Case 1:20-mc-00376-AKH Document 4 Filed 11/13/20 Page 1 of 13

UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF NEW YORK

IN RE EX PARTE APPLICATION OF )
BITSTAMP LTD. )
Pursuant to 28 U.S.C. § 1782, )
For an Order to Obtain Discovery ) Case No: _______________
In Aid of a Foreign Proceeding )
)

MEMORANDUM OF LAW IN SUPPORT OF EX PARTE APPLICATION

FOR AN ORDER PURSUANT TO 28 U.S.C. § 1782 TO OBTAIN DISCOVERY

WITHERS BERGMAN LLP

Christopher LaVigne, Esq.
Joseph Gallo, Esq.
430 Park Avenue, 10th Floor
New York, NY 10022-3505
Phone: (212) 848-9800
Fax: (212) 848-9888
Attorneys for Bitstamp Ltd.
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TABLE OF CONTENTS

Page(s)

FACTUAL BACKGROUND ..........................................................................................................1

ARGUMENT ...................................................................................................................................3

I. Applicant Satisfies Section 1782’s Statutory Requirements for Relief ...................4

II. The Court Should Exercise its Discretion to Grant Applicant’s Section
1782 Application ......................................................................................................7

A. Bank of America and Citibank Are Not Parties to the Danish

Proceeding, And the Documents Sought are Not Within the Danish
Court’s Reach...............................................................................................7

B. The Danish Court Will Likely Be Receptive to this Court’s

Assistance ....................................................................................................8

C. This Application Is Made in Good Faith and Is Not Made to

Circumvent the Discovery Rules of the Danish Court.................................9

D. The Subpoena Requests Are Not Unduly Intrusive or Burdensome ............9

CONCLUSION ..............................................................................................................................10

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TABLE OF AUTHORITIES

Page(s)

Cases

In re Accent Delight Int’l Ltd.,

869 F.3d 121 (2d Cir. 2017).......................................................................................................5

In re Application of Aldunate,
3 F.3d 54 (2d Cir. 1993).............................................................................................................4

In re Application of Hill,
2005 WL 1330769 (S.D.N.Y June 3, 2005) ..............................................................................4

In re Application of Malev Hungarian Airlines,

964 F.2d 97 (2d Cir. 1992).........................................................................................................4

Matter of Degens,
2020 WL 4252725 (S.D.N.Y. July 24, 2020) ............................................................................7

In re Gemeinshcaftspraxis Dr. Med. Schottdorf,

2006 WL 3844464 (S.D.N.Y. Dec. 29, 2006) ...........................................................................8

Gushlak v. Gushlak,
486 Fed. Appx. 215 (2d Cir. 2012) ............................................................................................4

Matter of HES (Caribbean) Int’l Holdings, S.R.L.,

2020 WL 728892 (D.N.J. Feb. 13, 2020) ..................................................................................6

Intel Corp. v. Advanced Micro Devices, Inc.,

542 U.S. 241 (2004) ......................................................................................................... passim

In re Pimenta,
942 F.Supp.2d 1282 (S.D. Fla. 2013) ........................................................................................6

Ukrnafta v. Carpatsky Petroleum Corp.,

2009 WL 2877156 (D. Conn. Aug. 27, 2009) .......................................................................8, 9

Statutes

28 U.S.C. § 1782 .................................................................................................................... passim

F.R.C.P. 45(d)(3) .............................................................................................................................4

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Bitstamp Ltd. (“Bitstamp” or “Applicant”), by and through its undersigned counsel,

respectfully applies to this Court for an order pursuant to 28 U.S.C. § 1782 authorizing Applicant

to issue subpoenas to The Bank of America Corporation (“Bank of America”) and Citibank, N.A.

(“Citibank”), both of which reside, are found, and conduct business within the Southern District

of New York, for the production of documents and information for use in a proceeding in

Denmark.

FACTUAL BACKGROUND

Applicant is a United Kingdom company that has sued CNG Processing ApS (“CNG”), a

Danish company, in The Danish Maritime and Commercial High Court (the “Danish Court”),

Case No. BS-16981/2019-SHR (the “Danish Proceeding”). Applicant initiated the Danish

Proceeding on April 10, 2019. (Declaration of Kristian Storgaard, dated November 11, 2020 (the

“Storgaard Decl.”), at ¶ 3.)

The Danish Proceeding stems from contracts entered into between Applicant, a

cryptocurrency exchange in the European Union, and CNG, an internet payment services

provider based in Denmark, in July 2018, pursuant to which CNG agreed to facilitate certain

online payment services, such as bank transfers, for Applicant’s customers. Specifically, CNG

agreed to provide an “E-Wallet” service to be used by Applicant’s customers when making bank

transfers in United States dollars (“USD”) in connection with their purchase and sale of

cryptocurrency, such as Bitcoin, on Applicant’s trading platform. (See Storgaard Decl. at ¶ 4.)

As part of these agreements, CNG agreed to immediately administer the necessary United

States bank accounts to facilitate both domestic United States and international USD transfers for

Applicant’s customers. CNG administered multiple United States bank accounts, including at

least six bank accounts at Bank of America and at least one bank account at Citibank. Pursuant
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to the parties’ agreements, CNG was supposed to facilitate Applicant’s customers purchasing

cryptocurrencies in USD by allowing those customers to deposit USD into the relevant Bank of

America accounts, facilitate Applicant’s customers selling cryptocurrencies for USD by

permitting withdrawals from the relevant Citibank and/or Bank of America accounts, and

facilitate the flow of funds between both banks’ accounts in order to ensure the Citibank accounts

would never be overdrawn by customer withdrawals and vice versa. (See id. at ¶ 5.)

However, CNG was significantly delayed in opening the United States bank accounts

and, when it did open United States accounts, those accounts were hampered by deposit and

withdrawal limits, and other limitations on transfers to, from, and between the relevant Citibank

and Bank of America accounts, none of which were contemplated by the parties’ agreements.

Additionally, CNG never established a consistent and workable payment service for Applicant’s

customers’ international USD transactions. (See id. at ¶ 6.)

In light of these failings, Applicant terminated its agreements with CNG and demanded

return of (1) its initial security deposit to CNG in the amount of $1,717,424.10 and (2) customer

deposits in accounts facilitated by CNG totaling $971,527.59. CNG has refused to turn over

these funds and has not provided any information regarding their continued existence or

availability. (See id. at ¶ 7.)

On April 10, 2019, Applicant commenced the Danish Proceeding seeking from CNG,

among other damages, return of its deposit and its customers’ funds. The status and disposition

of the relevant Citibank and Bank of America accounts, and the amounts deposited into those

accounts, are important issues in the Danish Proceeding. (See id. at ¶ 8.)

In lieu of providing any information regarding these funds or their continued existence,

CNG has instead claimed that it is unable to return these funds to Applicant because Bank of

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America and Citibank have frozen the accounts due to suspicious activity by an individual that

deposited funds in the accounts. CNG has offered no documents from either Bank of America or

Citibank to support its claims regarding the status of these accounts. (See id. at ¶ 9.)

From October 5 to October 7, 2020, Bitstamp and CNG participated in a trial in the

Danish Proceeding. At trial, CNG provided testimony regarding the relevant Citibank and Bank

of America accounts, and repeated its allegation that those accounts were frozen. CNG did not

provide any documentation from Bank of America or Citibank evidencing that funds still remain

in these accounts or supporting its claims these accounts were frozen. (See id. at ¶ 10.)

In addition, CNG testified that the accounts in question are actually not held by CNG or

in the name of CNG, but by a third party. CNG, however, refused to provide specific information

about the identity of that third party. CNG’s testimony regarding this alleged third party control

of the account was not disclosed to Bitstamp before the trial. (See id. at ¶ 11.)

Discovery that sheds light on the accuracy and veracity of CNG’s claims regarding the

relevant Citibank and Bank of America accounts is crucial to the ongoing controversy between

CNG and Bitstamp in the Danish courts. CNG has failed to provide information regarding these

accounts in the Danish Proceeding, and information regarding the accounts is not within the

judicial reach of the Danish Court. (See id. at ¶¶ 14-15.)

ARGUMENT

The function of Section 1782 is to assist the gathering of evidence located in the United

States in aid of foreign proceedings. See Intel Corp. v. Advanced Micro Devices, Inc., 542 U.S.

241, 248 (2004). A district court should consider a Section 1782 discovery request in light of the

statute’s “twin aims of providing efficient means of assistance to participants in international

litigation in our federal courts and encouraging foreign countries by example to provide similar

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means of assistance to our courts[.]” In re Application of Malev Hungarian Airlines, 964 F.2d

97, 100 (2d Cir. 1992). “In light of these goals, the section has become amenable to

‘increasingly broad applicability.’” In re Application of Hill, 2005 WL 1330769, at *2 (S.D.N.Y

June 3, 2005). Indeed, the statute was intended as “a one-way street”… “[to grant] wide

assistance to others, but [demand] nothing in return.” Malev Hungarian Airlines, 964 F.2d at 101

(citation and quotation omitted).

It is common and proper for the court to grant a Section 1782 application ex parte, with

the respondent later having the opportunity to challenge the discovery request by moving to

quash pursuant to Federal Rule of Civil Procedure 45(d)(3). Gushlak v. Gushlak, 486 Fed. Appx.

215, 217 (2d Cir. 2012).

I. Applicant Satisfies Section 1782’s

Statutory Requirements for Relief

To obtain discovery pursuant to Section 1782, an applicant must establish that three

initial statutory requirements are met:

(1) The person from whom the discovery is sought resides or is found
in the district where the application is filed;

(2) The discovery is for use in a proceeding before a foreign tribunal;

and

(3) The application is made by a foreign or international tribunal or

any “interested person.”

See 28 U.S.C. § 1782(a). The United States Supreme Court has cautioned lower courts against

reading any additional requirements into the statute’s application. See Intel, 542 U.S. at 255

(advising lower courts to resist placing additional “categorical limitations . . . on the statute’s

reach.”). See also In re Application of Aldunate, 3 F.3d 54, 59 (2d Cir. 1993) (“[W]e are not free

to read extra-statutory barriers to discovery into Section 1782.”).

Here, Applicant’s request for discovery satisfies Section 1782’s statutory prerequisites.

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First, Bank of America and Citibank, the persons from whom discovery is sought, reside,

are found, and conduct business in the Southern District of New York. Specifically, Bank of

American maintains corporate offices in the Bank of American Tower, located at One Bryant

Park, New York, NY 10036, and Citibank maintains corporate offices at 388 Greenwich Street,

New York, NY 10013. (Declaration of Christopher LaVigne, dated November 12, 2020 (the

“LaVigne Decl.”), at ¶¶ 4-5.

Second, Applicant seeks discovery for use in a proceeding before a foreign tribunal,

namely the Danish Proceeding, to determine the status of the accounts that CNG administered in

connection with the parties’ dispute. The success of both Bitstamp’s claims against CNG and

CNG’s counterclaims against Bitstamp in the Danish Proceeding will depend, in part, on the true

status, control, and disposition of the relevant Citibank and Bank of America accounts. (See

Storgaard Decl. at ¶ 13.) The requested documents in the proposed subpoenas submitted will

constitute direct evidence regarding these important issues. (See Storgaard Decl. at ¶ 8; see

LaVigne Decl., Exs.1 and 2.) Accordingly, the “for use” requirement of the statute is met here.

See In re Accent Delight Int’l Ltd., 869 F.3d 121, 132 (2d Cir. 2017) (“[T]he term ‘for use’ in

Section 1782 has only its ordinary meaning – that the requested discovery is ‘something that will

be employed with some advantage or serve some use in the proceeding.’”).

More specifically, CNG’s unsubstantiated claims regarding the status and disposition of

the relevant Citibank and Bank of America accounts were raised at trial in the Danish

Proceeding. (See Storgaard Decl. at ¶¶ 10-11.) Under Danish law, the parties in the Danish

Proceeding will be permitted to appeal the Danish Court’s decision of the trial. The Danish

Court’s decision is scheduled to be issued on December 2, 2020. That decision is not the final

disposition of the Danish Proceeding, and the parties will have four weeks from that date to file

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their appeals. Under Danish law, the parties are permitted to present evidence in support or

defense of an appeal, including evidence that was not presented or available during the initial

trial. (See id. at ¶¶ 12.)

CNG’s new testimony at trial regarding the status and control of the relevant accounts

means that the information sought in these subpoenas will be important to the parties’ appeals of

the Danish Court’s decision. The success of an appeal from either or both of Bitstamp’s claims

against CNG and CNG’s counterclaims against Bitstamp will depend, in part, on the true status,

control, and disposition of the relevant Citibank and Bank of America accounts. Accordingly,

discovery that sheds light on the accuracy and veracity of CNG’s claims regarding the relevant

Citibank and Bank of America accounts is crucial to the ongoing controversy between CNG and

Bitstamp in the Danish courts. (See id. at ¶¶ 13-14.) Intel Corp., 542 U.S. at 247 (“[T]he

‘proceeding’ for which discovery is sought under § 1782(a) must be in reasonable contemplation,

but need not be ‘pending’ or ‘imminent[.]’”); Matter of HES (Caribbean) Int’l Holdings, S.R.L.,

2020 WL 728892, at *2 (D.N.J. Feb. 13, 2020) (“A district court may order a person to produce a

document for use in a proceeding in a foreign or international tribunal pursuant to 28 U.S.C. §

1782 regardless of whether a matter is pending or imminent; rather, the proceeding for which

discovery is sought need only be within ‘reasonable contemplation.’”) (quoting In re Pimenta,

942 F.Supp.2d 1282, 1287 (S.D. Fla. 2013)).

Third, and finally, Applicant, as party to the Danish Proceeding, is an interested party

under the statute.

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II. The Court Should Exercise its Discretion to

Grant Applicant’s Section 1782 Application

If these statutory requirements are satisfied, the district court is free to grant Applicant’s

request for discovery assistance. 28 U.S.C. § 1782(a). In Intel, supra, the Supreme Court

identified four factors that should guide the district court’s consideration (the “Intel factors”):

(1) Whether the person from whom discovery is sought is a participant

in the foreign proceeding, in which event the need for § 1782(a)
aid generally is not as apparent as it ordinarily is when evidence is
sought from a nonparticipant in the matter arising abroad;

(2) The nature of the foreign tribunal, the character of the proceedings
underway abroad, and the receptivity of the foreign government or
the court or agency abroad to U.S. federal-court judicial assistance;

(3) Whether the § 1782(a) request conceals an attempt to circumvent

foreign proof-gathering restrictions or other policies of a foreign
country or the United States; and

(4) Whether the request is unduly intrusive or burdensome.

Matter of Degens, 2020 WL 4252725, at *3 (S.D.N.Y. July 24, 2020), citing Intel, 542 U.S. at

264-65.

Here, not only does Applicant’s application satisfy Section 1782’s statutory requirements,

but the Intel factors counsel strongly in favor of this Court granting Applicant’s request for

discovery.

A. Bank of America and Citibank Are Not Parties to the Danish Proceeding,
And the Documents Sought are Not Within the Danish Court’s Reach

Bank of America and Citibank are not parties to the Danish Proceeding and are not

subject to the jurisdiction of the Danish Court. (See Storgaard Decl. at ¶16.) CNG has failed to

provide substantive information regarding these accounts in the Danish Proceeding, and

information residing with Citibank and Bank of America regarding the accounts is not within the

judicial reach of the Danish Court. (See id. at ¶ 15.) Thus, as the Supreme Court had held, the

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need for foreign assistance to supplement the discovery in the Danish Proceeding is apparent.

See Intel, 542 U.S. at 264 (“A foreign tribunal has jurisdiction over those appearing before it, and

can itself order them to produce evidence . . . . In contrast, nonparticipants in the foreign

proceeding may be outside the foreign tribunal’s jurisdictional reach; hence, their evidence,

available in the United States, may be unobtainable absent § 1782(a) aid.” (internal citations

omitted)).

B. The Danish Court Will Likely Be Receptive to this Court’s Assistance

Courts in this circuit have previously held that courts should “err on the side of

permitting requested discovery” where there is no “authoritative proof” that the foreign

government would not be receptive to the materials. See In re Gemeinshcaftspraxis Dr. Med.

Schottdorf, 2006 WL 3844464 (S.D.N.Y. Dec. 29, 2006), at *6 (noting that this “liberal” rule is

supported by “the availability of corrective measures abroad[,]” namely that the foreign court can

“simply choose to exclude or disregard” the material); Ukrnafta v. Carpatsky Petroleum Corp.,

2009 WL 2877156, at *5 (D. Conn. Aug. 27, 2009) (granting application where there was no

basis to believe evidence to be obtained would not be accepted in foreign tribunal). Additionally,

Section 1782 assistance is available even where the materials would clearly not be obtainable if

located in the foreign jurisdiction. Intel, 542 U.S. at 260 (“nothing in the text of § 1782 limits a

district court’s production-order authority to materials that could be discovered in the foreign

jurisdiction if the materials were located there.”).

The Danish Court may order entities and individuals who are not parties to legal

proceedings to provide disclosure, but only where those non-parties have submitted to the

jurisdiction of the Danish Court. (See Storgaard Decl. at ¶ 16.) Bank of America and Citibank

are not parties to the Danish Proceeding and are not subject to the jurisdiction of the Danish

Court. (See id.) Further, the Danish Court has not expressed any opposition to any evidence

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gathered through Section 1782 proceedings in connection with the Danish Proceeding, nor would

it be expected to express such opposition. (See id. at ¶ 17.) Lastly, the Danish courts are

receptive to United States court judicial assistance when there is information that can only be

obtained from United States residents. (See id.) Accordingly, this factor weighs in favor of

granting the Application.

C. This Application Is Made in Good Faith and Is Not Made

to Circumvent the Discovery Rules of the Danish Court

This request is not made in an effort to circumvent foreign proof-gathering restrictions.

(See Storgaard Decl. at ¶ 18.) See also Ukrnafta, 2009 WL 2877156, at *5 (finding that there

was no evidence that applicant was attempting to conceal an attempt to circumvent foreign

proof-gathering restrictions). Here, Applicant satisfies this good faith basis because it will use

the requested documents to resolve the disputed claims regarding the relevant accounts in the

Danish Proceeding. (See, generally Storgaard Decl.) The Danish Court provides litigants the

means to obtain and use discovery from non-parties, including discovery after the initial trial has

taken place, and the requested discovery from Bank of America and Citibank will not circumvent

any limits on discovery imposed by the Danish Court. (See id. at ¶ 18.)

D. The Subpoena Requests Are Not Unduly Intrusive or Burdensome

Lastly, the requests for documents in the proposed subpoenas are neither unduly intrusive

nor burdensome. CNG (or the recently disclosed third parties that allegedly control the relevant

accounts on CNG’s behalf) purports to administer the relevant accounts as part of its relationship

with Applicant, so Applicant’s procurement of information about those accounts is not unduly

intrusive. (See Storgaard Decl. at ¶¶ 5, 11.) During the parties’ business relationship, Bitstamp

obtained partial information regarding some of the relevant accounts from CNG, and is able to

use that information to attempt to narrow the scope of its requested discovery here. Accordingly,

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the document requests in Applicant’s proposed subpoenas are narrowly tailored to request

information regarding the relevant Bank of America and Citibank accounts; where possible,

Applicant provided account numbers in an attempt to facilitate Bank of America’s and Citibank’s

anticipated response. (See LaVigne Decl., Exs. 1 and 2.) In addition, Bank of America and

Citibank are both multi-national banks that routinely provide information regarding their

respective accounts for use in domestic and international legal proceedings. Accordingly, the

proposed subpoenas’ requests are not unduly burdensome.

CONCLUSION

Applicant respectfully requests that this Court grant this Application pursuant to 28

U.S.C. § 1782, and issue an Order, substantially in the form of the Proposed Order attached to

the Declaration of Christopher LaVigne in support hereof, authorizing Applicant to serve

subpoenas and document requests substantially in the form attached to the Declaration of

Christopher LaVigne in support hereof.

Dated: New York, New York

November 12, 2020

WITHERS BERGMAN LLP

By:
Christopher LaVigne, Esq.
Joseph Gallo, Esq.
430 Park Avenue, 10th Floor
New York, New York 10022
Tel: (212) 848-9800
Fax: (212) 848-9888
chistopher.lavigne@withersworldwide.com
joseph.gallo@withersworldwide.com
Attorneys for Bitstamp Ltd.

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