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Judge rescues the self-proclaimed bitcoin inventor Craig Wright



  Craig Wright, right, arrives in federal court in West Palm Beach, Florida, June 28, 2019.
Enlarge / Craig Wright, right, arrives in federal court in West Palm Beach, Florida, 28 June 2019.

Saul Martinez / Bloomberg via Getty Images

Australian internet personality Craig Wright claims to be bitcoin inventor Satoshi Nakamoto. Many people don't believe him. But one person who believes him is Ira Kleiman, the brother of late technologist Dave Kleiman. According to possibly falsified emails published by Gizmodo in 201

5, Wright and Kleiman worked together to develop and launch bitcoin in 2008 and 2009.

These documents suggested that Wright and Kleiman collaborated to mine hundreds of thousands of bitcoins in 2009 and 2010 That would make Ira Kleiman heir to a multi-billion dollar fortune. Last year, Kleiman sued Wright and sought his share of Nakamoto bitcoins.

Kleiman and Wright have fought in a Florida courtroom ever since. In a ruling on Tuesday, federal magistrate judge Bruce Reinhart rescued Wright for repeatedly misleading the court and wasting all time.

Wright claims that after drug dealers and traffickers began using bitcoin, Wright got spooked and decided to separate from cryptocurrency. He created a legal entity called the Tulip Trust, with him and Dave Kleiman as trustees. He then encrypted the keys to his bitcoin holdings using an encryption scheme that required multiple keys to remove the codes. When Kleiman is dead, Wright claims he can no longer remove the file.

Judge Reinhart does not buy it.

"Dr. Wright's behavior did not impress me as someone who told the truth," the judge wrote. "I completely reject Dr. Wright's testimony of the alleged Tulip Trust, the alleged encrypted file and his alleged inability to identify his bitcoin holdings." In fact, Reinhart concluded that "Wright's testimony that this trust exists was intentionally false."

"Dr. Wright's story was not only backed by other evidence in the mail, it defies common sense and real-life experience," the judge added. More generally, Reinhart found that Wright's "failure to comply with court orders is intentional and in bad faith."

The judge asked Kleiman to file a solicitation request in the case. And decisively, he determined that any bitcoins Wright that was mined before 2013 were joint ownership of Wright and Kleiman.

The judge did not decide whether Wright is Satoshi

The whole case has an unreality because Reinhart's ruling does not address the most important question: do bitcoins exist at all?

Bitcoins were easy to extract in the early years of cryptocurrency. Forensic analysis indicates that more than 1 million bitcoins were mined in 2009 and 2010 and have not been moved since then. These bitcoins are now worth around $ 10 billion. It is widely believed that many of these bitcoins belong to bitcoin creator Satoshi Nakamoto. Kleiman's lawsuit is based on the assumption that Wright is Nakamoto and controls these bitcoins.

But if Wright is not Nakamoto, there is no reason to believe that Wright has a million bitcoins – or something close to that figure. Kleiman and Wright may be fighting a legal battle for non-existent bitcoins.

But Tuesday's ruling does not address this issue. "The court is not required to decide and does not decide whether defendant Dr. Craig Wright is Sata [o] Shi Nakamoto, the inventor of cybercurrency in bitcoin," Reinhart wrote.

There is much reason to doubt Wright's mantle of Nakamoto. It seems that central evidence linking Wright to Nakamoto has been forged many years after the fact. More importantly, if Wright wanted to prove himself to be Nakamoto, he could do so simply by producing a cryptographic signature using a private key associated with Nakamoto's identity. Wright has faced other repeated challenges to do this.

Ethereum creator Vitalik Buterin labeled Wright a "scam" last year.

Another possibility, of course, is that Wright is not Nakamoto, but made my bitcoins the first years of cryptocurrency – either with Kleiman or on his own.

At least Reinhart's Tuesday's ruling doesn't end the case – far from it. Wright will be given another opportunity to produce information about his bitcoin holdings. If he cannot do so – and cannot convince the judge that he is incapable of doing so – he may have more serious consequences, including a finding of contempt. On the other hand, if Wright produces a reliable record of his bitcoin holdings, the case will go on to a legal battle over how much of Wright's wealth belongs to the Kleiman estate.


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