Dr. Craig Wright responds to Kleiman case’s ruling by U.S. federal magistrate

A hearing in the Kleiman v. Wright case has concluded in the U.S. District Court for the Southern District of Florida on Monday with Magistrate Judge Bruce Reinhart recommending that half of the Bitcoin mined by Dr. Craig Wright before December 31, 2013 should be awarded to the Kleiman estate, along with half of intellectual property (IP) rights of Craig Wright prior to December 31, 2013.

As expected, sensational articles have already been written about the court ruling, but it’s important to remember that Magistrate Judge Reinhart issued a recommendation to the District Court judge (the assigned trial judge for the case), and even if adopted by the District Court judge, it is not a final judgement. There is still a long way to go – including a possible trial – before the matter is resolved.

Reinhart’s recommended ruling applies to the lawsuit filed by Ira Kleiman on behalf of Dave Kleiman’s estate. The case, which began in 2018, sued Dr. Wright for $10 billion worth of Bitcoin, claiming that Wright was after Dave’s BTC holdings. Monday’s event was the conclusion of an evidentiary hearing on discovery disputes in the case (in particular, whether Wright was able to comply with a court order requiring him to list Bitcoin he had mined, or whether he was unable to do so as he explained to the court). The full issues in the case will not be decided until other proceedings, and ultimately trial in March 2020.

Dr. Wright was asked to provide a list of public addresses for Bitcoin he mined before December 31, 2013, but because of the complicated details of the Tulip trust and also a technical solution he asked Kleiman to implement to make the mined Bitcoin unavailable to Wright’s family trust until at least January 2020, information related to such mined Bitcoin are intentionally not available to him until at least January 2020. Magistrate judge Reinhardt did not find Wright’s explanation to be credible.

The magistrate judge is not, however, referring the case for civil or criminal contempt. Instead, the magistrate judge elected to recommend issue sanctions in the case, which include determining that Wright was part of a “Satoshi partnership” with Kleiman in the beginning of Bitcoin, and is recommending a finding that Kleiman’s estate is entitled to half of the Bitcoin mined by Wright and half of Wright’s intellectual property (presumably related to Bitcoin, but this awaits the court’s written order to clarify) up to and including December 31, 2013.

In response to the court’s ruling, legal counsel for Dr. Wright provided the following response to CoinGeek:

The hearing before the magistrate concerned requests for information that Dr. Wright was ordered to produce but explained that he could not provide at this time. Dr. Wright disagrees with the magistrate’s ruling about those discovery issues, as well the basis for the magistrate’s findings regarding his ability to provide the information requested. Dr. Wright also believes the remedies recommended by the magistrate are extreme and disproportionate to the discovery dispute. This is not a final judgment in the case, and Dr. Wright intends to take steps available to him to continue to vigorously defend the claims asserted against him by Ira Kleiman.

In an interview with Modern Consensus, Dr. Wright confirmed that he is willing (if the court’s findings stand after a complete trial, disposition and any necessary appeal of the case) to “hand over $5 billion in BTC.”

The judge won’t rule on whether I’m Satoshi. But the partnership is. So when Dave Kleiman passed, the partnership transferred to Ira,” Dr. Wright told the news outlet, adding that the court recommendation doesn’t affect Bitcoin SV (BSV). “BSV, it won’t. But the judge ordered me to send just under 500,000 BTC over to Ira. Let’s see what it does to the market. I wouldn’t have tanked the market. I’m nice.

But because the court ruled that Ira Kleiman “inherited” $5 billion, he may have to dump some US$2 billion in BTC to pay estate tax, according to Dr. Wright, who noted:

Everyone wants to hate on me. This is the result. If you’d left me alone, I would have sat on my fucking money and you wouldn’t have to worry. And the biggest whale ever has to dump because he has to pay tax. It’s not a transfer. Florida has an estate tax. Trust me. This is not an outcome I would have liked. I own a lot of BTC. Dave should have owned 320,000 and I should have had 800,000 and now it’s 50/50. At the end of the day, that’s not a good thing for BTC.

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Dr. Craig Wright sued for $10.2b by brother of early Bitcoin advocate

Dr. Craig Wright, cryptocurrency pioneer and currently chief scientist of blockchain technology research and development firm nChain, is being sued for $10.2b by a relative of one of Bitcoin’s earliest advocates.

On Monday, word broke that Ira Kleiman, brother of deceased Bitcoin pioneer Dave Kleiman, had filed a federal lawsuit in the Southern District of Florida accusing Wright of acquiring via nefarious means some “hundreds of thousands” of Dave’s Bitcoins, along with “valuable intellectual property rights of various blockchain technologies.”

The complaint notes that Wright and Dave Kleiman shared a “longtime interest in cyber security, digital forensics, and the future of money,” and their early collaboration allowed them to accumulate “a vast wealth of bitcoins from 2009 through 2013,” the year Kleiman died following a long battle with MSRA.

The complaint says Kleiman’s family was ignorant of his Bitcoin holdings, because “for reasons not yet completely clear, [Kleiman and Wright] chose to keep their involvement in Bitcoin hidden from most of their family and friends.”

The complaint alleges that, following Dave’s death, Wright “forged a series of contracts that purported to transfer Dave’s assets to Craig and/or companies controlled by him.” The complaint further alleges that Craig “backdated these contracts and forged Dave’s signature on them.”

Ira Kleiman claimed Wright reached out to him after Dave’s death, confirming the pair’s Bitcoin activities but explaining that Dave had signed away his rights to the assets in exchange for a stake in an Australian company worth “millions.” The complaint calls this explanation “a lie” because this company “went bankrupt” following a dispute with the Australian tax office.

The complaint alleges that Wright had amassed a stash of around 1.1m Bitcoins, of which “at least 300,000” belonged to Dave. However, the plaintiff believes he’s entitled to all 1.1m Bitcoins mined by both Wright and Dave, which were “wrongfully converted” by Wright after Dave’s death. Ira is seeking the return of these Bitcoins – or their equivalent value in fiat currency – as well as numerous technology patents, plus interest and court costs.

It’s worth noting that Ira himself has no connection to the world of cryptocurrency and the legitimacy of the documentation he’s presented to support his claims is a matter of some debate within the crypto community.

Moreover, it’s long been rumored that Dave kept his Bitcoin stash on a hard drive with the highest level of encryption available at the time. This hard drive is currently in Ira’s possession, which would further call into question the capacity for anyone to access its contents.

Putting aside the dubious merits of Ira’s allegations, what doesn’t appear to be in dispute is Wright’s rightful place as a key figure at the genesis and early development of Bitcoin. Sadly, the heights that the cryptocurrency markets have since attained is also why we can likely expect more of these lawsuits to emerge in future.

After news of the lawsuit broke, Wright was queried on Twitter as to what the lawsuit was all about, to which he replied with a single word: “Greed”.

Note: Tokens on the Bitcoin Core (segwit) Chain are Referred to as BTC coins. Bitcoin Cash (BCH) is today the only Bitcoin implementation that follows Satoshi Nakamoto’s original whitepaper for Peer to Peer Electronic Cash. Bitcoin BCH is the only major public blockchain that maintains the original vision for Bitcoin as fast, frictionless, electronic cash.