"Everybody has a plan until they get punched in the mouth," said boxing superstar Mike Tyson.
This year, the so-called father of bitcoin, Craig Wright, tasted first blood.
Wright has long been adamant about his position as the creator of bitcoin. Much to a skeptical crypto ecosystem's chagrin, he has done everything except prove he was Satoshi Nakamoto, from registering the Bitcoin White Paper as his own to showing private keys that anyone could have accessed. In fact, the month of May brought many seeming triumphs and his currency - BTCSV - rose to $226 before a tumble of 100 points. The end of June brought more trouble with Wright sitting in a courtroom seemingly cowed before a judge.
The reason for his swift fall? Wright had to answer hard questions about his real involvement in a multi-billion dollar fund that he formed with his deceased business partner, Dave Kleiman. And those hard questions could, in the end, unmask the real Satoshi.
Wright is being sued by Ira Kleiman on behalf of the estate of his late brother for scheming to, according to the filing, “seize Dave’s bitcoins and his rights to certain intellectual property associated with the bitcoin technology.”
Kleiman's attorney's are attempting to prove that Wright transferred Kleiman's assets to his personal or companies' accounts, hid the evidence by backdating legal contracts, and forged a series of contracts and Dave’s signature on them.
At the heart of the lawsuit is a 1.1 million bitcoin Tulip Trust, which Kleiman alleges is comprised of coins collectively mined by his brother with Wright. The nChain chief scientist wholeheartedly denies this claim. In June, a redacted declaration surfaced that outlined Wright's purported ownership of the trust fund. In the document Wright claimed he had mined or purchased the entire lot between 2009 and 2011.
Elsewhere, Wright has put forward that Kleiman's involvement in the trust was limited to drafting the legal prose as well as assisting in the development of the complicated Shamir’s Secret Sharing Algorithm used to shield the multi-billion dollar holding. What's more, according to Wright, the private keys needed to decrypt the fund were distributed amongst corporate entities and mutual friends, including companies that have been liquidated as well as a former associate that he "has not been in touch with... since 2016," making the Tulip Trust inaccessible.
Though the initial complaint did not seek to ascertain whether Wright's alias is truthfully Nakamoto, the lawsuit can be seen as an outgrowth of that controversy.
Who is Satoshi Nakamoto?
Adding fuel to the fire was an ongoing investigation by Australian tax authorities into Wright's bitcoin holdings, which, after a police raid of Wright's home, drove the academic to England.
It was there that Wright held demonstrations for the BBC, The Economist and GQ where he presented control of some of first mined blocks on the bitcoin blockchain. He also published a "digital signature" used by Nakamoto in his blog. While these actions convinced some prominent bitcoin personalities, many remained skeptical, including bitcoin code contributor Jeff Garzik, who said:
Following the backlash, Wright said he would not publish additional information tying him to Nakamoto. He blogged at the time:
Yet, in May, Wright filed registrations with the U.S. Copyright Office over the original bitcoin code and white paper. In itself, a copyright does not prove the holder invented the technology. However, some saw the move as preparation for Wright's coming libel suits against Roger Ver, CEO of Bitcoin.com, and podcaster Peter McCormack. Over the past year Wright has become increasingly hostile towards his detractors, which also includes Ethereum inventor Vitalki Buterin and technologist John McAfee.
As stated previously, Kleiman's attorneys had no intention of ascertaining Nakamoto's identity. They wrote in the initial court filings, “it is unclear whether Craig, Dave and/or both created Bitcoin,” adding, "it is undeniable, however, that Craig and Dave were involved in Bitcoin from its inception and that they both accumulated a vast wealth of bitcoins from 2009 through 2013."
On April 16, Wright – who is being represented in the suit by Miami law firm Rivero Mestre LLP – moved to dismiss the complaint. In the motion, Weight argued that Ira Kleiman’s claims are without merit and that the plaintiff lacks any standing to file suit, calling the effort an “attempted shakedown” based on “a thin soup of supposition, speculation, conflicting allegations, hearsay and innuendo.”
As of a June 18 mediation session, the two parties were at an impasse, meaning the trial may progress to court.
Wright Calls Wright
A June 28 evidentiary hearing, a transcript of which was published shortly afterwards reveals much about how the rest of Wright’s legal odyssey may play out.
A forthcoming decision in this hearing does not only have implications for the ongoing Kleiman v Wright suit, but also for aforementioned libel cases Wright has lobbed against Roger Ver and Peter McCormack, who both accused Wright of fraudulently representing himself as Satoshi Nakamoto.
The last series of questions directed towards Wright on June 28 concerned his presentation at the Transform Africa summit in May 2018. At the time Wright noted the Rwandan GDP was around $8 billion, only to claim that he had more money than the entire country.
In court, however, he changed his tune.
“I was angry at the time," he said. "It didn't mean I could access or control it, and nor have I.”
This is part of Wright’s pattern of staking claims and then reversing them.
During the hearing, Wright gave testimony explaining why his $10 billion in bitcoin holdings – established in the Tulip Trust – are both legally and technologically inaccessible. This is the same stockpile Ira Kleiman, brother of Wright’s former business partner, Dave Kleiman, is suing for.
Ira’s representative at Boies Schiller Flexner, Velvel Freedman, claimed in the day-long hearing that Wright had embezzled funds from the Kleiman estate by forging documents and emails pertaining to the Trust, which allegedly contain 1.1 million bitcoin conjointly mined by Dave and Wright.
Despite multiple court orders, and threats of either a civil or criminal contempt charge, Wright had only published the first 70 addresses, which he also claims link him to his alter-ego, Satoshi Nakamoto. These listings allegedly correspond to the first 70 bitcoin blocks mined, before an unknown party joined the network at block 74.
“I'm very focused on ensuring things fall within the rules, and if I'm ordered to do something by a valid court, and I can do it, I will do whatever I have to do it,” Wright said, after claiming his invention “of Bitcoin was to create a system, not where code is law, but where code and law work together.”
He said he stopped mining in August 2010, after noticing bitcoin’s use for illegal activities on deep web markets such as the Silk Road and Hydra. At that point, he brought in forensic expert Dave Kleiman to “wipe” his involvement with Bitcoin from the public record and set up an encryption scheme and bonded courier service that would keep the tainted wealth out of his hands until at least 2020.
Wright also claimed that Dave prevented him from “destroying [bitcoin] utterly,” and that if he ever regains access to the trust, “every one of [the bitcoins] will go to funding educational charities for the poorest 1 billion people on Earth.”
However, despite Wright’s alleged efforts to provide a full inventory of his bitcoin addresses, including employing the chief technology officer of nChain Steve Shadders to develop software to dig for possible addresses, the funds remain elusive.
Freedman, during his cross-examination, had a tough time swallowing that Craig could lose access what amounts to about $10 billion in bitcoin.
For his part, Freedman’s strategy during his cross-examination of Wright was to tease out purported inconsistencies between Wright’s testimony and documents submitted to the court as evidence, ultimately attempting to show a willful disregard for the court’s orders.
“It looks like the modus operandi of the defendant is to take emails, you know, from Dave or from other people that were around the relevant time period and alter data,” Freedman said while addressing the bench after the cross-examination.
Freedman brought up an email allegedly sent to Wright from Kleiman in 2011, which elaborated on the creation of the Tulip Trust at the heart of the case.
When examining the metadata of the document, Freedman alleged it had been badly altered in 2014 “to try and create evidence that Dave transferred Bitcoin into a trust under [Wright’s] control.”
The email was apparently received on Thursday, the 24th of June, 2011, which Freedman showed to actually be a Friday. Furthermore, the document contained a Calibri font copyrighted by Microsoft in 2015.
Wright’s defense first involved an arcane explanation of “create” dates and “modify” dates. When pressed, he stated bluntly, “This is a PDF of an email, not the email… You are committing perjury by falsely putting in a document. That is not real evidence. You have created something,” and threw the print out.
Wright also claimed the document came from corrupted servers of a company that was being forced into liquidation at the time.
“When someone has modified a file on a compromised server that was hacked, and is known to be hacked, then all sorts of funny things happen,” he said.
Freedman then pointed out the email was sent via Craig@panopticrypt on PCCSW01 – CSW being Wright’s initials. Wright countered that both the email address and computer were not in his possession by that time.
Ultimately, Wright’s defense against a contempt charge hinges on his ability to prove that the keys to decryption are beyond his control.
Freedman, for his part, put forward evidence that Wright may be lying about how many different keys are necessary for this task, or that Wright may in fact be in possession of them already.
Wright’s other strategy is seemingly to deflect ownership or custodianship of some of the bitcoin that would presumably be part of his holdings. He accused Freedman of “conflating” bitcoin held in the Tulip Trust with bitcoin held in the Liberty Reserve, a defunct cryptocurrency exchange.
Likewise, Wright later claimed that 821,000 bitcoin were unaccounted for because they were legally represented by a company called Wright International Investments through a convoluted ownership structure that Judge Bruce Reinhardt needed to clarify.
“Is it your position that if you were technologically capable of accessing the necessary information about these Bitcoin, you would still not, under my order, produce that information?... that you don't have to produce anything having to do with these 821,000 Bitcoin because they're not your Bitcoin?,” Reinhardt asked.
It was later shown, at one point at least, that Wright was the sole shareholder of this company.
Image via Youtube.
The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.