{"id":14426,"date":"2019-08-28T22:18:19","date_gmt":"2019-08-28T22:18:19","guid":{"rendered":"https:\/\/davidgerard.co.uk\/blockchain\/?p=14426"},"modified":"2019-09-14T23:05:05","modified_gmt":"2019-09-14T23:05:05","slug":"wright-loses-big-to-kleiman-judge-rules-kleiman-estate-owns-half-the-satoshi-stash","status":"publish","type":"post","link":"https:\/\/davidgerard.co.uk\/blockchain\/2019\/08\/28\/wright-loses-big-to-kleiman-judge-rules-kleiman-estate-owns-half-the-satoshi-stash\/","title":{"rendered":"Wright loses big to Kleiman \u2014 judge rules Kleiman estate owns half the Satoshi stash"},"content":{"rendered":"

Craig Wright claims to be Satoshi Nakamoto, the inventor of Bitcoin. He says he invented it with the help of Dave Kleiman,<\/a> a computer security expert who died in 2013.<\/p>\n

(Approximately nobody believes Wright’s claim, after he famously failed to come through on it repeatedly in 2016. See chapter 6<\/a> of Attack of the 50 Foot Blockhain.<\/i><\/a>)<\/p>\n

Satoshi Nakamoto mined about a million bitcoins. These coins have not moved since Satoshi disappeared in 2011.<\/p>\n

Ira Kleiman is the executor of his brother Dave’s estate. Ira says that, if “Satoshi” mined a million bitcoins … then half of them are Dave’s, and Wright needs to hand them over. Wright denies he was in partnership with Kleiman, and denies that Kleiman has any ownership over the coins. The estate sued Wright over this<\/a> in early 2018.<\/p>\n

Wright has variously claimed that the coins are locked in a trust, that he doesn’t know who the trustees are, and that Dave signed over all rights to the coins anyway. He’s been obstructive in document discovery and in depositions. He’s made contradictory claims. He’s submitted documents in discovery that experts have identified as trivially forged.<\/p>\n

After a hearing on Monday 26 August, Magistrate Judge Bruce Reinhart has given his order<\/a> concerning the coins \u2014 he’s struck out Wright’s defenses, and ordered that the Kleiman estate owns half the bitcoins. Wright also has to pay some of Kleiman’s legal costs.<\/p>\n

The remedy as written is not as drastic as early Twitter reports from the hearing<\/a> had it, and Wright’s interview with Modern Consensus<\/a> after the hearing. (That interview is the most gullible document I’ve read this week.) Though the remedy’s still pretty drastic, and it implies the drastic take on events.<\/p>\n

The Court is not<\/i> ruling on whether Craig Wright is Satoshi Nakamoto \u2014 both Kleiman and Wright have accepted Wright’s claim for the purposes of this case.<\/p>\n

 <\/p>\n

\"\"<\/a><\/p>\n

 <\/p>\n

Wright’s Bitcoin holdings as of 2013<\/h3>\n

This order is about just one wrinkle in this case \u2014 Kleiman’s 11 June motion<\/a> to compel Wright to produce a list of the bitcoins he held as of 31 December 2013, and never mind the excuses.<\/p>\n

The Court suggested Kleiman ask for Wright’s holdings as of a particular date. Kleiman asked for “a listing of all the bitcoin that was owned [by Wright]<\/i> on December 31, 2013″ \u2014 because Dave died on 26 April 2013 \u2014 and the Court concurred.<\/p>\n

In Wright’s deposition of 4 April, he declined to answer questions about how much Bitcoin he mined from 2009 to 2010. He testified that a trust, the Tulip Trust, was formed in 2011, and held the mined bitcoins.<\/p>\n

Kleiman asked the Court to make Wright detail his bitcoin holdings, and give full details on the trust and the bitcoins it held. The Court concurred. Wright provided a list of trustees and beneficiaries and documentation on two trusts called the “Tulip Trust.”<\/p>\n

On 3 June, Kleiman filed the “Motion to Compel Defendant to Comply with this Court\u2019s Orders Directing Him to Produce a List of the Bitcoins He Held as of December 31, 2013.”<\/p>\n

Kleiman also asked that if Wright continued not to comply, “that the Court deem all of Dr. Wright\u2019s holdings in the Tulip Trust to be joint property belonging to both Dr. Wright and David Kleiman.”<\/p>\n

The Court gave Wright a deadline of 17 June to “produce a complete list of all bitcoin that he mined prior to December 31, 2013,” and entered an Order to Show Cause why Wright should not be found in contempt of court.<\/a><\/p>\n

Wright responded with literally meaningless technobabble:<\/p>\n

What I actually did was, I transferred the algorithms and software that I had used, the nonpublic version of Bitcoin that I was working on, into an encrypted file. The encrypted file was then \u2014 basically the key was split so that other people could have it.<\/p><\/blockquote>\n

Over two days of hearings on the motion, Wright testified that “after drug dealers and human traffickers began using Bitcoin, he wanted to disassociate himself completely from it” \u2014 so he put his bitcoins from 2009\u20132010 into an encrypted file, held by a blind trust, the Tulip Trust. He divided the key into slices, and gave Dave Kleiman a “controlling number” of slices.<\/p>\n

Two experts also testified \u2014 Steve Shadders, the Chief Technology Officer from Wright’s company nChain, on his efforts to identify Wright’s bitcoins from the public Bitcoin blockchain, and plaintiff’s witness Matthew Edman on documents submitted by Wright in discovery that he thought were forgeries.<\/p>\n

Rule 37<\/h3>\n

Federal Rule of Civil Procedure 37<\/a> is how a judge deals with obnoxious and bad-faith parties to a case. Rule 37 allows the Court to, amongst other actions:<\/p>\n