A New York court has temporarily paused a major lawsuit seeking to hand ownership of tens of thousands of bitcoin wallets to the plaintiffs. Recent fund movement was confirmed from a long-dormant bitcoin address linked to the case, raising questions over the plaintiffs' claim that the assets are “abandoned property.”

Cryptoslate, a blockchain media outlet, reported on June 8 that the New York court decided to halt further procedures related to the plaintiffs’ request for a declaratory judgment until a hearing on an amicus brief scheduled for July 14.

The lawsuit was filed by Noah Doe and ABC Company and XYZ Company against John Doe 1 to 39,069. The plaintiffs are seeking a transfer of ownership, arguing the bitcoin wallets are effectively lost or neglected assets, citing Article 7-B of New York State’s personal property law.

The key issue is whether a court can grant legal rights to a bitcoin wallet to a specific party even without possession of the private key. The plaintiffs argue wallets that have not moved for a long time should be treated as abandoned property.

But the facts have recently shifted. About 35.55 bitcoin moved on June 2 from “1LwWtSs7tMCwcRczQd5kVMv3xpWw6w4Sxe,” one of the old bitcoin addresses linked to the lawsuit. A withdrawal transaction occurred from an address that had been dormant for a long time.

It has not been confirmed who executed the transaction. But it is interpreted as indicating that at least someone held the private key to the address, because asset movement on the bitcoin network is impossible without a valid private-key signature.

This also conflicts with the plaintiffs’ logic. The plaintiffs argued the wallets were effectively neglected based on their long inactivity, but the recent transaction suggests at least some addresses remained controllable.

Legal experts have also raised concerns. The pause in proceedings was prompted by an amicus brief filed by lawyer Ian R. Cohen. Cohen argued that Article 7-B of New York State’s personal property law was originally designed on the premise of tangible property that can be handed over to police.

He said finding an address on a public blockchain is different from “finding” as envisioned by the law, and that confirming an address does not mean possessing the assets or the private key. He also said a long lack of movement alone cannot conclusively show that the holder abandoned the property.

The case also differs from typical lost-property cases. New York State has dormant-property rules for virtual assets, but they set out procedures for transferring assets held by specific institutions such as exchanges or custodians to the state government after a certain period. They do not apply to self-custodied bitcoin wallets managed directly by individuals.

The scale is also significant. Galaxy Research estimated a total of 3,799,629 bitcoin is stored across the 39,069 addresses targeted by the lawsuit. At current prices, that is worth about $240 billion. That is why the impact could be large even if the case is resolved through a procedural default judgment.

Even if a court recognizes ownership for a specific party, whether that party can actually move the bitcoin is a separate issue. On the bitcoin network, only the entity holding the private key can transfer the asset. Conversely, if the coins later move to an off-chain system such as an exchange or custodian, a party holding a New York judgment may have room to file competing claims.

The industry views the case as a representative example showing that legal ownership of digital assets and control on a blockchain network are different concepts. At the July 14 hearing, whether the court proceeds with the default judgment process or re-examines the legal premise of the lawsuit itself is expected to be the key point to watch.