Delaware Court Protects Crypto Trade Secrets, Lets Most Claims Stand
Delaware Court Hands Crypto Firm Partial Victory Over Former Partner
Diamond Fortress Technologies and its founder Charles Hatcher just won a narrow but important procedural win in Delaware. The Superior Court refused to dismiss most of their claims against a former business associate, keeping alive allegations that the defendant misappropriated confidential wallet technology and blocked the company’s ability to raise capital. For crypto projects built on Delaware entities, the ruling signals that state courts will protect trade secrets even when the underlying assets are digital tokens and private keys.
The dispute started in 2021 when Diamond Fortress accused a former partner of leaking proprietary multi-signature wallet architecture to competitors and using that information to launch a rival product. Hatcher claimed the theft killed a planned token offering and destroyed millions in anticipated valuation. The defendant moved to dismiss, arguing the claims were too vague and that any “secrets” were already public on the blockchain. The court rejected that argument for nine of the ten counts, holding that private-key generation methods and internal wallet logic can still qualify as trade secrets even if transaction data eventually appears on-chain.
Only the count for tortious interference with prospective business relations was tossed. The judges found the plaintiffs failed to identify a specific investor or deal that was actually thwarted, leaving that claim without the required “reasonable probability” of success. Everything else—misappropriation, breach of contract, conversion of intellectual property—survives and moves into discovery.
In plain English, Delaware just told crypto founders: if you keep your code and key-generation process off-chain and under NDA, state courts will treat it like any other valuable trade secret. That matters because most token projects still incorporate in Delaware and look to its courts for fast, business-friendly rulings. The decision also underscores that simply publishing a token contract on Ethereum does not automatically make every upstream design choice public.
For exchanges and DeFi protocols, the ruling raises the cost of hiring ex-employees from rival projects. Due-diligence teams will now need stronger screens for prior confidentiality obligations, and insurers may start carving out “trade-secret” exclusions on directors-and-officers policies. Meanwhile, founders gain a slightly sharper weapon against copycat competitors, though they still must plead concrete, non-public elements to survive a motion to dismiss.
The message is simple: Delaware is open for crypto business, but only if you document what actually stays secret.
