Third-Party Doctrine Applies in Cryptocurrency Searches

               In a decision by the United States Court of Appeals for the Fifth Circuit, the court has ruled that cryptocurrency transactions are subject to the third-party doctrine. This means that cryptocurrency records are not protected by the Fourth Amendment and may be searched by law enforcement at any time, even without a warrant. This will make it significantly harder for criminal defendants to protect their identity in cryptocurrency transactions, whether made in New York or elsewhere, as they will effectively be unable to contest a law enforcement search of that data.

The case before the court, U.S. v. Gratkowski, concerned a man who conditionally pled guilty in a lower court to exchanging cryptocurrency for child pornography through an online cryptocurrency exchange. However, the defendant contested whether law enforcement could legally search data related to his cryptocurrency exchanges, asserting his Fourth Amendment right against unreasonable search and seizure. The primary question before the court was whether the Fourth Amendment would protect the information obtained from the cryptocurrency exchange of his transactions, or if the records were considered “third-party” information that he had no right to contest.

The Fifth Circuit has ruled that, in the case of cryptocurrency, the third-party doctrine applies. The third-party doctrine states that an individual only has the right to contest unreasonable searches and seizures against themselves and their personal property, not against others. This is the same rationale that allows law enforcement, for example, to search bank records without a warrant. Because the records belong to the exchange, and not to the person conducting the transaction, they have no standing to contest a search of the exchange’s records.

This ruling is a significant blow against cryptocurrency advocates, who promised these digital currencies would allow for anonymous commercial transactions. However, far from delivering this promised anonymity, these cryptocurrencies can now be monitored by law enforcement under the third-party doctrine, just like any other financial transaction. Whether in New York or elsewhere, criminal defendants should beware, because paying for goods or services in cryptocurrency will not protect them from law enforcement scrutiny.

If you or someone you know has been arrested for a criminal offense, you will need legal counsel to help you preserve your rights and work to get the best possible outcome for your matter. A New York criminal defense lawyer, who is experienced in handling criminal cases of all sorts, can advise you of your legal rights and will fight for your best interests in court. If you or your loved one has been arrested, contact the Suffolk County criminal defense attorneys at McGuire, Peláez and Bennett at (631) 348-1702.

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