United States v. Gratkowski

Decision Date30 June 2020
Docket NumberNo. 19-50492,19-50492
Citation964 F.3d 307
Parties UNITED STATES of America, Plaintiff - Appellee v. Richard Nikolai GRATKOWSKI, Defendant - Appellant
CourtU.S. Court of Appeals — Fifth Circuit

Joseph H. Gay, Jr., Assistant U.S. Attorney, U.S. Attorney's Office, Western District of Texas, Mark Eckenwiler, U.S. Department of Justice, Criminal Division, Washington, DC, for Plaintiff-Appellee.

Bradford W. Bogan, Assistant Federal Public Defender, Maureen Scott Franco, Federal Public Defender, Federal Public Defender's Office, Western District of Texas, for Defendant-Appellant.

Before STEWART, DENNIS, and HAYNES, Circuit Judges.

HAYNES, Circuit Judge:

Richard Gratkowski appeals the district court's denial of his motion to suppress evidence obtained through a search warrant. We AFFIRM.

I. Background
A. Factual Background

Gratkowski became the subject of a federal investigation when federal agents began investigating a child-pornography website (the "Website").1 To download material from the Website, some users, like Gratkowski, paid the Website in Bitcoin.

Bitcoin is a type of virtual currency. Each Bitcoin user has at least one "address," similar to a bank account number, that is a long string of letters and numbers. Bitcoin users send Bitcoin to other users through these addresses using a private key function that authorizes the payments. To conduct Bitcoin transactions, Bitcoin users must either download Bitcoin's specialized software or use a virtual currency exchange, such as the one used here, called Coinbase.

When a Bitcoin user transfers Bitcoin to another address, the sender transmits a transaction announcement on Bitcoin's public network, known as a blockchain.2 The Bitcoin blockchain contains only the sender's address, the receiver's address, and the amount of Bitcoin transferred. The owners of the addresses are anonymous on the Bitcoin blockchain, but it is possible to discover the owner of a Bitcoin address by analyzing the blockchain.

For example, when an organization creates multiple Bitcoin addresses, it will often combine its Bitcoin addresses into a separate, central Bitcoin address (i.e., a "cluster"). It is possible to identify a "cluster" of Bitcoin addresses held by one organization by analyzing the Bitcoin blockchain's transaction history. Open source tools and private software products can be used to analyze a transaction.

B. Procedural History

Federal agents used an outside service to analyze the publicly viewable Bitcoin blockchain and identify a cluster of Bitcoin addresses controlled by the Website. Once they identified the Website's Bitcoin addresses, agents served a grand jury subpoena on Coinbase—rather than seeking and obtaining a warrant—for all information on the Coinbase customers whose accounts had sent Bitcoin to any of the addresses in the Website's cluster. Coinbase identified Gratkowski as one of these customers. With this information, agents obtained a search warrant for Gratkowski's house. At his house, agents found a hard drive containing child pornography, and Gratkowski admitted to being a Website customer.

The Government charged Gratkowski with one count of receiving child pornography and one count of accessing websites with intent to view child pornography.

Gratkowski moved to suppress the evidence obtained through the warrant, arguing that the subpoena to Coinbase and the blockchain analysis violated the Fourth Amendment. The district court denied the motion. Gratkowski entered a conditional guilty plea to both counts, reserving the right to appeal the denial of his motion to suppress. After the district court issued its final judgment, Gratkowski timely appealed.

II. Standard of Review

In reviewing "a district court's ruling on a motion to suppress, we review questions of law de novo and factual findings for clear error." United States v. Ganzer , 922 F.3d 579, 583 (5th Cir.), cert. denied , ––– U.S. ––––, 140 S. Ct. 276, 205 L.Ed.2d 171 (2019) (mem.) (internal quotation marks and citation omitted). "We will uphold a district court's denial of a suppression motion if there is any reasonable view of the evidence to support [the denial]." Id. (internal quotation marks and citation omitted).

III. Discussion

Gratkowski presents the novel question of whether an individual has a Fourth Amendment privacy interest in the records of their Bitcoin transactions.3 For the Government to have infringed upon an individual's Fourth Amendment protection against unreasonable searches, the person must have had a "reasonable expectation of privacy" in the items at issue. United States v. Jones , 565 U.S. 400, 406, 132 S.Ct. 945, 181 L.Ed.2d 911 (2012). Under the third-party doctrine, a person generally "has no legitimate expectation of privacy in information he voluntarily turns over to third parties." Smith v. Maryland , 442 U.S. 735, 743–44, 99 S.Ct. 2577, 61 L.Ed.2d 220 (1979). But relying on Carpenter v. United States , ––– U.S. ––––, 138 S. Ct. 2206, 2217, 201 L.Ed.2d 507 (2018), which limited the applicability of the third-party doctrine in the context of cell phones, Gratkowski argues that the Government violated his reasonable expectation of privacy in the records of his Bitcoin transactions on (1) Bitcoin's public blockchain and (2) Coinbase. In that regard, Gratkowski argues that the district court erred in denying his suppression motion. We hold that it did not.

A. The Third-Party Doctrine

Applying the third-party doctrine, the Supreme Court in United States v. Miller held that bank records were not subject to Fourth Amendment protections. 425 U.S. 435, 439–40, 96 S.Ct. 1619, 48 L.Ed.2d 71 (1976). The Court concluded that the bank records were "not confidential communications but negotiable instruments," which "contain[ed] only information voluntarily conveyed to the banks and exposed to their employees in the ordinary course of business." Id. at 442, 96 S.Ct. 1619. It recognized that in enacting the Bank Secrecy Act, Congress assumed that individuals lacked "any legitimate expectation of privacy concerning the information kept in bank records." Id. at 442–43, 96 S.Ct. 1619 (noting that the express purpose of the Act was "to require records to be maintained because they ‘have a high degree of usefulness in criminal tax, and regulatory investigations and proceedings’ " (quoting 12 U.S.C. § 1829b(a)(1) )).

The Court has also held that the third-party doctrine applies to telephone call logs. Smith , 442 U.S. at 742–44, 99 S.Ct. 2577. It held that individuals had no privacy interest in the telephone numbers they dialed because people generally do not have any actual expectation of such privacy and "voluntarily convey[ ]" the dialed numbers to the phone company by placing a call. Id.

However, the Supreme Court recently concluded differently in the context of cell phones. See Carpenter , 138 S. Ct. at 2217. In Carpenter , the Court held that individuals had a privacy interest in their cell phone location records, known as cell-site location information ("CSLI"), despite the records being held by a third party. Id. In discussing the third-party doctrine, the Court noted that the sole act of sharing did not eliminate an individual's privacy interest. Id. at 2219. Rather, the Court considered (1) "the nature of the particular documents sought," which includes whether the sought information was limited and meant to be confidential, and (2) the voluntariness of the exposure. Id. at 2219–20 (internal citation and quotation marks omitted).

Regarding the nature of the information sought, the Court noted that "telephone call logs reveal little in the way of identifying information" and that checks are "not confidential communications but negotiable instruments ... used in commercial transactions." Id. at 2219 (internal quotation marks and citations omitted). Unlike telephone call and bank records, CSLI provides officers with "an all-encompassing record of the holder's whereabouts" and "provides an intimate window into a person's life, revealing not only [an individual's] particular movements, but through them [their] familial, political, professional, religious, and sexual associations." Id. at 2217 (internal quotation marks and citation omitted). Because individuals "compulsively carry cell phones with them all the time[,]" cell phones have become "almost a feature of human anatomy." Id. at 2218 (internal quotation marks and citation omitted). Thus, the Court held that CSLI "implicate[d] privacy concerns far beyond those considered in Smith and Miller ." Id. at 2220.

As for the voluntary exposure component, the Court noted that CSLI was not voluntarily shared information for two reasons. First, "cell phones and the services they provide are such a pervasive and insistent part of daily life that carrying one is indispensable to participation in modern society." Id. (internal quotation marks and citation omitted). Second, CSLI does not require "any affirmative act on the part of the user." Id. So long as the user has their cell phone on, a third party receives CSLI. Id.

B. Gratkowski's Reasonable Expectation of Privacy in his Information on the Bitcoin Blockchain

Gratkowski cites Carpenter to support his argument that he had a privacy interest in the information held in the Bitcoin blockchain. But the information on Bitcoin's blockchain is far more analogous to the bank records in Miller and the telephone call logs in Smith than the CSLI in Carpenter .

The nature of the information on the Bitcoin blockchain and the voluntariness of the exposure weigh heavily against finding a privacy interest in an individual's information on the Bitcoin blockchain. The Bitcoin blockchain records (1) the amount of Bitcoin transferred, (2) the Bitcoin address of the sending party, and (3) the Bitcoin address of the receiving party. The information is limited. Moreover, transacting through Bitcoin is not "a pervasive [or] insistent part of daily life,"4 and transferring and receiving Bitcoin requires an "affirmative act" by the...

To continue reading

Request your trial
7 cases
  • United States v. Harmon
    • United States
    • U.S. District Court — District of Columbia
    • July 24, 2020
    ...can be transferred electronically anywhere in the world with no bank and no government forms."); United States v. Gratkowski , No. 19-50492, 964 F.3d 307, 308–09, (5th Cir. June 30, 2020) ("Bitcoin is a type of virtual currency."). The term bitcoin refers to both a system and a unit. As a s......
  • In re Search Multiple Email Accounts Pursuant to 18 U.S.C. § 2703 for Investigation of Violation of 18 U.S.C. § 1956
    • United States
    • U.S. District Court — District of Columbia
    • August 26, 2021
    ...users may mix or launder on their own by creating multiple BTC addresses. See Brief of Plaintiff-Appellee, United States v. Gratkowski , 964 F.3d 307 (5th Cir. 2020), 2020 WL 736044, at *7. Other users may employ tumbler or "mix or laundry services" to facilitate a similar process. Meiklejo......
  • Harper v. Rettig
    • United States
    • U.S. District Court — District of New Hampshire
    • May 26, 2023
    ...are subject to the Bank Secrecy Act as regulated financial institutions. Both keep records of customer identities and currency transactions. Id. (citations omitted). The Carpenter Court was concerned about the surveillance aspect of CSLI; the data provided “a detailed chronicle of a person'......
  • In re Search of One Address in Wash., D.C., Under Rule 41
    • United States
    • U.S. District Court — District of Columbia
    • January 6, 2021
    ...blockchain contains only the sender's address, the receiver's address, and the amount of Bitcoin transferred." United States v. Gratkowski , 964 F.3d 307, 309 (5th Cir. 2020). Although "[t]he owners of the addresses are anonymous on the [BTC] blockchain," id. , law enforcement can use publi......
  • Request a trial to view additional results
6 books & journal articles
    • United States
    • American Criminal Law Review No. 58-3, July 2021
    • July 1, 2021
    ...updating the third party doctrine applied to cryptocurrency f‌inancial records held by third party banks. See United States v. Gratkowski, 964 F.3d 307, 312 (5th Cir. 2020) (“[T]he nature of the information and the voluntariness of the exposure weigh heavily against f‌inding a privacy inter......
  • Computer Crimes
    • United States
    • American Criminal Law Review No. 60-3, July 2023
    • July 1, 2023
    ...required.”). Circuit courts have continued to apply the third-party doctrine to new technologies. See, e.g. , United States v. Gratkowski, 964 F.3d 307, 312 (5th Cir. 2020) (cryptocurrency records); Sanchez v. L.A Dep’t of Transp., 39 F.4th 548, 561 (9th Cir. 2022) (location data from e-sco......
  • Computer Crimes
    • United States
    • American Criminal Law Review No. 59-3, July 2022
    • July 1, 2022
    ...that the third-party doctrine applied to cryptocurrency f‌inancial records held by third-party banks. See United States v. Gratkowski, 964 F.3d 307, 312 (5th Cir. 2020) (“[T]he nature of the information and the voluntariness of the exposure weigh heavily against f‌inding a privacy interest ......
  • Table of Cases null
    • United States
    • Full Court Press California Guide to Criminal Evidence Table of Cases
    • Invalid date
    ...Cir. 1990)—Ch. 4-A, § U.S. v. Gouveia, 467 U.S. 180, 104 S. Ct. 2292, 81 L. Ed. 2d 146 (1984)—Ch. 5-D, §2.1.1 U.S. v. Gratkowski, 964 F.3d 307 (5th Cir. 2020)—Ch. 2, §2.1.1(2)(f)[7] U.S. v. Gray, 199 F.3d 547, 53 Fed. R. Evid. Serv. 28 (1st Cir. 1999)—Ch. 2, §9.1 U.S. v. Grey, 959 F.......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT