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New crypto tech brings legal recourse to the blockchain

Chicago-based blockchain firm Jurat will debut technology on Tuesday that will allow for legal enforcement actions to be filed directly on the blockchain.

A new sheriff in the "wild west" of cryptocurrency trading is giving blockchain attorneys and participants in the $1.7 trillion digital asset market hope that increased consumer safeguards will help the nascent industry achieve greater adoption.

FOX Business has learned that Chicago-based blockchain firm Jurat will debut technology on Tuesday that will allow for legal enforcement actions to be filed directly on the blockchain – an immutable, decentralized ledger that records data such as transactions between crypto wallets.

Jurat’s native coin, JTC, which is set to list Tuesday on the BitMart exchange, connects with state and federal court systems using technology that can recover stolen coins, freeze accounts associated with illicit activity and enforce legal recourse for so-called "smart contracts" (digital agreements that are stored on a blockchain and automatically executed without intermediaries).

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Many in the crypto industry blame the fear of investing in an inherently volatile and easily manipulated asset class, coupled with numerous scams and frauds heralded by the media, for the slow adoption rate crypto and blockchain technology have endured since the creation of bitcoin in 2009.

A New York federal jury convicted former crypto golden boy Sam Bankman-Fried in November for defrauding customers using his now-bankrupt cryptocurrency exchange FTX. Bankman-Fried was found guilty of stealing as much as $8 billion of customer funds and using them to hedge risky bets at his crypto trading firm Alameda Research. The collapses of stablecoin issuer Terraform Labs and crypto lender Celsius in 2022 also contributed to tens of billions in customer losses.

A 2023 Pew Research study found that 75% of Americans who have heard of cryptocurrencies are not confident in their safety and reliability, while just 17% of U.S. adults say they have ever invested in, traded or used a cryptocurrency.

"The absence of an effective method for enforcing legal rights for consumers has prevented crypto from seeing mainstream adoption," said Jurat CEO Mike Kanovitz. "More robust on-chain policing will not only help tame the lawlessness that scares away would-be adopters and draws the ire of government officials, it can unlock incredible utility for commerce."

On-chain enforcement actions may indeed be a faster, more efficient way of obtaining legal remedies for victims of crypto scams. Until now, courts have faced limited resources for effectively enforcing smart contracts between parties transacting on the blockchain, as well as freezing and seizing digital assets without the help of an intermediary or asset custodian like a centralized exchange.

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Meanwhile, traditional enforcement agencies like the Securities and Exchange Commission and the Commodities Futures Trading Commission have also lacked resources and infrastructure to police activity on the blockchain, resulting in nearly all enforcement actions being brought after the alleged offense has occurred.

SEC Chairman Gary Gensler, the self-proclaimed "cop on the beat" for digital assets, brought more than two dozen crypto-related enforcement actions in 2023. Gensler has referred to the crypto industry as a field rife with fraudsters, hucksters and scam artists who refuse to come into compliance with the SEC.

Kanovitz and his team of lawyers believe their technology will help government agencies like the SEC prevent crime in real-time as well as aid retail customers in reclaiming lost or stolen funds.

Jurat has already had some success in putting its decentralized enforcement technology to the test. In August, a U.S. district court blocked several Russian and North Korean hackers from accessing their crypto wallets using Jurat’s on-chain enforcement model.

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"There is multi-trillion-dollar potential for this technology because that’s the total value of current litigation over contracts and partnerships," said Jeremy Hogan, attorney and founder of law firm Hogan & Hogan. "Jurat will be one of the ways to enforce a contract when the world is ready to embrace Web3."

But Jurat’s strategy is not without criticism. So-called crypto "purists," individuals who are staunch supporters of decentralization, argue that on-chain surveillance and enforcement go against the vision bitcoin inventor Satoshi Nakamoto had when the first blockchain database was created. The pseudonymous Nakamoto preached a financial system that was not controlled by the government or overseen by any one entity, but by the people collectively.

"Cryptocurrency must evolve to achieve mass adoption. On-chain legal enforcement is evolution. It is healthy for the whole space," Kanovitz added.

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