Court Speaks on Bitcoin Issue, Vacates a Conviction

APRIL 22, 2014 – STAMFORD, CT – MushkinLaw raised the issue of the location of jurisdiction over bitcoin transactions in its recent article. The article, on MushkinLaw.com under Bitcoin, set up a scenario where everything was virtual and things went wrong. Every address was an email address or URL and the physical location of all the players was unknown. It then posed the question:

Is jurisdiction where the physical offices of the various participants are located, the location of their servers, or where the harm complained of hurt a physical entity? What government(s) can take jurisdiction? To what court can the complainant go for justice?

In US v. Auernheimer, just decided, Auernheimer and Spitler, his chat room buddy (a/k/a his “co-conspirator”) accessed the iPad accounts stored in AT&T’s servers and downloaded 140,000 email addresses. Auernheimer emailed the press bragging how smart they were along with the email addresses they had downloaded. He was promptly indicted for computer fraud and identity fraud in New Jersey. Auernheimer was in Arkansas, Spitler was in San Francisco, and AT&T’s servers were in Texas and Georgia. So where does the case go to trial? Why was he indicted in New Jersey? That was the question before the U.S. Court of Appeals sitting in Philadelphia.

In law, the question was one of “venue.” The government argued that the disclosure of 4,500 addresses of New Jersey residents affected them and violated New Jersey law. It could be said they were victims. This is the “locus of affects” approach. The Court examined each of the statutes under which the defendant was indicted and even looked for guidance to the Declaration of Independence. It found nothing supporting the use of that test. Instead it found that each of the statutes under which Auernheimer was indicted required the Court to determine the place where they illegally accessed their information, a “locus delicti” test. Very broadly that is where they “broke and entered.” On the other charge, the Court pointed out that the participants did not write the project, deploy it, inform the victims or write the press from New Jersey – any or all of which might make a New Jersey indictment applicable. The Court vacated the indictment, throwing out a 41-month jail sentence. Lucky guy.

Joseph R. Sahid, a member of the MushkinLaw Bitcoin team, commented, “That the Declaration of Independence helped the Court answer this very modern question would make Thomas Jefferson, the founder of the law school I attended, smile.”

The Court said the critical conduct did not take place in New Jersey but left it to the reader to imply where it did take place. We shall see what happens in future cases. Other courts may accept other legal theories. Unfortunately none of these things are simple.

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