CipherBlade Founder Says Blockchain Sleuthing Firm ‘Hijacked’

Pennsylvania blockchain forensics firm CipherBlade claims that a group of employees executed a “hostile takeover,” in a lawsuit filed in Alaska.

The suit alleges misappropriation of trade secrets, unfair competition and racketeering.

This is the second attempt at suing the company’s new leadership; a previous filing was withdrawn from a New York court.

Blockchain forensics firm CipherBlade appears to be under new management – but court documents show the transition of power was far from peaceful.

The Pennsylvania firm claims that a group of employees executed a “hostile takeover” of the company earlier this year while founder Richard Sanders was volunteering in war-torn Ukraine assisting local police with crypto investigations, according to a lawsuit. In his absence, the firm’s clients and some staff were transferred to new CipherBlade entities in Alaska and Singapore, effectively emptying his business, Sanders told CoinDesk.

“Unfortunately, the CipherBlade domain (cipherblade.com), social media pages (including Twitter and LinkedIn) and other CipherBlade property have been stolen from me and from CipherBlade LLC (PA) (my company) by people whom I trusted to uphold my values and keep the company running smoothly,” Sanders wrote in a Monday LinkedIn post.

Now, the company (from which Sanders has stepped away) is making a second attempt at suing cipherblade.com’s new management. The firm withdrew a similar complaint from a New York court earlier this year.

A civil complaint filed last week with the U.S. District Court of Alaska seeks damages for a host of misdeeds including misappropriation of trade secrets, unfair competition and racketeering.

Paul Sibenik, former senior investigator at CipherBlade, and Sanders’ pick to run the Pennsylvania firm after the alleged takeover, said the lawsuit’s goal is to warn old and potential clients that the new CipherBlade does not represent the values of the company Sanders built – and that all but one of its original senior investigators have left the company.

“It’s really about the ethics of what is happening. We don’t want them to misrepresent themselves as us, as they have mostly brand new investigators with little to no experience at CipherBlade,” Sibenik said in an interview with CoinDesk. “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.”

CipherBlade, under Sanders’ leadership, conducted numerous noteworthy investigations into the flow of funds through blockchains, including one that helped free two Venezuelan software engineers wrongly imprisoned over the hacking of a local crypto exchange.

Sanders told CoinDesk that the “hijacked or spin-off CipherBlade” still uses his reputation to draw clients and enhance the platform’s credibility.

“There are still mentions of me, my work and my credentials on cipherblade.com’s website despite my continued efforts to have them removed,” Sanders said in the LinkedIn post.

That is not to say Sanders hasn’t faced criticism in the past. In 2019, CipherBlade was accused by journalist and crypto critic Amy Castor of trying to fix the image of crypto exchange ShapeShift when the detective firm claimed the exchange had facilitated the laundering of $6 million less than what the Wall Street Journal had reported in an expose.

The New York court filings from the Pennsylvania firm’s first attempt to sue the new CipherBlade revealed the firm to be a tangled web of companies – which reporters like Castor and David Gerard had previously questioned – spanning the U.K., multiple U.S. states, Singapore and Cyprus.

After the New York court denied Sanders’ company’s application for a temporary restraining order and the defendants argued lack of jurisdiction, the firm pulled its lawsuit to refile it in Alaska, home to one of the new entities as well as a defendant.

Meanwhile, the defendants of the New York lawsuit, including Manuel Kriz and Michael Krause – whom CipherBlade Pennsylvania claimed were among the architects of the takeover – denied all allegations against them through their lawyers.

“Our clients vigorously dispute the allegations made in the complaint and have moved to dismiss each of the claims against them. Cipherblade (Alaska) and Cipherblade (Singapore) are continuing to operate and will continue to provide world-class service for their clients,” Evan Glassman and Michael G. Scavelli of Steptoe & Johnson LLP, representing the defendants, told CoinDesk in a written statement.

Defendant party CipherBlade did not immediately respond to a comment request from CoinDesk on the new complaint filed in Alaska.

Although CipherBlade Pennsylvania still exists, and Sibenik is still CEO, it’s no longer taking on new clients, he told CoinDesk on Monday.

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