A mixed verdict: No real light on Bitcoin’s origin

After weeks of testimony and weeks more of deliberations, the jury delivered its verdict Monday in the matter of Kleiman v. Wright, a much-watched case in which an important computer scientist contested the claims pressed by the estate of another on a matter of more than a little fascination to the world of alternative investments: How did Bitcoin begin? And who owns/controls the huge cash of Bitcoins that the legendary flounder reserved for himself? The verdict supports the defendant, Craig Wright, on all but one of the counts of the Kleiman estate’s complaint. On that one count, conversion, the jury found that Wright had wrongfully taken Bitcoin-related property belonging to a corporation (W&K Info Defense) in which both the plaintiff and the defendant’s ex-wife have or claim an interest. The verdict, then, is in formal terms against the defendant for $100 million. The net loss the verdict represents is less than that, though, when one considers that if Wright pays this money at all much of it will never pass to the Kleiman family. [There is much to be settled about the ownership of W&K by distinct litigation.] Off the hook for billions For context: if the jury had believed the claims of the plaintiff, Dave Kleiman’s estate, as pressed by the deceased’s brother Ira Kleiman, Wright would have been on the hook for billions. The cache of Bitcoins said to be in the hands of “Satoshi,” the legendary creator of Bitcoin -- or of any such real people or persons as may have created that persona -- may include as many as 1.1 million of the coins, with a value at present of roughly $70 billion. Half of that, then, would be $35 billion. In those terms one can see how a judgment for merely $100 million might come as a relief. To return, though, to Kleiman v. Wright: the verdict is something of a surprise because on December 1 the jury informed Judge Beth Bloom that it was deadlocked. There has been a good deal of speculation since to the effect that it would likely stay deadlocked, resulting in a mistrial. A success for the Allen charge Bloom called the jurors into the courtroom and read them what is known as an “Allen charge,” standard language for such circumstances telling the jury that “the trial has been expensive in time, effort, money and emotional strain for both plaintiff and defendant. If you fail to agree on a verdict, the case remains open and may have to be tried again…There is no reason to believe either side could try it better or more exhaustively.” She also told the jurors they could take all the time they needed. She then sent them back to the jury room to continue deliberating. A mistrial would have been declared had they continued to insist they could not agree on a verdict. In the hallway of the courthouse, defense attorney Andres Rivero said, “It isn’t over ‘til it’s over.” Indeed, it wasn’t. The lawsuit came about because the Kleiman estate, represented by David’s brother Ira, believes that Wright engaged in a “scheme….To seize Dave’s bitcoins and his rights to certain intellectual property associated with the Bitcoin technology.” Ira Kleiman’s lawsuit claimed that Wright and Dave Kleiman had together established an entity, W&K Info Defense Research LLC, to mine bitcoin and organize their intellectual property. Wright said in response that he and Kleiman were never partners though they were friends and confidants. A critical exchange: Could Dave Kleiman code? All the back-and-forth of the complicated trial may be condensed in an exchange on Wednesday, Nov. 10. This was a shortened court day, because of a COVID scare in the jury. Everybody ended up going home early for a four-day weekend, since the following day was Veterans’ Day. But while the court was in session that Wednesday, there was a fascinating back-and-forth between Kleiman’s lawyer, Vel Freedman, of Roche Freedman LLP, and the defendant, Wright. Wright has claimed for example that the late Dave Kleiman didn’t know how to code. That, if true, would of course limit the degree to which he could be credited with any contribution to Satoshi’s work. But Freedman produced a message on an internet forum in which Wright had said, “Dave took my 2 million lines of code that I had in 2010 and transformed these into a documented set of over 6 million lines of code.” Apparently, this was a testament to Dave’s coding abilities and their importance. Freedman also produced a document saying that Dr. Wright’s companies owned 6,088,555 lines of code. This suggests that this was a consequence of that 2010 work he had mentioned. Or it is an odd numerical coincidence. When Freedman confronted Wright on the stand on this point, Wright said that he liked to build Dave up in public communications, but that Kleiman had not in fact added the massive amounts of new lines of code. Struggling with the numbers Early in its deliberations, a question from the jury indicated that it was struggling with numbers. “Many of us do not feel comfortable adjcating [sic] an amount,” they wrote in the note, read aloud by U.S. District Judge Beth Bloom, of the Southern District of Florida. Aside from what one gathers was mere haste in jotting down “adjudicating,” this note seemed to observers to indicate that the jurors had reached agreement that there was a partnership, and that Kleiman’s estate was due something. How much? That was the question on which the jury seemed to be stuck. In hindsight, though, it seems likely that the jury had decided there was conversion liability to the corporation at this point, though it may not yet have made any decision about the existence of a partnership or the rest of the case. The plaintiff and the defense in this case both agreed that Wright was at least an important part of the “Satoshi Nakamoto” whole, the creator of Bitcoin. It is important, then, to be clear that in the broader cryptocurrency world that claim is very much disputed. The skeptics notably include Cardano founder and Ethereum co-founder Charles Hoskinson, who wrote two years ago that Wright doesn’t have the “foundational knowledge” on which Satoshi drew, and has a completely different communicative style. Also, Hoskinson said, Satoshi “wasn’t down with the patents.” In mid-November, the Wall Street Journal ran a misleading headline about the Miami trial, “Bitcoin Creator Satoshi Nakamoto Could Be Unmasked at Florida Trial.” That headline crossed a line, ignoring the fact that no trial can be said to test the facts to which both parties stipulate. In this case, both Wright and the Kleiman estate shared a common view of many of the facts: Wright was either a part of Satoshi or the whole of him. Kleiman was either Wright’s business partner or at least a friend and confidant. The view that Satoshi might have been a third person or some other group of people. That the Wright-Kleiman relationship question is simply irrelevant to the origin of Bitcoin -- cannot be said to have been rejected by these proceedings because no party to these proceedings pressed it. The Falcons can’t possibly lose a game between the Vikings and the Packers.

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A mixed verdict: No real light on Bitcoin’s origin

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Christopher Faille

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