Australian Internet personality Craig Wright claims he is bitcoin inventor Satoshi Nakamoto. A lot of people don’t believe him. But one person who does believe him is Ira Kleiman, the brother of deceased technologist Dave Kleiman. According to possibly forged emails published by Gizmodo in 2015, Wright and Kleiman worked together to develop and launch bitcoin in 2008 and 2009.
Those documents suggested that Wright and Kleiman collaborated to mine hundreds of thousands of bitcoins in 2009 and 2010. That would make Ira Kleiman the heir to a multibillion-dollar fortune. So last year, Kleiman sued Wright, seeking his share of the Nakamoto bitcoins.
Kleiman and Wright have been battling in a Florida courtroom ever since. In a Tuesday ruling, federal Magistrate Judge Bruce Reinhart savaged Wright for repeatedly misleading the court and generally wasting everyone’s time.
Wright claims that after drug dealers and human traffickers started using bitcoin, Wright got spooked and decided to dissociate himself from the cryptocurrency. He created a legal entity called the Tulip Trust, with him and Dave Kleiman as trustees. Then he encrypted the keys to his bitcoin holdings using an encryption scheme that required multiple keys to unscramble the data. With Kleiman dead, Wright claims he can no longer unscramble the file.
Judge Reinhart isn’t buying it.
“Dr. Wright’s demeanor did not impress me as someone who was telling the truth,” the judge wrote. “I completely reject Dr. Wright’s testimony about the alleged Tulip Trust, the alleged encrypted file, and his alleged inability to identify his bitcoin holdings.” Indeed, Reinhart concluded that “Wright’s testimony that this trust exists was intentionally false.”
“Dr. Wright’s story not only was not supported by other evidence in the record, it defies common sense and real-life experience,” the judge added. More generally, Reinhart found that Wright’s “non-compliance with the court’s orders is willful and in bad faith.”
The judge invited Kleiman to submit a request for attorney’s fees in the case. And crucially, he ruled that any bitcoins Wright mined prior to 2013 were the joint property of Wright and Kleiman.
The judge didn’t decide whether Wright is Satoshi
The entire case has an air of unreality because Reinhart’s ruling doesn’t address the most important question: do the bitcoins exist at all?
Bitcoins were easy to mine in cryptocurrency’s early years. Forensic analysis indicates that more than 1 million bitcoins were mined in 2009 and 2010 and haven’t been moved since then. These bitcoins are now worth around $10 billion. It’s widely assumed 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 those bitcoins.
But if Wright isn’t Nakamoto, then there’s no reason to think Wright has a million bitcoins—or anything close to that figure. Kleiman and Wright might be fighting a legal battle over bitcoins that don’t exist.
But Tuesday’s ruling doesn’t 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 the bitcoin cybercurrency,” Reinhart wrote.
There’s a lot of reason to doubt Wright’s claim to Nakamoto’s mantle. Key pieces of evidence linking Wright to Nakamoto appear to have been forged years after the fact. More importantly, if Wright wanted to prove that he is Nakamoto, he could do it quite easily by producing a cryptographic signature using a private key associated with Nakamoto’s identity. Wright has ducked repeated challenges to do this.
Ethereum creator Vitalik Buterin labeled Wright a “fraud” last year.
Of course, another possibility is that Wright isn’t Nakamoto but did mine some bitcoins in the early years of the cryptocurrency—either with Kleiman or on his own.
In any event, Reinhart’s Tuesday ruling doesn’t end the case—far from it. Wright will be given yet another opportunity to produce information about his bitcoin holdings. If he can’t do so—and can’t convince the judge that he’s incapable of doing so—he could face more serious consequences, including a finding of contempt. On the other hand, if Wright does produce a credible record of his bitcoin holdings, the case will proceed to a legal fight over how much of Wright’s fortune properly belongs to the Kleiman estate.