Case 3:20-cv-07363-WHO Document 103 Filed 02/10/22 Page 1 of 9
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`
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` Kyle W. Roche (pro hac vice)
`kyle@rochefreedman.com
`Edward Normand (pro hac vice)
`tnormand@rochefreedman.com
`Ivy T. Ngo (SBN 249860)
`ingo@rochefreedman.com
`Daniel M. Stone (pro hac vice)
`dstone@rochefreedman.com
`Peter Bach-y-Rita (SBN 267442)
`pbachyrita@rochefreedman.com
`ROCHE FREEDMAN LLP
`99 Park Avenue, 19th Floor
`New York, NY 10016
`Telephone: (646) 350-6883
`
`Attorneys for Plaintiff
`
`UNITED STATES DISTRICT COURT
`NORTHERN DISTRICT OF CALIFORNIA
`
`MARK SHIN,
`Plaintiff,
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`v.
`ICON FOUNDATION,
`Defendant.
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`
`
`Case Number: 3:20-cv-07363-WHO
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`PLAINTIFF’S MOTION TO STAY
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`Hearing Date: March 23, 2022
`Time:
`2:00 pm
`Judge:
`Hon. William H. Orrick
`Courtroom: Dept: 2, 17th Floor
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`Complaint filed: October 20, 2020
`Amended Complaint filed: January 8, 2021
`Second Am. Complaint filed: June 1, 2021
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`Plaintiff’s Motion to Stay
`Case No. 3:20-cv-07363-WHO
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`Case 3:20-cv-07363-WHO Document 103 Filed 02/10/22 Page 2 of 9
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` TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD:
`PLEASE TAKE NOTICE that on March 23, 2022, at 2:00 p.m., before the Honorable Wil-
`liam H. Orrick of the United States District Court for the Northern District of California, Plaintiff
`Mark Shin will and hereby does move to stay this civil action pending resolution of the Colorado
`criminal prosecution because the parallel civil and criminal matters concerning the exact same con-
`duct places an unreasonable burden on Shin’s Fifth Amendment right against self-incrimination.
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`INTRODUCTION
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`This is a novel case concerning emerging technologies and issues of first impression regarding
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`a large quantity of crypto-assets minted, as ICON’s own lawyers have stated, “out of the ether.” Plain-
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`tiff and Counterclaim-Defendant Mark Shin (“Shin”), for his part, pursued justice in this matter by
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`suing Defendant and Counterclaimant the ICON Foundation (“ICON”) in federal court. ICON, how-
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`ever, decided not to fight fair. ICON repeatedly threatened to report Shin to law enforcement unless
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`Shin returned all the assets generated through the Bug and accepted ICON’s proposed payout of
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`$200,000. Declaration of Kyle Roche (“Roche Decl.”) Ex. 1. This textbook extortion failed, and Shin
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`instead filed a lawsuit against ICON to recover his assets that ICON had taken from him. ICON none-
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`theless made good on its threats by presenting a false and misleading portrayal of what happened to
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`federal law enforcement, who then executed seizure warrants for Shin’s crypto-assets.
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`For approximately nine months the federal government investigated Mr. Shin. Ultimately, after
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`Mr. Shin’s attorneys interceded and provided the assigned federal prosecutors with an explanation of
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`what had actually occurred with the Bug, the acting United States Attorney for the District of Colorado
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`refused to permit the filing of even a civil asset forfeiture complaint against the assets that the FBI had
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`seized. As a result, the FBI agent, having put in months of work on the case as a result of the infor-
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`mation fed to him by ICON, decided to bring the case to Colorado local prosecutors in Arapahoe
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`county who, within three weeks of learning about the case, and having done no independent
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`Plaintiff’s Motion to Stay
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`Case 3:20-cv-07363-WHO Document 103 Filed 02/10/22 Page 3 of 9
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`investigation, indicted Shin for theft. Arapahoe County’s theory, nonsensical on its face, is that Shin
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`stole the ICX minted by the Bug from “ICON Nation,” meaning every other person who held their
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`own ICX at the time of the Bug. The assigned Assistant District Attorney has produced no evidence
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`to the defense supporting this novel theory of ownership.
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`The Arapahoe county indictment, stitched together with information fed to law enforcement
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`by ICON, now leaves Shin in an unenviable position between pursuing his own civil lawsuit case
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`against ICON, or risking the use of any of his statements against him in a Colorado criminal trial.
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`Given this conundrum, Shin has no choice but to ask this Court to stay discovery in this matter pending
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`the outcome of the criminal matter.
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`FACTUAL BACKGROUND
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`While the Court is familiar with the factual background of the subject matter of this dispute,
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`see Order Granting in Part and Denying in Part Motion to Dismiss Second Amended Complaint (ECF
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`No. 68); Order Granting in Part and Denying in Part Motion to Dismiss the Counterclaim (ECF No.
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`97), the Court has yet to be informed of the circumstances of the ICON-fueled prosecution of Mr.
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`Shin.
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`As noted above, ICON first attempted to pressure Shin into handing over, to ICON, the ICX
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`minted through the Bug. When Shin refused, and instead informed ICON that, unless the parties could
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`reach an agreement, he would file suit to recover his property, ICON made good on its earlier prom-
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`ises, and falsely reported to the FBI that an “unauthorized hacker” had attacked the ICON blockchain.
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`Roche Decl. Ex. 2; Ex. 3; Ex. 4. This was false because, as ICON was well aware, Mr. Shin did not
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`“hack” anything: he merely discovered a bug that ICON had released. Thereafter, relying on ICON’s
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`misrepresentations, the FBI seized Mr. Shin’s ICX. E.g., Roche Decl. Ex. 5. Yet the FBI did not even
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`do this without ICON; instead, ICON directly interfaced with the exchanges on behalf of the FBI.
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`Roche Decl. Ex. 6.
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`Case 3:20-cv-07363-WHO Document 103 Filed 02/10/22 Page 4 of 9
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`After months of investigation, the prosecutors zeroed in on the ultimate problem: there was no
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`evidence that the ICX at issue was anyone else’s property. See Roche Decl. Ex. 7 (asking for a response
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`to Shin’s argument that he was the “first-in-time” owner); Roche Decl. Ex. 8 (claiming that the “ICON
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`Nodes” have 125,00 ICX). ICON’s answer—that the ICON Blockchain computer nodes somehow
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`owned the ICX—was obviously unpersuasive and wrong, given that it would effectively mean, by
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`comparison, that every bank teller tasked with distributing money to customers would also “own” that
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`same money. As a result, the U.S. Attorneys’ Office for the District of Colorado declined to prosecute
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`or even pursue civil forfeiture. Ex. 9 at ¶ 12. Yet, while the federal prosecutors refused to accept this
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`farfetched theory, the FBI agent brought the case to the Arapahoe County District Attorney’s Office.
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`Less than three weeks later—with no additional investigation—Shin was indicted by a local grand
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`jury, charged with stealing from “ICON Nation.” Roche Decl. Ex. 10. In short, the District Attorney’s
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`indictment makes the same bizarre claim as ICON, that all ICX owners (or in the State’s parlance,
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`“ICON Nation”) own all ICX at their creation. See Roche Decl. Ex. 10 at ¶ 69. Shin must ask the
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`Court to stay this action to ensure that he protects his Fifth Amendment rights.
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`LEGAL STANDARD
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`“The decision whether to stay civil proceedings in the face of a parallel criminal proceeding
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`should be made ‘in light of the particular circumstances and competing interests involved in the case.’”
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`Keating v. Off. of Thrift Supervision, 45 F.3d 322, 324 (9th Cir. 1995) (citing Federal Sav. & Loan
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`Ins. Corp. v. Molinaro, 889 F.2d 899, 902 (9th Cir.1989)). While the Keating court outlined certain
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`factors for courts to weigh, the primary consideration is whether the civil and criminal action concern
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`a common nucleus of facts. See McCormick v. Rexroth, 2010 WL 934242, at *2 (N.D. Cal. Mar. 15,
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`2010) (noting that “the most important factor” to consider is whether the “simultaneous civil and crim-
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`inal proceedings involve the same or closely related facts.”) (internal citations omitted); Milton
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`Case 3:20-cv-07363-WHO Document 103 Filed 02/10/22 Page 5 of 9
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`Pollack, Parallel Civil and Criminal Proceedings, 129 F.R.D. 201, 203 (1990) (“The most important
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`factor at the threshold is the degree to which the civil issues overlap with the criminal issues.”).
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`As Keating explains, courts must also consider the following factors, though no single factor
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`is dispositive:
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`(1) the interest of the plaintiffs in proceeding expeditiously with this litigation or any particular
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`aspect of it, and the potential prejudice to plaintiffs of a delay;
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`(2) the burden which any particular aspect of the proceedings may impose on defendants;
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`(3) the convenience of the court in the management of its cases, and the efficient use of judicial
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`resources;
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`(4) the interests of persons not parties to the civil litigation; and
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`(5) the interest of the public in the pending civil and criminal litigation.
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`Keating, 45 F.3d at 324.
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` Another important factor for courts to consider is the extent of exposure the criminal defendant
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`faces. “The strongest case for a stay of discovery in the civil case occurs during a criminal prosecution
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`after an indictment is returned. The potential for self-incrimination is greatest during this stage, and
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`the potential harm to civil litigants arising from delaying them is reduced due to the promise of a fairly
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`quick resolution of the criminal case under the Speedy Trial Act.” Pollack, Parallel Civil and Criminal
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`Proceedings, 129 F.R.D. at 203. Additionally, there is a substantial concern with parallel civil pro-
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`ceedings where witnesses would be expected to invoke the Fifth Amendment. See S.E.C. v. Nicholas,
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`569 F. Supp. 2d 1065, 1070 (C.D. Cal. 2008) (“The specter of parties and witnesses invoking their
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`Fifth Amendment rights would render civil discovery largely one-sided.”).
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`Plaintiff’s Motion to Stay
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`Case 3:20-cv-07363-WHO Document 103 Filed 02/10/22 Page 6 of 9
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`ARGUMENT
`I. A STAY IS NECESSARY TO PROTECT SHIN’S FIFTH AMENDMENT RIGHTS IN
`THE CURRENTLY PENDING CRIMINAL MATTER.
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`As detailed above, Shin originally brought this civil action to demonstrate that the ICX at issue
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`were his, and that ICON had unlawfully interfered with his enjoyment of the same. See Complaint
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`(ECF No. 1). It was only at ICON’s insistence, fueled by misleading accounts of Shin’s conduct, that
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`the federal government investigated him, and then, when the acting United States Attorney for Colo-
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`rado concluded that Shin had committed no crime, he was indicted by a local grand jury in Arapahoe
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`County, Colorado. ICON’s calculated decision to goad prosecutors into indicting him, which has now
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`been fully revealed by emails produced by ICON in discovery, has made it impossible for Shin to
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`properly prosecute this action and defend himself from ICON’s counterclaims. Instead, Shin has been
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`presented with a Hobson’s choice: he can vigorously pursue his claims, but only at the risk that state
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`prosecutors will use his testimony against him in the criminal matter. See Square 1 Bank v. Lo, No.
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`12-CV-05595-JSC, 2014 WL 7206874 (N.D. Cal. Dec. 17, 2014) (describing the choice of a party of
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`whether to invoke their fifth amendment rights in a parallel civil action as a Hobson’s choice.).
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`While the question of whether or not to stay a parallel civil action in favor of a pending criminal
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`action is in the Court’s discretion, the primary concern is how closely related the facts are between the
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`two actions. See McCormick v. Rexroth, 2010 WL 934242, at *2 (N.D. Cal. Mar. 15, 2010) (noting
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`that “the most important factor” to consider is whether the “simultaneous civil and criminal proceed-
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`ings involve the same or closely related facts.”) (internal citations omitted). Here, there can be no
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`dispute that the civil and criminal matter concern the exact same nucleus of facts regarding ICON’s
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`Revision 9 bug and the property Mr. Shin obtained on August 22, 2020. See Second Amended Com-
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`plaint (ECF No. 58); Amended Counterclaim (ECF No. 100); Roche Decl. Ex. 10. Indeed, the State’s
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`Indictment concerns the same nonsensical theory that Mr. Shin stole the relevant ICX from every
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`Case 3:20-cv-07363-WHO Document 103 Filed 02/10/22 Page 7 of 9
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`member of “ICON Nation” that ICON’s Amended Counterclaim asserts. Compare Amended Coun-
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`terclaim (ECF No. 100) ¶ 69 (describing the ICX as property of all ICX owners) with Roche Decl. Ex.
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`10 at 3 (alleging that the ICX were stolen from “ICON Nation,” or every user of ICX). Essentially,
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`ICON’s civil counterclaim seeks to prove the same thing as the Colorado prosecutors—that Shin’s
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`ICX were somehow the property of someone else who owned the ICX before they appeared in his
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`wallet—and thus continued discovery will necessarily implicate Shin’s fifth amendment rights. See
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`Continental Ins. Co. v. Cota, 2008 WL 4298372, at *2 (N.D. Cal. Sept. 19, 2008) (where the civil and
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`criminal case seek to adjudicate similar actions, discovery in the civil action implicates the party’s
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`fifth amendment rights and risks prejudicing the criminal defendant).
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`The other Keating factors also weigh in favor a stay.
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`First, ICON cannot complain of prejudice from the delay of the civil litigation stemming from
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`a prosecution that they instigated, supported, and demanded. As described above, it was ICON and
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`their lawyers who pushed the federal government to investigate Shin, who assisted the government in
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`communicating with the exchanges to seize Shin’s assets, and who then coordinated with Colorado
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`state prosecutors when the federal prosecutors declined to prosecute or seek civil forfeiture of Mr.
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`Shin. See Roche Decl. Ex. 11. Indeed, while Shin initiated this lawsuit, he did so without any
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`knowledge that ICON was aggressively pursuing criminal sanctions for Shin, and thus, the fact that
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`Shin is the original plaintiff should not affect the calculus. See McCormick, 2010 WL 934242, at *2
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`(rejecting the argument that a party with an affirmative claim cannot seek a stay of discovery).
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`Second, additional discovery in this matter stands to substantially burden Shin’s rights in both
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`this and the pending criminal action. Obviously, Shin’s testimony is important to the prosecution of
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`this civil matter, as well as to rebut ICON’s meritless defenses. However, with the criminal case pend-
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`ing, Shin would be ill-advised to testify because by doing so he may have to invoke his Fifth Amend-
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`ment rights, which could adversely be used against him. See Consumer Fin. Prot. Bureau v. Glob. Fin.
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`Case 3:20-cv-07363-WHO Document 103 Filed 02/10/22 Page 8 of 9
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`Support, Inc., No. 15-CV-02440-GPC-WVG, 2016 WL 2868698, at *5 (S.D. Cal. May 17, 2016). If
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`he does not, he could be faced with the prospect that any of his statements, no matter how innocuous,
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`could be weaponized by the state prosecutors in Colorado. Additionally, if this action proceeds, Shin
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`will be forced to expose expert testimony and defenses relevant to the criminal case well beyond the
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`disclosures required under the Colorado rules. See Micron Tech. Inc. v. United Microelectronics Corp.,
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`No. 17-CV-06932-MMC, 2019 WL 3037542, at *3 (N.D. Cal. July 11, 2019) (forcing a defendant
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`through discovery would cause disclosure in excess of what the government is entitled to under the
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`relevant rules); Petrov v. Alameda Cty., 2016 WL 6563355, at * 5 (N.D. Cal. Nov. 4, 2016) (when a
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`civil case proceeds against indicted defendants, they could “be forced to expose the basis of their
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`defense to the criminal charges and the scope of criminal discovery would thus be unfairly ex-
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`panded.”).
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`Third, granting this stay will promote judicial efficiency because the overlap in criminal and
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`civil allegations means that a resolution of the criminal matter could serve to “narrow the issues and
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`streamline discovery,” as the criminal matter concerns the same property rights that ICON asserts here.
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`See S.E.C. v. Alexander, No. 10-CV-04535-LHK, 2010 WL 5388000, at *5 (N.D. Cal. Dec. 22, 2010).
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`Instead, a stay would “allow civil discovery to proceed unobstructed by concerns regarding self-in-
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`crimination.” Jones v. Conte, 2005 WL 1287017, at *1 (N.D. Cal. Apr. 19, 2005) (citations omitted).
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`Fourth, there are no third-party interests that justify the continuation of the civil case. While
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`ICON is sure to argue that the putative class has an interest in this case, that is a red herring. First, the
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`class that ICON asserts exists has not yet been certified, and ultimately should not be certified. See
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`Shin’s Motion to Dismiss the Counterclaim or to Strike Counterclaims (ECF No. 77). Second, in the
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`event that Shin is convicted in Colorado (despite the myriad legal and factual infirmities with the
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`criminal case), any purported “victims” of Shin’s actions (there are none) could put in a claim for
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`restitution in the criminal proceedings. See S.E.C. v. Alexander, No. 10-CV-04535-LHK, 2010 WL
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`Plaintiff’s Motion to Stay
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`5388000, at *6 (“Moreover, even if the civil case is delayed, there remains a possibility that investors
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`may obtain prompt restitution through the criminal proceeding.”); Colo. Rev. Stat. Ann. § 18-1.3-603
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`(all convictions require consideration of restitution).
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`Fifth, the public’s interest is in favor of a stay because “the public's interest in the integrity of
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`the criminal case is entitled to precedence over the civil litigant.” Jones, 2005 WL 1287017, at *2
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`(citations omitted).
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`In sum, all of the factors favor a stay. Shin’s Motion to Stay should be granted.
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`II.
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`IN THE ALTERNATIVE, THE COURT SHOULD STAY THE MATTER SOLELY
`AS TO SHIN’S DEPOSITION AND OTHER DISCOVERY RESPONSES
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`In the event, however, that the Court determines that the full action should not be stayed, the
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`Court should instead enter a narrower stay of discovery solely concerning Shin’s deposition. Shin’s
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`deposition is the juncture at which Shin’s Fifth Amendment rights are most likely to be burdened.
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`Thus, even if the Court determines that a full stay is not warranted, the Court should issue a limited
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`stay to protect Shin from the Hobson’s choice of his deposition. See Petrov v. Alameda Cty., 2016 WL
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`6563355, at *7 (issuing a partial stay for all discovery and Rule 26 disclosures for the indicted defend-
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`ants while allowing the case to proceed against other defendants).
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`CONCLUSION
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`Shin respectfully requests, for the reasons stated above, that the Court stay this matter pending
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`resolution of the Colorado criminal matter.
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`Dated: February 10, 2022
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`ROCHE FREEDMAN LLP
`
`/s/ Kyle W. Roche
`Kyle W. Roche (pro hac vice)
`Edward Normand (pro hac vice)
`Ivy T. Ngo
`Daniel M. Stone (pro hac vice)
`Peter Bach-y-Rita (SBN 267442)
`
`Attorneys for Plaintiff
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`Plaintiff’s Motion to Stay
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