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3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 8 AT SEATTLE 9 10 STEPHEN JOHN CLAYTON, et al., CASE NO. C23-1324JLR 11 Plaintiffs, ORDER v. 12 DOES, 13 Defendants. 14 16 Before the court is pro se Plaintiffs Stephen John Clayton and Christopher Stephen 17 Clayton’s (“Plaintiffs”) ex parte “motion for discovery to subpoena third parties without 18 initial disclosure.” (Mot. (Dkt. # 12).) The court has considered the motion, the relevant 19 portions of the record, and the governing law. Being fully advised, the court DENIES 20 Plaintiffs’ motion without prejudice to file a subsequent ex parte motion for leave to 21 serve third-party subpoenas prior to a Rule 26(f) conference. 22 // 2 Plaintiffs want to know who “cashed out” Stephen Clayton’s cryptocurrency
3 reserves on various crypto exchange platforms. (Am. Compl. (Dkt. # 10) at 2.) Between 4 May 10, 2022 and August 22, 2022, Stephen1 allegedly deposited $61,809.40 worth of 5 Ethereum cryptocurrency into an account using the website vip.biitflyeir.com (“Book 6 Exchange”). (Id. at 1-2.) When he later sought to withdraw his investment, Stephen was 7 only able to retrieve $2,275 worth of United States Dollar Tether, another 8 cryptocurrency. (Id. at 2.) Plaintiffs later discovered that the remaining principal had
9 been liquidated on three crypto exchanges: (1) Binance 14, operated by Binance 10 Holdings Limited (“Binance”) in the Cayman Islands; (2) CEX.IO, operated by CEX.IO 11 Corp. (“CEX.IO”) in Naperville, Illinois; and (3) OKX 7, operated by Aux Cayes 12 FinTech Co. Ltd. (“OKX”) in the Republic of Seychelles. (Id. at 2-4; Mot. at 2-3.) 13 Plaintiffs then worked with “professional cryptocurrency tracers” to verify that Binance,
14 CEX.IO, and OKX are in possession of “relevant personally identifiable information of 15 unknown Defendants” (the “Doe Defendants”). (Am. Compl. at 4; see also Mot. at 3.) 16 In other words, Plaintiffs believe Binance, CEX.IO, and OKX can tell them who stole 17 Stephen’s crypto. 18 Accordingly, Plaintiffs filed the present motion seeking “approval to issue
19 subpoenas” to Binance, CEX.IO, and OKX demanding that they “[p]rovide the names, 20 physical addresses, email addresses, redacted bank account numbers and banking 21
22 1 The court uses Plaintiffs’ first names for clarity. 1 institutions on file for the account holders associated with four distinct transaction ID 2 numbers where [Stephen’s] value of cryptocurrency was cashed out” in order “to identify
3 the unknown Defendants.” (Mot. at 4, 11, 15.) 5 This court has a “duty to construe pro se motions liberally.” United States v. Qazi, 6 975 F.3d 989, 993 (9th Cir. 2020). Accordingly, the court construes Plaintiffs’ motion as 7 one requesting leave to serve third-party subpoenas prior to a Rule 26(f) conference. See 8 Malibu Media, LLC v. Doe, 319 F.R.D. 299, 301 (E.D. Cal. 2016) (ruling on such a
9 motion); Strike 3 Holdings, LLC v. Doe, No. C17-1733MJP, 2017 U.S. Dist. LEXIS 10 204354, at *1 (W.D. Wash. Dec. 12, 2017) (same). The court first sets forth the relevant 11 legal standard before turning to the merits of Plaintiffs’ motion. 12 A. Legal Standard 13 A party may seek production of documents from third parties pursuant to Federal
14 Rule of Civil Procedure 45. See Fed. R. Civ. P. 45(a)(1). “The scope of third-party 15 discovery is governed by Rule 26 and includes ‘any nonprivileged matter that is relevant 16 to a party’s claim or defense and proportional to the needs of the case.’” Bel Power Sols., 17 Inc. v. Monolithic Power Sys., Inc., No. C23-0008JCC, 2023 WL 2401926, at *1 (W.D. 18 Wash. Mar. 8, 2023) (quoting Fed. R. Civ. P. 26(b)(1)). Importantly, “Rule 45 does not
19 allow for interrogatories to third parties,” including “interrogatories disguised as a request 20 for production.” Id. (first citing Turner v. Ralkey, No. C20-5472BHS-DWC, 2021 WL 21 135855, at *3 (W.D. Wash. Jan. 13, 2021); then citing Duong v. Groundhog Enters., Inc., 22 No. 2:19-cv-01333-DMG-MAA, 2020 WL 2041939, at *8 (C.D. Cal. Feb. 28, 2020)). 1 “As a general rule, discovery proceedings take place only after the defendant has 2 been served.” MG Premium Ltd. v. Does 1-20, No. C20-5134BHS, 2020 WL 1675741,
3 at *1 (W.D. Wash. Apr. 6, 2020) (quoting Columbia Ins. Co. v. Seescandy.com, 185 4 F.R.D. 573, 577 (N.D. Cal. 1999)). Courts have made exceptions to this rule “in rare 5 cases” such as those in which “the tortious activity occurred entirely online,” allowing 6 “limited discovery to ensue after filing of the complaint to permit the plaintiff to learn the 7 identifying facts necessary to permit service on the defendant.” Id. (quoting Columbia 8 Ins. Co., 185 F.R.D. at 577).
9 Requests for pre-service discovery may be granted upon a showing of good cause. 10 Id.; see also Strike 3 Holdings, 2017 U.S. Dist. LEXIS 204354, at *1 (holding that good 11 cause existed for the plaintiff to serve a third party subpoena prior to a Rule 26(f) 12 conference). District courts in this Circuit have developed a three-factor test to determine 13 whether good cause exists to permit the sort of early discovery Plaintiffs seek to assist in
14 identifying unknown defendants. See MG Premium, 2020 WL 1675741, at *1; see also 15 QOTD Film Inv. Ltd. v. Does 1-30, No. 2:16-cv-00928-APG-GWF, 2016 WL 8735619, 16 at *2 (D. Nev. May 6, 2016). “First, the moving party should be able to identify ‘the 17 missing party with sufficient specificity such that the Court can determine that defendant 18 is a real person or entity who could be sued in federal court.’” MG Premium, 2020 WL
19 1675741, at *1 (quoting Columbia Ins. Co., 185 F.R.D. at 578). “Second, the moving 20 party should be able to identify ‘all previous steps taken to locate the elusive defendant.’” 21 Id. at *2 (quoting Columbia Ins. Co., 185 F.R.D. at 578). And “[t]hird, the moving party 22 should be able to ‘establish to the Court’s satisfaction that [its] suit against defendant 1 could withstand a motion to dismiss.’” Id. (quoting Columbia Ins. Co., 185 F.R.D. at 2 578).
3 B. Plaintiffs’ Motion for Early Discovery 4 For the reasons explained below, the court concludes that Plaintiffs’ requests are 5 tantamount to an interrogatory and that Plaintiffs have not demonstrated good cause for 6 the requested early discovery. 7 a. Improper Interrogatory 8 To begin, Plaintiffs’ request that Binance, CEX.IO, and OKX “[p]rovide the
9 names, physical addresses, email addresses, redacted bank account numbers and banking 10 institutions on file for the account holders associated with four distinct transaction ID 11 numbers” (Mot. at 15) is an interrogatory because it is a written question seeking written 12 information—not physical documents, electronically stored information, or other tangible 13 things that are discoverable through a subpoena. See Womack v. Tate, No.
14 1:19-cv-00614-ADA-BAM (PC), 2023 U.S. Dist. LEXIS 121496, at *6 (E.D. Cal. July 15 14, 2023) (“An interrogatory is a written question propounded by one party to another 16 who must answer under oath and in writing.”); see also Fed. R. Civ. P. 45(a)(1)(A)(iii) 17 (noting that subpoenas may command persons to “attend and testify; produce designated 18 documents, electronically stored information, or tangible things in that person’s
19 possession, custody, or control; or permit the inspection of premises”). What Plaintiffs 20 seek is not a form of discovery permitted under Rule 45. See Bel Power Sols., 2023 WL 21 2401926, at *1.
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3 4 5 6 7 UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON 8 AT SEATTLE 9 10 STEPHEN JOHN CLAYTON, et al., CASE NO. C23-1324JLR 11 Plaintiffs, ORDER v. 12 DOES, 13 Defendants. 14 16 Before the court is pro se Plaintiffs Stephen John Clayton and Christopher Stephen 17 Clayton’s (“Plaintiffs”) ex parte “motion for discovery to subpoena third parties without 18 initial disclosure.” (Mot. (Dkt. # 12).) The court has considered the motion, the relevant 19 portions of the record, and the governing law. Being fully advised, the court DENIES 20 Plaintiffs’ motion without prejudice to file a subsequent ex parte motion for leave to 21 serve third-party subpoenas prior to a Rule 26(f) conference. 22 // 2 Plaintiffs want to know who “cashed out” Stephen Clayton’s cryptocurrency
3 reserves on various crypto exchange platforms. (Am. Compl. (Dkt. # 10) at 2.) Between 4 May 10, 2022 and August 22, 2022, Stephen1 allegedly deposited $61,809.40 worth of 5 Ethereum cryptocurrency into an account using the website vip.biitflyeir.com (“Book 6 Exchange”). (Id. at 1-2.) When he later sought to withdraw his investment, Stephen was 7 only able to retrieve $2,275 worth of United States Dollar Tether, another 8 cryptocurrency. (Id. at 2.) Plaintiffs later discovered that the remaining principal had
9 been liquidated on three crypto exchanges: (1) Binance 14, operated by Binance 10 Holdings Limited (“Binance”) in the Cayman Islands; (2) CEX.IO, operated by CEX.IO 11 Corp. (“CEX.IO”) in Naperville, Illinois; and (3) OKX 7, operated by Aux Cayes 12 FinTech Co. Ltd. (“OKX”) in the Republic of Seychelles. (Id. at 2-4; Mot. at 2-3.) 13 Plaintiffs then worked with “professional cryptocurrency tracers” to verify that Binance,
14 CEX.IO, and OKX are in possession of “relevant personally identifiable information of 15 unknown Defendants” (the “Doe Defendants”). (Am. Compl. at 4; see also Mot. at 3.) 16 In other words, Plaintiffs believe Binance, CEX.IO, and OKX can tell them who stole 17 Stephen’s crypto. 18 Accordingly, Plaintiffs filed the present motion seeking “approval to issue
19 subpoenas” to Binance, CEX.IO, and OKX demanding that they “[p]rovide the names, 20 physical addresses, email addresses, redacted bank account numbers and banking 21
22 1 The court uses Plaintiffs’ first names for clarity. 1 institutions on file for the account holders associated with four distinct transaction ID 2 numbers where [Stephen’s] value of cryptocurrency was cashed out” in order “to identify
3 the unknown Defendants.” (Mot. at 4, 11, 15.) 5 This court has a “duty to construe pro se motions liberally.” United States v. Qazi, 6 975 F.3d 989, 993 (9th Cir. 2020). Accordingly, the court construes Plaintiffs’ motion as 7 one requesting leave to serve third-party subpoenas prior to a Rule 26(f) conference. See 8 Malibu Media, LLC v. Doe, 319 F.R.D. 299, 301 (E.D. Cal. 2016) (ruling on such a
9 motion); Strike 3 Holdings, LLC v. Doe, No. C17-1733MJP, 2017 U.S. Dist. LEXIS 10 204354, at *1 (W.D. Wash. Dec. 12, 2017) (same). The court first sets forth the relevant 11 legal standard before turning to the merits of Plaintiffs’ motion. 12 A. Legal Standard 13 A party may seek production of documents from third parties pursuant to Federal
14 Rule of Civil Procedure 45. See Fed. R. Civ. P. 45(a)(1). “The scope of third-party 15 discovery is governed by Rule 26 and includes ‘any nonprivileged matter that is relevant 16 to a party’s claim or defense and proportional to the needs of the case.’” Bel Power Sols., 17 Inc. v. Monolithic Power Sys., Inc., No. C23-0008JCC, 2023 WL 2401926, at *1 (W.D. 18 Wash. Mar. 8, 2023) (quoting Fed. R. Civ. P. 26(b)(1)). Importantly, “Rule 45 does not
19 allow for interrogatories to third parties,” including “interrogatories disguised as a request 20 for production.” Id. (first citing Turner v. Ralkey, No. C20-5472BHS-DWC, 2021 WL 21 135855, at *3 (W.D. Wash. Jan. 13, 2021); then citing Duong v. Groundhog Enters., Inc., 22 No. 2:19-cv-01333-DMG-MAA, 2020 WL 2041939, at *8 (C.D. Cal. Feb. 28, 2020)). 1 “As a general rule, discovery proceedings take place only after the defendant has 2 been served.” MG Premium Ltd. v. Does 1-20, No. C20-5134BHS, 2020 WL 1675741,
3 at *1 (W.D. Wash. Apr. 6, 2020) (quoting Columbia Ins. Co. v. Seescandy.com, 185 4 F.R.D. 573, 577 (N.D. Cal. 1999)). Courts have made exceptions to this rule “in rare 5 cases” such as those in which “the tortious activity occurred entirely online,” allowing 6 “limited discovery to ensue after filing of the complaint to permit the plaintiff to learn the 7 identifying facts necessary to permit service on the defendant.” Id. (quoting Columbia 8 Ins. Co., 185 F.R.D. at 577).
9 Requests for pre-service discovery may be granted upon a showing of good cause. 10 Id.; see also Strike 3 Holdings, 2017 U.S. Dist. LEXIS 204354, at *1 (holding that good 11 cause existed for the plaintiff to serve a third party subpoena prior to a Rule 26(f) 12 conference). District courts in this Circuit have developed a three-factor test to determine 13 whether good cause exists to permit the sort of early discovery Plaintiffs seek to assist in
14 identifying unknown defendants. See MG Premium, 2020 WL 1675741, at *1; see also 15 QOTD Film Inv. Ltd. v. Does 1-30, No. 2:16-cv-00928-APG-GWF, 2016 WL 8735619, 16 at *2 (D. Nev. May 6, 2016). “First, the moving party should be able to identify ‘the 17 missing party with sufficient specificity such that the Court can determine that defendant 18 is a real person or entity who could be sued in federal court.’” MG Premium, 2020 WL
19 1675741, at *1 (quoting Columbia Ins. Co., 185 F.R.D. at 578). “Second, the moving 20 party should be able to identify ‘all previous steps taken to locate the elusive defendant.’” 21 Id. at *2 (quoting Columbia Ins. Co., 185 F.R.D. at 578). And “[t]hird, the moving party 22 should be able to ‘establish to the Court’s satisfaction that [its] suit against defendant 1 could withstand a motion to dismiss.’” Id. (quoting Columbia Ins. Co., 185 F.R.D. at 2 578).
3 B. Plaintiffs’ Motion for Early Discovery 4 For the reasons explained below, the court concludes that Plaintiffs’ requests are 5 tantamount to an interrogatory and that Plaintiffs have not demonstrated good cause for 6 the requested early discovery. 7 a. Improper Interrogatory 8 To begin, Plaintiffs’ request that Binance, CEX.IO, and OKX “[p]rovide the
9 names, physical addresses, email addresses, redacted bank account numbers and banking 10 institutions on file for the account holders associated with four distinct transaction ID 11 numbers” (Mot. at 15) is an interrogatory because it is a written question seeking written 12 information—not physical documents, electronically stored information, or other tangible 13 things that are discoverable through a subpoena. See Womack v. Tate, No.
14 1:19-cv-00614-ADA-BAM (PC), 2023 U.S. Dist. LEXIS 121496, at *6 (E.D. Cal. July 15 14, 2023) (“An interrogatory is a written question propounded by one party to another 16 who must answer under oath and in writing.”); see also Fed. R. Civ. P. 45(a)(1)(A)(iii) 17 (noting that subpoenas may command persons to “attend and testify; produce designated 18 documents, electronically stored information, or tangible things in that person’s
19 possession, custody, or control; or permit the inspection of premises”). What Plaintiffs 20 seek is not a form of discovery permitted under Rule 45. See Bel Power Sols., 2023 WL 21 2401926, at *1. The court therefore DENIES Plaintiffs’ motion to the extent it seeks an 22 order permitting third-party discovery that is not authorized by the Federal Rules of Civil 1 Procedure. The court notes that Plaintiffs could permissibly attempt to discover the 2 desired information by requesting documents from Binance, CEX.IO, and OKX in
3 compliance with Rule 45. 4 b. Good Cause 5 Plaintiffs also fail to demonstrate good cause for issuing Rule 45 subpoenas to 6 Binance, CEX.IO, and OKX. The court considers each of the relevant three factors 7 below. See MG Premium, 2020 WL 1675741, at *1 (setting forth the three-factor test 8 regarding early discovery).
9 First, Plaintiffs have identified the Doe Defendants as individuals “associated with 10 the operation of the [Book Exchange] platform” who had “access to [Stephen’s] 11 account.” (Am. Compl. at 5.) Accordingly, they have “identified the missing party(s) 12 with as much clarity as possible.” MG Premium, 2020 WL 1675741, at *1. “Thus, as 13 real persons/entities, these Does can be sued in federal court.” Id.
14 Second, Plaintiffs have adequately detailed the steps they took to locate the Doe 15 Defendants. Plaintiffs hired “professional cryptocurrency tracers” and list the exact 16 transaction ID numbers associated with the allegedly fraudulent withdrawals of Stephen’s 17 crypto funds in their complaint. (See Am. Compl. at 3-4.) Plaintiffs have come to a dead 18 end, however, and it does not appear that there are any additional measures they could
19 take to identify the Doe Defendants other than to obtain their identifying information 20 from Binance, CEX.IO, and OKX. Because Plaintiffs “must serve subpoenas” to obtain 21 they information they seek, this factor weighs in favor of finding good cause. MG 22 Premium, 2020 WL 1675741, at *2. 1 The third factor is where Plaintiffs fall short. See MG Premium, 2020 WL 2 1675741, at *2 (stating that the third factor requires the movant to show that the
3 complaint could withstand a motion to dismiss). Plaintiffs assert that the court has 4 federal question jurisdiction via Section 4b of the Commodity Exchange Act (“CEA”), 7 5 U.S.C. § 6(b) (see Am. Compl. at 5; see also 9/12/23 Order (Dkt. # 11) at 2 (describing 6 Plaintiffs’ CEA claim)), but they have not alleged a prima facie case of fraud under 7 Section 4b. Aside from the “Jurisdiction and Venue” section of their complaint, 8 Plaintiffs do not discuss the CEA or Section 4b. (See generally Am. Compl.) Plaintiffs’
9 assertion of a claim under the CEA is unlikely to survive a motion to dismiss because 10 Section 4b “governs domestic futures transactions,” not standard crypto-asset exchanges. 11 See First Commodity Corp. of Bos. v. Commodity Futures Trading Comm’n, 676 F.2d 1, 12 4 (1st Cir. 1982) (emphasis added); see also Hirk v. Agri-Rsch. Council, Inc., 561 F.2d 13 96, 104 (7th Cir. 1977) (“Section 4b encompasses conduct ‘in or in connection with’
14 futures transactions.” (quoting 7 U.S.C. § 6b(a))); Congressional Rsch. Serv., 15 Crypto-Asset Exchanges: Current Practices and Policy Issues 2 (July 23, 2021), 16 https://crsreports.congress.gov/product/pdf/IN/IN11708 (noting that the CEA provides 17 for the regulation of “derivatives exchanges (for example, exchanges trading Bitcoin 18 futures rather than Bitcoins),” but “does not otherwise regulate these markets or market
19 participants”). It does not appear that Stephen purchased cryptocurrency futures. (See 20 generally Am. Compl.) Instead, he “deposited 51.355 units of [Ethereum] into his Book 21 Exchange account,” which were later allegedly dispersed and withdrawn by the Doe 22 Defendants. (Id. at 3.) 1 The court concludes that Plaintiffs’ complaint is unlikely to survive a motion to 2 dismiss. Good cause therefore does not currently exist to subpoena Binance, CEX.IO,
3 and OKX for information concerning the Doe Defendants. See MG Premium, 2020 WL 4 1675741, at *2. Plaintiffs may file a second amended complaint against the Doe 5 Defendants that plausibly alleges a violation of federal law in accordance with the 6 Supreme Court’s decisions in Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic 7 Corp. v. Twombly, 550 U.S. 544 (2006).
9 For the foregoing reasons, the court DENIES Plaintiffs’ motion to subpoena third 10 parties (Dkt. # 12). The court GRANTS Plaintiffs leave to file a second amended 11 complaint by no later than December 29, 2023. Plaintiffs may then file a renewed ex 12 parte motion for leave to serve third-party subpoenas prior to a Rule 26(f) conference by 13 no later than January 26, 2024.
14 Dated this 6th day of December, 2023. A 15 JAMES L. ROBART 16 United States District Judge 17 18 19 20 21 22