Editor’s Note: With $3.6 billion in bitcoin on the line, nChain founder and self-proclaimed Satoshi Nakamoto’s Craig Wright is about to argue that he shouldn’t be fined $650,000 for lying in court, because he didn’t.
The court filing, which Modern Consensus has seen before it enters the public record, is part of Wright’s attempt to fend off a claim on half of a cache of 1,000,000 bitcoin mined in the early days of bitcoin by its creator, Satoshi Nakamoto.
Wright is being sued by the estate of his late partner, Dave Kleiman.
So far Wright has been hammered in court. Magistrate Judge Bruce Reinhart, who oversaw a pre-trial stage of the case, has fined him, threatened to jail him twice, and flat-out called him a liar.
The judge also ordered him to give Kleiman’s brother the half million bitcoin, but Wright’s appealing that, too.
Wright said the real culprit is not his answers or behavior in court, but the judge’s inability to understand Bitcoin, or his extraordinary life as—he claims—Nakamoto.
That failure of imagination caused Reinhart to come to the wrong conclusions about his testimony, he argued. This argument is before the Judge Beth Bloom of the Southern District of Florida, who is overseeing the case. And has also called Wright a liar.
While his claim to the Nakamoto mantle is widely derided in the cryptocurrency community, the lawsuit is based on it being true. If he’s not Nakamoto, he’ll never have access to that stack of bitcoin worth, a press time prices, about $7.2 billion. Of course, it was $10 billion when the case was filed in February 2018.
If that’s the case, Ira Kleiman will be more upset than the judge. But not by a whole lot, as judges do not like having their time wasted. Fortunately for Wright he’s already given a number of explanations—a number of them conflicting—as to why he may never be able to access the encrypted Tulip Trust that is thought to contain the king’s ransom in bitcoin.
Maybe Judge Bloom will actually believe them.
Craig Wright has failed to impress the court in the early stages of a lawsuit that presumes he is actually responsible for the creation of bitcoin.
This filing shows Wright is determined to maintain a strategy that Magistrate Judge Bruce Reinhart didn’t buy—that “there is absolutely no basis for imposing any sanctions on Dr. Wright, because the uncontroverted evidence shows that he is unable to access a listing of the bitcoin that he mined” before 2013, as the court ordered.
Judge Reinhart, you’re no Satoshi Nakamoto
Wright, who claims to be Nakamoto, takes exception to Reinhart’s statement that it is “inconceivable” that anyone would simply lock away something worth a fortune.
The real problem, he argued, was that the judge wasn’t able to understand his unique life experience. Specifically, that anyone would set up a system in which they could lose “billions… if [a] bonded courier does not appear” with the encryption keys to the 1,000,000-bitcoin Tulip Trust.
Noting that Reinhart came to the “conclusion [that this] defies ‘real-life experience,’” Wright’s lawyers argued that the “[o]rder fails to consider that the Magistrate’s life experience and, frankly, most people’s life experience, may not correspond to that of the inventor of Bitcoin.”
“Dr. Wright unequivocally testified in detail as to why he was unable to comply,” the filing said. “The algorithm necessary to generate a complete list of his Bitcoin public addresses is in an encrypted file that is protected by a Shamir encryption scheme… . To unlock the encrypted file, Dr. Wright would need at least 8 of the 15 key slices, but he has only 7.”
The rest of the keys will not be returned to him until, Jan. 1, 2020, Wright has said.
Judge Reinhart, you don’t “get” Bitcoin
Wright also argued that Judge Reinhart accused him of making contradictory statements simply because he doesn’t understand how cryptocurrencies like bitcoin work.
For one thing, Wright’s filing points out, Judge Reinhart does not seem to understand how bitcoins work. Actually, in many documents during this trial, lawyers from both sides refer to bitcoin addresses and private keys simply as “bitcoin.”
Wright’s filing gives this example: “According to Magistrate [Judge Reinhart] , Dr. Wright ‘unequivocal[y]’ stated in his April 18th motion and May 8th declaration that the ‘trust held bitcoin,’ but ‘testified at his deposition and the evidentiary hearing that ‘the trust only holds keys,’ not actual bitcoin,” the filing noted.
For another, the whole point of Judge Reinhart’s hearings was to get a list of the public keys of Bitcoin Wright mined before Dec. 31, 2013.
That’s pointless, Wright argued. “[T]here is no record evidence showing that a listing of bitcoin that Dr. Wright mined would have helped plaintiffs prove that Dave had an ownership interest in those bitcoin, let alone that Dave mined them,” he said in the filing. “Bitcoin is a pseudonymous currency, which does not contain the names of the bitcoin miners or owners.”
Nor would public address keys enable Kleiman’s attorneys to trace the bitcoins as they were never moved, he argued.
Of course, it’s likely that the court and Kleiman want to see that for themselves rather than take Wright’s word for it.
That’s not a forgery it’s a printing error
One of the biggest blows to Wright’s credibility with Judge Reinhart—and the already-disbelieving cryptocurrency community—was the allegedly forged Tulip Trust document.
Allegedly from 2011, an expert witness testified that “the font files embedded in the document were copyrighted in 2015, implying that the document really was drafted in 2015.”
A lot of Wright doubters laughed when this alleged ham-handed forgery came out in court last summer. But, Wright’s filing argued, this could be explained by the fact that they were printed around the time that the joint WIRED and Gizmodo leak outed Wright as Satoshi Nakamoto. That means they may have been scanned and made into PDF files using optical character recognition (OCR).
Even the expert witness who revealed that inconsistency—Mathew Edman, the cyber security expert who took down Silk Road kingpin Ross Ulbricht—”conceded that the document could have been drafted in 2012, but simply OCR’d in 2015, which could have embedded the 2015 fonts into the document,” Wright argued.
Several “could have’s” follow in the footnote to that section of the filing. “The timing inconsistencies in the PGP [email encryption] signatures could have been caused by a poorly configured computer clock,” it reads. “The supposed issues with the PGP version histories could have been cause by an Alpha or Beta version of the software.”
After two more “supposed” issues, the footnote concluded, “[e]ach of these plausible explanations contradicts the “[f]raudulent documents” accusation.”
Which Tulip Trust do you mean?
The Tulip Trust is one of the most storied parts of the Satoshi Nakamoto legend—his multi-billion-dollar horde.
In an earlier filing, Wright mentioned that there is also a Tulip Trust II.
Judge Reinhart’s order, the filing said, “found that Dr. Wright made “irreconcilable statements about the Tulip Trust,” stating that “[t]he April 18 Motion stated it was a blind trust and he was not a trustee. His sworn declaration three weeks later stated that he is one of the trustees of the Tulip Trust.”
It continued, “[i]n making this finding, the order failed to consider that there are two Tulip Trusts. As shown by the trust documents, Dr. Wright is the trustee of one of the Tulip Trusts but is not a trustee of the other.”
Hey look, here’s $360,000
Wright has repeatedly told the court that he can’t access any of the bitcoins he mined before 2013. That wasn’t entirely true.
Wright’s attorney, Zaharah Markoe, sent Kleiman’s lawyer Velvel Freedman an email with addresses of 50 bitcoins Wright had forgotten.
It’s a view into the early days if bitcoin. Mined at 1:34 p.m. on April 18, 2009, he was able to do it on a simple laptop.
Markoe adds that these bitcoins were mined on Wright’s personal laptop, so they were not put into the Tulip Trust
The $7.2 billion “if”
Having testified that the Shamir encryption keys will be delivered to him in January, Wright argues the court should have just waited “to see if he receives the key slices” to unlock the Tulip Trust delivered to him.
“At a minimum, Dr. Wright should have been afforded the opportunity to wait until that date … to generate the list of his bitcoin holdings, which he could then provide to plaintiffs,” the filing argued.
It continues, “At that point, even plaintiffs would have to concede that Dr. Wright’s inability to do the impossible and comply with the discovery order caused them absolutely no prejudice.”
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