[WSBAPT] Crypto-Wallet Question

[Rich Holland]

Crypto wallets do not actually contain any crypto.  Your wallets at best contain a ledger and the location of your crypto on the relevant beacon chain.  They are kind of a map pointing to the correct coordinates.

The key words or ‘seed phrase’ is the ultimate recovery phrase.  With that phrase you could, in theory, throw all the wallets in the garbage or completely delete the programs and still recover the location of the coins on the beacon chain with the seed phrase.  As such, getting locked out of a wallet does not destroy or otherwise prevent access to the crypto by use of seed phrase on a new computer or with a new wallet - again assuming you have the seed phrase.

There is no customer service for most Defi (decentralized finance) because it is de-centralized.  Go to the website addresses for the wallet program and check in their FAQs for instructions on how to use the wallet.  Do not just google it or ask on reddit or similar - you’re guaranteed to lose the funds.

Greater detail on what to do / how to cash in depends entirely on the protocol.  It sounds like the departed was somewhat savvy …. but wow storing your seed phrase as it appears was done is truly poor security - like taping you bank login and PIN to your monitor / though it seems fortunate in this case.

If/when someone decides to move, transfer, sell any of the holdings do it very meticulously and use small test amounts first.  Check every entry every time.  Malware exists that does nothing to your computer other than ‘clip’ your send to address and replaces it with a scammers (Like the bank wire scams but sneakier).  Also you can, for example, use the incorrect protocol and the coins are just inaccessible and the transactions rarely can be reversed.  If it helps to make this part less confusing think of it as wiring to BoA but you used the US Bank wire system (pretending every bank has its own for the moment because there is no Federal Reserve or central authority in Defi).  US Bank doesn’t have the funds and BoA can’t access them. They just sit there in perpetuity. You want to make that mistake with a nickel not a grand.

Good luck and be careful.  This may be a first, but it won’t be a last.  I’m a real estate attorney and we are starting, or were before the current bear market, to get the ‘can you close a transaction with bitcoin?’ and all the odd concerns about a crypto escrow account - something that doesn’t happen exist with WSBA blessing as far as I am aware.

Please keep the list updated!

Rich on his phone
________________________________
From: wsbapt-bounces at lists.wsbarppt.com <wsbapt-bounces at lists.wsbarppt.com> on behalf of Doehne, Jen <jdoehne at eisenhowerlaw.com>
Sent: Friday, April 14, 2023 3:24:58 PM
To: wsbapt at lists.wsbarppt.com <wsbapt at lists.wsbarppt.com>
Subject: [WSBAPT] Crypto-Wallet Question


Hello all-

Background: Administrator of intestate estate discovered that decedent held multiple cryptocurrency wallets, but is not certain if any of the wallets contain any actual currencies in them. Decedent died unexpectedly and did not leave clear instructions, or any instructions, on how to gain access to any of the wallets. Administrator discovered random scraps of paper which have the name of each wallet followed by multiple random words, which are suspected to be the “seed phrase” or “key” for each wallet, but Administrator is uncertain, as are we. Administrator has researched each wallet (Metamask, Coinbase Waller-not the exchange, Tzero, Trust wallet, and Pie Wallet) and none of the wallets appear to have a “department” or customer service or any such division which can be contacted for assistance or to subpoena for access. Thus, our questions are as follows:



  1.  Has anyone dealt with such an issue, and if so, are we correct that these wallets are truly decentralized and there is no single corporate or other type of entity which can be subpoenaed for access to the crypto in each wallet?
  2.  Would someone be “locked out” permanently if they enter the seed phrase incorrectly, or would the wallet provide some sort of warning that x amount of attempts remain?
  3.  Generally, how have other attorneys dealt with crypto issues in probates? And how do others view the PR/Administrator’s fiduciary duties as it pertains to gaining access to cryptocurrencies a decedent may have left behind?



Thanks for any insight!

Best,

Jen



Jen Doehne, Attorney
Pronouns she/her/hers
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