Bdi Capital, LLC v. Bulbul Invs. LLC

446 F.Supp.3d 1127

BDI CAPITAL, LLC, Plaintiff,

v.BULBUL INVESTMENTS LLC d/b/a Campbx, Keyur Mithawala Defendants.

CIVIL ACTION NO. 1-18-cv-3392-AT

United States District Court, N.D. Georgia, Atlanta Division.

Signed March 11, 2020

John Joseph Richard, Mark B. Carter, Taylor English Duma LLP, Atlanta, GA, Martin Mushkin, Law Office of Martin Mushkin, LLC, Stanford, CT, for Plaintiffs.

Pratt H. Davis, Robert Daniel Terry, Parker MacIntyre, Atlanta, GA, for Defendants.

ORDER

AMY TOTENBERG, UNITED STATES DISTRICT JUDGE

This matter is before the Court on Defendants Bulbul Investments LLC d/b/a CampBX ("CampBX") and Keyur Mithwala's (collectively, "Defendants")¹ Motion for Summary Judgment [Doc. 75]. Plaintiff BDI Capital, LLC has also filed a Motion to Strike, which contains an embedded request for leave to file a sur-reply. [Doc. 83]. The Motion to Strike is DENIED , but the request to file the sur-reply is GRANTED , and the Court will direct the clerk to file the proposed sur-reply, Doc. 83-1, Pages 9–14. For the reasons that follow, the Motion for Summary Judgment is GRANTED IN PART and DENIED IN PART .

I. STANDARD FOR SUMMARY JUDGMENT

Summary judgment may only be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to summary judgment as a matter of law." FED. R. CIV. P. 56(c). The "purpose of summary judgment is to pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial." Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting the Advisory Committee's note to FED. R. CIV. P. 56 ). "[The] party seeking summary judgment always bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of the [record before the court] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The burden then shifts to the non-movant to establish, by going beyond the pleadings, that there is indeed a genuine issue as to the material facts its case. Thompson v. Metro. Multi–List, Inc. , 934 F.2d 1566, 1583 n.16 (11th Cir. 1991) ; Chanel, Inc. v. Italian Activewear of Fla., Inc. , 931 F.2d 1472, 1477 (11th Cir. 1991). A dispute of material fact "is ‘genuine’ ... [only] if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ; see also Matsushita , 475 U.S. at 587, 106 S.Ct. 1348.

When ruling on the motion, the Court must view all the evidence in the record in the light most favorable to the non-moving party and resolve all factual disputes in the non-moving party's favor. Welch v. Celotex Corp. , 951 F.2d 1235, 1237 (11th Cir. 1992) ; Ryder Int'l Corp. v. First Am. Nat'l Bank , 943 F.2d 1521, 1523 (11th Cir. 1991). The Court must avoid weighing conflicting evidence. Liberty Lobby , 477 U.S. at 255, 106 S.Ct. 2505 ; McKenzie v. Davenport–Harris Funeral Home , 834 F.2d 930, 934 (11th Cir. 1987). Nevertheless, the non-moving party's response to the motion for summary judgment must consist of more than conclusory allegations, and a mere "scintilla" of evidence will not suffice. Walker v. Darby , 911 F.2d 1573, 1577 (11th Cir. 1990) ; Peppers v. Coates , 887 F.2d 1493, 1498 (11th Cir. 1989). But where a reasonable fact finder may "draw more than one inference from the facts, and that inference creates a genuine issue of material fact, then the court should refuse to grant summary judgment." Barfield v. Brierton , 883 F.2d 923, 933–34 (11th Cir. 1989) (citation omitted).

The essential question is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson , 477 U.S. at 251–52, 106 S.Ct. 2505.

II. FACTUAL BACKGROUND²

In 2011 Defendant Keyur Mithawala began, through his company CampBX, to develop the code for a Bitcoin trading platform that would allow its users to buy and sell Bitcoins against U.S. Dollars. (Def.'s Statement of Undisputed Material Facts ("SUMF") ¶ 6, not disputed , Pl.'s Resp. to SUMF ("RSUMF") ¶ 6).

Bitcoins³ are a type of virtual currency, or "cryptocurrency" stored in virtual "wallets." (Id. ¶ 1).⁴ A wallet, which is created by the official Bitcoin software, can store bitcoins of a single user. (Id. ¶ 2). Alternatively, a wallet can store bitcoins of multiple users using built-in "Accounts" functionality and track each user's Bitcoin balance independently, which is the type of "wallet" employed by CampBX. (Id. ¶ 2–3). Each account on the CampBX trading platform had two types of balances - Bitcoin and cash (in U.S. Dollars) (Id. ¶ 7).

Transferring bitcoins entails two "keys," a public key and a private key. "Both are large strings of numbers that are mathematically linked to the wallet address.... The private key is used to mathematically derive the public key, which is transformed with a hash function to produce the address that other people can see."⁵ Any bitcoin transfer thus creates a transaction ID (TXID), and in the case of a single user wallet as described above, the TXID of outgoing transfers includes a reference to one or more incoming TXID's. (Id. ¶ 4). In the case of a multi-user wallet, the TXID's of individual users may be jumbled due to the pooled nature of the wallet. (Id. ¶ 5).

In 2013, BDI, through Jay Daniel, began the process to set up an account with CampBX. (Id. ¶ 9). There were no transactions, attempted transactions or communications between BDI Capital, LLC ("BDI") and CampBX between May 2015 and July 2017. (Id. ¶ 10).

Somewhere around July 4, 2017, Mr. Daniel alleges that he attempted to make a withdrawal of all of BDI's bitcoins stored on CampBX. (Deposition of Jay Daniel, at 40–42, Doc. 42). Mr. Daniel contends that he was unable to complete the transaction, and received an error message. (Id. at 43:17–22). He contends that he attempted to initiate a help desk ticket, but received a "red error message." (Id. at 47:11–17). Mr. Daniel alleges he tried to make a help desk ticket again the next day, and received another error. (Id. at 49:12–20). Around that time, Mr. Daniel alleges he sent an email to CampBX, but received no response. (Id. at 50:18–20). Mr. Daniel does not have any record of these attempts and no longer has access to the email address from which this email was allegedly sent. (Id. at 27:5–27:16, 28:09–28:19, 52:11–20). Camp BX contends that it has full help desk records preserved from 2011 through the present, and there is no record of any help desk tickets being attempted or submitted by BDI in or around July 2017. (K. Mithawala Decl. ¶ 10, Doc. 75-3).⁶

Mr. Daniel made no further attempts to withdraw the coins until December of 2017. (Dep. Daniel at 53:17–21, 54:9–12, 17–20). Mr. Daniel contends that he received the same error message when he attempted to withdraw the Bitcoin, ostensibly regarding withdrawal limits, and the same error message when he attempted to make a help desk request. (Id. at 55). Mr. Daniel has no record of these attempts. (Id. at 56:1–4). Defendants likewise have no record of an email or alleged attempted second transaction in July of 2017. (K. Mithawala Decl. ¶ 11). Furthermore, the computer from which all of these transactions originated was destroyed. (Dep. Daniel at 49:2–49:6).

In December of 2017, Mr. Daniel contends that after reading a post on Reddit, he became aware that CampBX was in the process of shutting down or had been shut down, and at this point contacted BDI's counsel. (Id. at 57:14–20, 58:2– 22). The Court picks back up on this thread later.

Meanwhile, Defendants contend that in 2017, they decided to close CampBX because the banks it used had elected to discontinue their business with entities involved with virtual currencies such as Bitcoins. (K. Mithawala Decl. ¶ 13; Dep. K. Mithawala at 150:17-150:24).⁷ The Reddit post referenced above was not posted by any of the Defendants. (Def.'s SUMF ¶ 20, not disputed , Pl.'s RSUMF ¶ 20). Defendants contend that they began to notify account holders in a staggered manner to withdraw their coins, ostensibly "to try to prevent an overwhelming number of questions to CampBX's help desk at one time." (K. Mithawala Decl. ¶ 14; Dep. K. Mithawala at 125:14-125:21). There appears to be no dispute that BDI never received such notice, though Defendants contend that this is because BDI was not in the first batch of account holders to be notified. (K. Mithawala Decl. ¶ 16; Daniel Decl. ¶ 13).

As noted above, BDI contacted its counsel in December of 2017, who sent a demand letter to Defendants dated December 6, 2017. (Am. Compl. ¶ 19, Ex. 2, Doc. 11-1 at 8; Answer ¶ 19 ("Defendants [sic] believes it received the letter referenced in the allegations of Paragraph 19 of the Complaint.")). The letter indicated that it was sent on behalf of Jay Daniel, not BDI, and provided an email address for Mr. Daniel directly. (Doc. 11-1 at 8). The letter stated that "our client is having trouble withdrawing bitcoins from the CampBX account from your company" and that "he has 14.86155791 BTC in their [sic] trading account along with ... $2,816.87." (Id. ). The letter requested that CampBX "transfer these amounts immediately."

Defendant Keyur Mithawala did not receive the letter until approximately January 10, 2018. (Def.'s SUMF ¶ 27, not disputed , Pl.'s RSUMF ¶ 27). Defendants did not respond to the letter. (Id. ¶ 28). Defendants claim that they did not respond to it because it did not contain a valid CampBX user name or email address, making it impossible to identify the account to which it corresponded, and that the email and user...