highest hourly rates a lawyer has ever made. The beauty of volatility.

This was a few more than 1 hours worth of work, but done gladly for a community both Andrew and I feel a huge affinity toward.

A quick thank you to everyone who is sooooo motivated to kick some ass here now that we don't have toxicity and a premined stake looming over.

Thanks for all the effort you're putting in Andrew!

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Importantly, HF23, did not actually fork the Steem blockchain into two separate chains, it simply changed the operating code of the existing Steem blockchain.

This is a very important distinction, and it is also false.
Every code change is technically a fork.
No one is "forced" to use the new code; the code is open-source.
Just because no one is running the old code doesn't mean a fork didn't happen.

If you try to make the argument to say that this is theft,
you can certainly use the same logic to say the Hive fork is theft.

That being said, what Steem is doing LOOKS a lot more like theft and securities fraud from the outside looking in, so I could certainly see them winning in court while Hive would not be targeted. However, it would set a very dangerous precedent; one that puts Hive (and all forks) in danger once the real world actually realizes how this all works.

You're mistaken. Hive was forked by nonconsensus witnesses. That's the difference, and it's a very big one. Steem forked with consensus witnesses with the sole purpose to remove funds from users.

Any person can fork the code that is nonconsensus without anyone being affected. With consensus witnesses fork, everyone on that chain is effected.

Since this, all can be proven Justin Sun runs the network, this post from a few hours ago makes it clear as day to a child that Sun does control the network: https://hive.blog/witness-category/@crokkon/steem-witness-ranks-excluding-dev365

Since it is known Justin Sun spins up fake accounts and votes them in from one computer, this is a Sybil attack on Steem, by definition: https://en.wikipedia.org/wiki/Sybil_attack

You're mistaken. Hive was forked by nonconsensus witnesses. That's the difference, and it's a very big one.

If 20 people had made this decision instead of one no one would back down and stop calling this theft.
I don't think the Sybil attack really has anything to do with the logic behind calling this theft.

Would you rather that Sun stopped buying everyone's bags and dumped Steem sub 1 cent?
Would this also be theft?
This is what we all thought was going to happen anyway.
I think it's cool that they are trying to keep the project alive and stem the bleeding.
We all knew that Steem was fucked when this all went down.
I'm actually impressed they've made it this far.
We all got more money out of Steem than we were expecting.

I 100% agree that this is securities fraud, by definition, and Steemit Inc is likely going down for this.

But, since you are now claiming that the consensus witnesses made this choice, doesn't that mean that they have the right to do whatever they want?

They are elected by DPoS and if there is consensus then it has to happen. This also means that the blockchain itself (all the coins) is the property of elected witnesses and not regular users/accounts.

Yes, users can vote to change the elected witnesses, but @dev365 must be considered as a normal stakeholder in court. Even though we know it should be a non-voting stake, in court, promises don't hold.

There is a difference between centralized governance and decentralized consensus. The only reason decentralized consensus is "wild wild west" is that there is no one to sue. You can't sue bitcoin, etc. However, when you buy 30% of the dev fund in an OTC deal from the founding company, it turns steem into a security. Now, there is someone to sue and a legal target here, if someone wanted to sue they could.

For decentralized consensus to steal funds, wherever the funds ended up would be liable, if they sent to null that would be a very weird spot and you'd probably be fucked there. But people steal because they are greedy. The decentralized consensus wouldn't hurt the chain as it would hurt their own investment. Justin Sun does not care what the west thinks of us and he can spin the media in the east as our voices are not heard. He has market makers to pump the price even if he steals from you. This is apples and oranges not only from a consensus standpoint but from an incentive standpoint.

For decentralized consensus to steal funds, wherever the funds ended up would be liable, if they sent to null that would be a very weird spot and you'd probably be fucked there.

Interesting as all hell. I have no idea what the result would be if it all got nulled. Guess it would partly be up to you too if that happened.

There is many choices available to seek legal recourse and/or pecuniary relief but see it flourish in the near future for all matters involving blockchain.

The only reason decentralized consensus is "wild wild west" is that there is no one to sue.

I can see a future where a specific decentralized environment and every beneficiary or participant of it is held proportionately liable to pay damages/ penalties for any civil or criminal case won in a court of law.
The defendant named would be that specific decentralized environment, as if the road upon which a car crash occurred was named as a defendant party to the plaintiff's loss!

If it does ever get attempted, then that's when the really spicy times begin. the mind boggles!

You made great points, but I still think this would be debatable in court. I don't know if there is precedent for such a case, or if owning 30% of a decentralized blockchain can make it a security.

It definitely is a reasonable argument, and I am curious to see how this would play out in court. In any case what matters is that you guys get the money back, and hopefully without lawyers.

It is completely wrong legally to suggest that in a DPOS blockchain all coins are the property of the elected witnesses.
If that was the case then the witnesses, rather than the owners of the coins would have to pay all the taxes!
There is already plenty of established law that cryptocurrency is property belonging to the legitimate holder of the keys.

Why is law of ownership being applied to cryptos when the whole point was to own your coins without any state intervening. Your keys your crypto. Not because of the law, because of the code. Your votes your decisions. Including theft. If you are against that then do not vote for witnesses that are ready to steal. If you are 51% attacked and have no choice, fork away. Simple.

You own your gold and silver without any state or bank intervening. Not because of the law but because of chemistry and physics.

That doesn't mean you can't or shouldn't seek legal assistance if it is stolen.

Satoshi created Bitcoin to free us from fiat currencies and banks, not all government and law.
Crypto can achieve the former but never the later.

Even if all fiat currencies disappear and the whole world moves onto crypto and decentralised communities like Hive become the norm on the internet, there will always be a real world of governments, law, police, armies and taxes.

I understand where you're coming from but I think your analogy proves my point, not yours.

If someone steals your gold, you definitely should ask for legal assistance I agree with that. However, the executive order 6102 is the historical moment where the US government decided that you are no longer allowed to hoard gold and should use their notes instead. (https://en.wikipedia.org/wiki/Executive_Order_6102)

This shows that governments have the power to "steal" your money legally! They can give you a note instead of a currency - again, legally! - and then years later sell the gold and leave you with worthless notes. That is stealing, but it is technically agreed by the majority since in a democracy there are elections.

In your analogy, the witnesses are the government, and they are elected by stakeholders (or the people in a democracy). Since the witnesses can pass and execute laws on the blockchain by changing the code, and since they have the approval of the majority (they are elected), why can't they steal your money legally? They can, and did so in the steem case, and with the support of the majority of the voting stake.

In a company, there is a shareholder agreement protected by law and therefore the government that majority shareholders cannot simply decide to vote to steal someone else's shares. However, in a DPoS blockchain, there is no shareholder agreement or contract protected by the state. The only rules are those in the code, and everyone who bought the coin knows this before buying the coin.

If you want to define what the witnesses/Justin did as stealing, I accept that in a conversation, but not in legal terms. I also believe they stole, and went again important principles that they should have respected, BUT they definitely did not break any rules or laws. They simply used the DPoS system, which we all agreed to be a part of.

I would insult Justin Sun gladly, but I wouldn't sue him.

This is a very interesting and informative comment and discussion above and below.

I will be preparing detailed legal opinions on both the soft fork that temporarily froze the governance voting rights of the Steemit Inc stake and the fork which created the Hive blockchain.

Justin Sun has claimed that both these forks were stealing from him and these claims need to be addressed with detailed technical legal analysis.

It is important to note that the analysis of whether certain conduct is theft is completely separate and unrelated to whether a cryptocurrency is a security.
Something only needs to be "property" to be the subject of theft.

The definition of theft is pretty universal whereas the definition and regulation of a security varies widely from one jurisdiction to another.

It is best not to confuse these issues.

Make sure to take a look at this post by @blocktrades explaining why forking is not theft:
https://peakd.com/cryptocurrency/@blocktrades/the-legal-basis-of-cryptocurrency-forks

Also I'm about to put you on blast in my next post for referencing Justin Sun so much when he can clearly hide behind the shell corporation Steemit Inc.

We can't beat Justin in court. He will dump Steem to zero, claim Steemit Inc got hacked, and declare bankruptcy without losing any money.

I've looked at @blocktrades post and while it is good overall, it is completely wrong when it says:

So in the end, while there are no technical or legal limits on what changes can be made in a fork

It is quite ironic given @blocktrades are the biggest victim of this HF23 crime.

The criminal law limits all human behaviour in a country and when that criminal law is pretty universal (like theft) it limits it everywhere.
There is no blockchain exemption to the criminal law.
Blockchains and cryptocurrencies are not complete law free zones, and nor should they be.

Even in a completely decentralised blockchain, its is possible to apply criminal law to witnesses that implement code that commits a serious felony. Complete anonymity from determined a law enforcement operation is very hard to achieve as Ross Ulbricht and many others have found.

If the law breached is universal then extradition can and will happen.

In this case though it is easy for law enforcement, because Steem is completely controlled by Justin Sun.

Justin Sun cannot hide behind Steemit Inc in a criminal conspiracy charge and indeed all entities between Justin Sun and @dev365 (including potentially the Tron Foundation) will also be caught.

We absolutely CAN beat Justin Sun in Court and either put him behind bars for a long time (if China doesn't protect him) or prevent him ever leaving China again.

What would you say if I told you Hive was the original chain and Steem was the airdrop? Considering all the value lies in the layer zero community, this is pretty much the case. You might find you're actually doing legwork for the opposing team.

Justin Sun cannot hide behind Steemit Inc

Do you think Justin Sun has zero lawyers?
We are playing his game now.
We are out of our element.

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If you try to make the argument to say that this is theft,
you can certainly use the same logic to say the Hive fork is theft.

Comparing the fork that created Hive and HF23 that took Steem & SBD from the above steem blockchain accounts is like comparing apples and oranges. All the steem & SBD owned by the accounts of Justin Sun, Steemit Inc. & the people who supported Justin Sun are left in their respective accounts in the steem blockchain. They, just, did not get the equivalent of Hive & HBD in the newly created Hive blockchain like all the other steem accounts did.

You have no idea what you're talking about and if you want to know why you can check out my blog.

If you think Steem HF23 is somehow an "old asset" and Hive HF23 is a "new asset" you are lying to yourself.

If anything, Hive is the original chain and Steem is the fork. Hive retained 90%+ of the layer 0 community.

That is an interesting take but I don't think it holds any water. The original chain is NOT identified by "the layer 0 community" whatever that means. Not to mention all steemians are still active on steem commenting or powering down, etc. I believe the original chain is identified by the brand which is STEEM in this case and we all know which fork has retained the original brand and is therefore the original chain.

The HF23 didn't make a copy of the blockchain to create a new one, only made a change of the code to allow the thief of the funds. The technical analysis in blockchain terms is mostly irrelevant on the case and should be avoided to not confuse to the judge. The HIVE case and STEEM case are completely different in law terms, because in one you are retiring their funds from some accounts while in the other case HIVE didn't retired any funds of Justin's account but made a copy of the blockchain where those funds went to the DAO.

While for a programmer could be argumented that part of the DAO are stolen funds (which i don't think) for a court that should be simply ridiculous (as for the most people who understand the blockchain).

You can say HF23 is a hardfork and therefore a new blockchain but the fact is that is only an update of the blockchain.

The whole point of blockchain is to get away from the court. Courts can't and won't be able to do anything.

Well done. Thanks so much for putting this together. I'd been looking at it as a civil claim for embezzlement, but you rightfully point out the criminal nature of what happened,theft. That means injured parties actually need to get the Austin, TX Attorney General's office involved.

Yes. Everyone who is a victim of this theft should report it to both their local authorities and the Austin, TX Attorney General's office.
They can cite this advice to make it quick and easy to file a report.

Magnificent work and perfectly argumented, I didn't thought in the criminal conspiracy and it's a very serious acusation with a sentence probably larger than thief (at least in many countries idk in this specific jurisdiction).

I think that the legal way has to be used in this case, tricks like the used by our annonimous hero are great and saved the day but this issue has to be won in the court.
Justin Sun is asking a lesson and imo we should give him what he is asking for.

What an amazing post by a very generous and super sharp individual!

Props to @apshamilton for this magnificent piece of art!

Does anyone know what Bittrex is doing with the funds?

_THIEF.jpg

Does anyone know the CURRENT LOCATION OF JUSTIN SUN?

Does anyone know whether any law enforcement (or securities regulator) authority (in Texas or elsewhere) been made aware of this theft? If so, do you think they could issue an arrest warrant for Sun? Even one through INTERPOL? I would assume that if any warrants were issued, he would be apprehended (at least for questioning) should he happen to set foot on American soil.

This saga is more interesting than anything on Netflix. Gotta make more popcorn...

All the victims of this crime need to report it to their local authorities, using my advice above to provide most of the info the police etc will need.

If they do so there is a good chance that law enforcement will pursue Justin Sun including seeking Interpol notices and extradition if he sets foot anywhere with an extradition treaty with countries pursuing the criminal investigation.

Even China has laws against theft so he may not be safe even there.

Thank you for your reply. Do you know if there are witnesses or users from Texas (or elsewhere in the US) who have filed complaints with the police/authorities?

I'd really hate to see this criminal walk free. It is unbelievable what he did.

Also hoping that I can recover my own little amount of STEEM I had on the platform. Powered down just a few days ago, but have to wait 13 weeks. No idea if I will be able to get it back, and if I do, even how to get it out, as @blocktrades is no longer offering the service.

Excellent explanations, government laws always take precedence, that is why humans create governments. People actually like living under some sort of laws/regulations, as long as they are not too oppressive.

Respect to the lawyer for your pro bono service here. Sun may well be found guilty of this alleged crime in Texas, where Steemit is domiciled, but Sun may be in Honk Kong or wherever, for all we know, so how do we get him to stand trial? If it comes to that. Extradition may not work.

If law enforcement in Texas brings charges then Steemit Inc can't flee and extradition of Justin Sun to the US is possible from most countries.

But it is not just US law that has been broken and the victims are around the world.

Even China has laws against theft.

Unless China actively protects him: see Ross Ulbricht.

Thanks for your insight here. Ross of the banned Silk Road website, apparently still in jail.
Extradition sounds good - in this case.

Thanks a lot for your work on this Andrew! I hope there will be a sensible decision made by Bittrex who has been put in a very difficult position. Having an advise but also timeline as presented in your post will help them make an informed decision. Cheers!

Thank you for this @apshamilton. I'm not comprehending the present as clearly as I would like to put into words and concise explanation, but I'm highly inspired from the last few days. Left a bit reeling to be frank.

This post is an unexpected addition to it all and i'm shook!

  • You have potentiated something incredible here and activated one of the hidden powers of the blockchain (in my opinion)

also if you play @splinterlands, i'd recommend this splinterlands guild that's part of the @jpbliberty Crypto Class Action cause:

CryptoClassAction Knights

Fight Tech Goliaths with Crypto Legal Magic

  • First @splinterlands guild I ever joined with my @aagabriel account and the guild has always been friendly. It's for a good cause too!

In addition to being really interesting to read, this post highlights from a legal point of view the events that took place and the involvement of the actors who participated.

Thank you for this excellent work @apshamilton

wholeheartedly agree.

What is your opinion on Blocktrade's post about the fundamental underpinning of blockchain consensus? and subsequent posts regarding legal and philosophical structure of blockchains? It seems to contradict your position that wallets can be construed as private property.

Proving Justin Sun has anything to do with any of the questionable accounts in court will be next to impossible, especially since he publicly stated he doesn't have anything to do with it, unless you have some evidence that hasn't been revealed publicly. Jurisdictional issues will be a nightmare for anyone pursuing this, and I suspect more money would fall into the hands of lawyers than complainants if a successful verdict were reached.

A great effort in collating and presenting this Andrew!

Thanks and Thanks for the tip!

Really interesting. So which jurisdiction does apply in fact? Where was the alleged theft perpetrated? In England and Wales, cryptocurrency has been deemed to be property in orbiter comments relating to Bitcoin. There are also issues relating to @community321 being hacked which would need to be investigated in my view. 💭

In general Courts will have jurisdiction if either the victim or perpetrator of a crime is within their jurisdiction. In this case there are quite a few jurisdictions that meet this criteria including Texas, other US states, the UK and Australia.

I think you mean obiter dictum comments relating to Bitcoin. As far as I know there are no Courts in orbit yet :-)

Yes, obiter, it was auto corrected. And the hacking of @community321?

@community321 was attempting to returning stolen property to its rightful owners so his his/her actions in pursuit of this are legitimate.

While the actions of @community321 were clearly not expected by the conspiracy of thieves that implemented HF23, it is quite possible that he/she had control of the keys legitimately and simply refused to comply with the illegal instructions to participate in a theft.

For example if he/she was an employee or contractor of Justin Sun or Steemit Inc and had the keys as part of his/her job, it was entirely proper to refuse an illegal instruction and instead attempt to return stolen property to its owners.

Thank you so much Andrew for all the hardwork and research put into this. This is very comprehensive and I hope that righteousness wins!

This is impressive.

The clarity of your pro-bono legal counsel to the possible plaintiffs identified as victims of crime occurring out of the hard fork .23 is a valuable offering. Not just to plaintiffs, users and future cases of similar precedence but for the future of what a blockchain can be adapted to do.

It is not the imagination which limits the future, nor the unexpected resulting in the unforeseen - the limit of future adapation (for now) is the needs (of us, of all?) which have not yet been met.

Thank you for your hard work and effort that went into this post.

I found it fantastic to read both as a summary of the events, but then also a legal proceeding and how to move forward. Very well structured and logical. If I have have a blockchain issue I'll hire you.

Keep being amazing and groovy!

👉 Receive my dear friend @apshamilton, my congratulations for such professional and detailed work, which can serve as a libel against the demand for conspiracy to illegally exploit digital assets of 65 users, best regards from Venezuela...

I'am not a legal expert but IMHO this is by far the most objective analysis of this situation seen so far. REALLY good job!

Thanks and thanks for the tip.

Good work!
According to you, do you think the court is in the position of understanding all the things involved with blockchain technology and its governance?

The best approach with a court is not even to focus on blockchain.

Once Steem fell under the centralised control of Justin Sun back in March, it became more like your bank's internal accounting system. No bank on earth can just move funds out of clients accounts because it doesn't like them. Any court on earth can understand this.

ok, that's true

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To support your work, I also upvoted your post!

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I hope to this resolved as soon as possible.

Thit is becoming more and more intense.

This is the kind of post that you need to read more than once.
Very detail and straightforward.
A lot of good info to delve and see where this will go.

Kudos to you, all the best as well a big Thanks to take the fight forward

Let's see Justin burn! Hive on!

Hope it gets recovered

It's only your opinion... pfff, attention seeker.

People better not be using poloniex, get out while you can.

Couldn't the following argument be made: all STEEM coins are a property of the witnesses since they are producing the blocks and are elected by DPoS? Any decision of witnesses, even regarding ownership, is considered as consensus on the DPoS chain, since 15 or more witnesses approved the change.

justin denies that has control of dev365? how does that go

this could be useful

https://hive.blog/witness-category/@crokkon/steem-witness-ranks-excluding-dev365

Thank you for this honest and thorough run down of all the events that have transpired. I am hoping that with you on board, those people affected will be able to get their funds back.

This story goes way deeper. Your analysis is spot on. There was also crime committed before Justin Sun. Rats jumped ship on Steem. Justin got caught being greedy with the ball. Continue forward.

@apshamilton Will you help me to get my HIVE?
Thank you.

Code is lay didn't matter for JS and tried to stole the funds without any right on them. This breaks the blockchain laws and shouldn't be allowed, otherwise there is no trust in this.

A big thanks to @apshamilton for this great work

Nice job looking into this matter from the legal point of view, regardless if the legal action course will be taken or not!

I have no legal background and I am not an English native, but I wonder if here

involuntarily transfer the Steem & SBD held in the Targeted Accounts

a better word would be unconsented? Too me involuntary often relates to something accidental, excluding intention (like a reflex). "Unconsented" cannot be interpreted, I believe. And HF23 tranferred funds from their holders without consent, that's certain.

Excellent work, thanks.

Thanx for this interesting article🙏👌🍀❤️

@apshamilton, why don't you come on my show this afternoon? I'll be referring to this and to @epic's "this is the way" HF is not theft piece.

I'm on the Hive discord. Here's the link: https://discord.gg/

Thanks for the invite. I've sent you a message on the Discord server.