Blockchain forensics firm CipherBlade, based in Pennsylvania, is embroiled in a legal battle over what it claims to be a “hostile takeover” by a group of employees. The lawsuit, filed in Alaska, alleges misappropriation of trade secrets, unfair competition, and racketeering. The incident occurred earlier this year while the company’s founder, Richard Sanders, was volunteering in Ukraine, assisting local police with cryptocurrency investigations.
CipherBlade asserts that, in Sanders’ absence, a group of employees executed a takeover, relocating the firm’s clients and staff to new CipherBlade entities in Alaska and Singapore. Sanders contends that his company’s domain, social media pages, and other property were “stolen” from him by individuals he had trusted. He expressed his dismay on LinkedIn, stating, “Unfortunately, the CipherBlade domain, social media pages, and other CipherBlade property have been stolen from me and from CipherBlade LLC (PA) by people whom I trusted.”
This legal dispute marks CipherBlade’s second attempt to sue the new management, following the withdrawal of a similar complaint filed in a New York court earlier this year.
The civil complaint, filed in the U.S. District Court of Alaska, seeks damages for various alleged wrongdoings, including misappropriation of trade secrets, unfair competition, and racketeering. Paul Sibenik, former senior investigator at CipherBlade and Sanders’ chosen successor, highlighted the ethical concerns in an interview, emphasising the departure of original senior investigators and the presence of new, inexperienced staff. Sibenik stated, “We just don’t want people to think what they’re buying into, with CipherBlade now, in any way resembles what historically it would have been.”
Sanders, the founder, also detailed a home break-in during his absence, reporting the theft of essential business documents. He described fraudulent activities, including a U.S. Postal Service receipt for a package sent from his home to an address in Cyprus without his permission. These incidents, according to the lawsuit, are part of an alleged scheme involving forgery, mail fraud, impersonation, digital theft, physical theft, and questionable discretionary bonuses.
Sanders claims that his previous work and reputation are being leveraged by the “hijacked or spin-off CipherBlade” to attract clients and enhance credibility, noting that references to him still appear on the company’s website.
In response, CipherBlade’s new management posted a statement on LinkedIn disputing Sanders’ claims. The statement mentions that Sanders’ company was granted a licence to the ‘CipherBlade’ trademark in 2021 but alleges that collaboration became increasingly difficult. It asserts that Sanders’ expressions of personal animosity created safety concerns, leading to the revocation of the trademark licence.
CipherBlade, under Sanders’ leadership, gained recognition for its investigations into the flow of funds through blockchains, including a case that helped free two Venezuelan software engineers wrongly imprisoned over the hacking of a local crypto exchange.
CipherBlade’s current management vehemently disputes Sanders’ allegations, describing them as “baseless, vexatious, and motivated by personal animosity.” They pledge to address the claims through legal channels, emphasising their commitment to providing top-notch service to clients.
As the legal battle unfolds, the dispute sheds light on the complexities within CipherBlade and the challenges associated with the transition of leadership in the blockchain forensics industry.