Defendant “Wants to Go to a New Employer and Not Disclose the Serious Allegations Raised Against Him [in a Suit by His Ex-Employer]”
This is an interesting (and I think correct) ruling by Magistrate Judge N. Reid Neureiter, in Shapeshift US, Inc. v. Mukhiddinov (D. Colo.); the hearing was Nov. 10, but the transcript just became available (see also the short written order). First, the factual allegations:
The parties seek to restrict from public access [i.e., to seal -EV] a complaint filed by ShapeShift against Mr. Mukhiddinov under the Federal Computer Fraud and Abuse Act, 18 USC Section 1030. The complaint alleges one count of computer fraud and abuse and a second claim, under state law, for breach of the duty of loyalty.
Generally, the complaint alleges that Mr. Mukhiddinov, while working as an employee of ShapeShift, responsibility for finding and repairing weaknesses within their—the company’s computer network and maintaining the integrity of ShapeShift’s computing systems, intentionally and without authorization:
Number one, installed a program on ShapeShift’s computers for the purpose of maliciously stealing approximately $900,000 worth of Bitcoin and defrauding the company of its assets and property.
Number two, damaging the company’s computer infrastructure, which resulted in the cost to investigate and remediate the damage.
And number three, causing a loss of business, goodwill and profits.
Once his misconduct was discovered, Mr. Mukhiddinov apparently saw the error of his ways and agreed to return the full value of the Bitcoin that was stolen, but he had apparently already spent some of the Bitcoin. So some amount of the stolen property needed to be repaid in cash or in the form of some other cryptocurrencies.
Mr. Mukhiddinov repaid more than $100,000 in cash or electronic transfers and, in one form or another, Mr. Mukhiddinov returned the equivalent of all $900,000.
Unfortunately, ShapeShift suffered damages beyond the $900,000 in lost Bitcoin. Extensive efforts were required by ShapeShift to remediate the damage done to its computer infrastructure. Overtime was paid to the employees, code had to be rewritten to repair and secure the company’s software.
This mobilization allegedly resulted in business disruptions and lost profits. Launch of the mobile app was delayed because of reallocated engineering resources and ShapeShift’s most important project was delayed for two months.
ShapeShift’s systems, network and infrastructure had to be migrated to a new digital environment, resulting in serious outages and had a detrimental effect on ShapeShift’s ability to focus in carrying on its business operations.
So beyond the $900,000 in lost Bitcoin, which was repaid relatively promptly, ShapeShift’s complaint alleges that it incurred damages totaling tens of thousands of dollars, if not more, as a result of Mr. Mukhiddinov’s illegal actions.
A bit more on the reasons for the sealing request:
Apparently, before the filing of the lawsuit, the issue of the additional damages suffered by ShapeShift could not be resolved between the company and Mr. Mukhiddinov, prompting the filing of the public document, the hiring of counsel by Mr. Mukhiddinov, the resolution of the dispute, the stipulation of dismissal, and the joint request to
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