NY Lost-and-Found Lawsuit Targets 40,000 Bitcoin Wallets

What Happened

Cold-wallet dormancy rate for wallets inactive 5+ years currently sits at approximately 22% of circulating supply — in the range of 4.2–4.4 million BTC, per Glassnode's Long-Term Holder supply methodology (Glassnode, glassnode.com/bitcoin-supply-metrics — verify exact figure and publication date against current dashboard snapshot before publication). That figure has held within one standard deviation of its 36-month baseline. The legal question now entering a New York courtroom is whether that dormancy constitutes abandonment under state lost-and-found statute — a classification with no on-chain basis whatsoever.

A New York judge has stayed a lawsuit seeking legal ownership of nearly 40,000 bitcoin wallets, scheduling a July 2025 hearing to address a proposed amicus brief filed by attorney Ian R. Cohen. Cohen's brief argues that New York's lost-and-found statute cannot be applied to self-custodied assets controlled by private keys — where the distinction between "lost" and "deliberately inaccessible" is forensically undetectable.

Key Details

The legal mechanism at issue is New York's abandoned property law, which requires custodians to transfer dormant assets to the state after a defined inactivity period. The statute was written for bank accounts — assets with institutional custodians and activity logs. A UTXO has neither. A wallet holding 1 BTC since 2015 with zero outbound transactions is on-chain indistinguishable from one whose owner died, one whose owner uses it as a generational vault, or one secured in a Faraday-cage air-gap cold storage setup.

Exchange net outflows to cold storage wallets averaged 28,400 BTC per week across Q1 2024, per CoinGlass — users actively moving coins *off* exchange and into self-custody. That flow pattern represents deliberate, ongoing custody decisions, not abandonment. The amicus brief targets exactly this gap in statutory logic.

Why It Matters

The precedent risk is structural. In March 2020, when BitMEX faced CFTC action, exchange reserve balances dropped 35% in 72 hours as users withdrew to self-custody (CoinGlass). That flight-to-self-custody is the industry's foundational risk-management behavior. If a court accepts that dormant self-custodied wallets can be reclassified as abandoned property, the legal surface area expands to encompass every cold storage wallet, multisig vault, and privacy-preserving address that lacks regular on-chain activity.

The 2013 Silk Road seizure established that the DOJ could access wallets via private key acquisition — but that required court-authorized action against a named defendant. This lawsuit proposes a structural claim against wallet *states*, not wallet *owners*. That is a categorically different legal theory, and one the Bitcoin protocol cannot distinguish from normal long-term holding.

Long-term holder (LTH) supply — coins unmoved for 155+ days — currently represents 74.8% of circulating BTC (Glassnode). A statutory framework that treats inactivity as abandonment effectively criminalizes the dominant custody behavior of the network.

What Happens Next

The July 2025 hearing will determine whether Cohen's amicus brief is admitted. If admitted, the court must address the private-key custody argument before the underlying claim proceeds. If the amicus is rejected and the court allows the abandonment classification to proceed on its merits, every inactive self-custody wallet in New York — and potentially any jurisdiction that mirrors the statute — faces prospective legal reclassification. That is not a hypothetical tail risk; it is the direct logical extension of the plaintiff's theory.

What to watch: if the July hearing results in amicus admission, monitor LTH supply for a drop below 70% of circulating BTC concurrent with exchange inflow spikes exceeding 45,000 BTC in a single week (CoinGlass). That combination signals self-custody holders responding to legal uncertainty by moving coins onto exchange custodians — a behavioral reversal that would represent the largest structural shift in Bitcoin's holder base since the FTX collapse in November 2022, when exchange outflows hit 172,000 BTC in seven days (Glassnode). Conversely, if the amicus is denied and the abandonment theory survives to discovery, watch Glassnode's Illiquid Supply metric: any sustained weekly decline exceeding 50,000 BTC would confirm holders are exiting cold storage postures in direct response to the ruling.