Craig Wright will appeal $5 billion ruling

Say it in Inigo Montoya’s voice: ‘Hello. My name is Ira Kleiman. You robbed my brother. Prepare to pay.’

Self-proclaimed Bitcoin creator Craig Wright intends to appeal a ruling by Magistrate Judge Bruce Reinhardt that branded him a liar and ordered him to give approximately $5 billion worth of bitcoin to the estate of his late partner Dave Kleiman.

Borrowing Vazzini’s most memorable line from “The Princess Bride,” Reinhardt concluded in an August 27 ruling that Wright’s claims in the lawsuit are “inconceivable.”

In a court filing on August 30, attorneys for the nChain founder and Satoshi Nakamoto claimant asked for an extension to file a challenge to Reinhardt’s order, citing preparations for Hurricane Dorian, expected to make landfall in southeast Florida on Labor Day. The case is being heard by Judge Beth Bloom of the U.S. District Court for the Southern District of Florida, located in Miami. They want until September 24, rather than the current September 10 deadline to file.

Although Wright was downcast and resigned in an exclusive interview with Modern Consensus after the ruling was announced, he intends to challenge both Reinhardt’s findings and his authority to order the turnover of half of the 1.1 million bitcoin (BTC) believed to be held in the Tulip Trust formed by Wright and Klein. That order must be approved by Judge Bloom before taking effect.

“Reinhart issued an order deeming as established certain facts that go to the heart of this case and striking eight of Dr. Wright’s affirmative defense,” the filing said. Wright’s attorneys said Reinhardt did not have the authority to do this.

The sanctions, they added, “go to the heart of the case and the defendant’s ability to defend against the billion-dollar claims lodged against him.”

While much of Reinhardt’s 29-page legal ruling is full of technical terms and dry case citations, his description of Wright’s credibility as a witness is not.

“Dr. Wright’s story not only was not supported by other evidence in the record, it defies common sense and real-life experience,” Reinhardt wrote. “Consider his claims.”

1.    “He designed Bitcoin to be an anonymous digital cash system with an evidentiary trail.” 

2.    “He mined approximately 1,000,000 bitcoin, but there is no accessible evidentiary trail for the vast majority of them.”

3.    “He is a latter-day Dr. Frankenstein whose creation turned to evil when hijacked by drug dealers, human traffickers, and other criminals.” 

4.    “To save himself, he engaged David Kleiman to remove all traces of his involvement with Bitcoin from the public record.” 

5.    “As part of his efforts to disassociate from Bitcoin and “so that I wouldn’t be in trouble,” he put all his bitcoin (and/or the keys to it – his story changed) into a computer file that is encrypted with a hierarchical Shamir encryption protocol.” 

6.    “He then put the encrypted file into a “blind” trust (of which he is one of the trustees), gave away a controlling number of the key slices to now-deceased David Kleiman, and therefore cannot now decrypt the file that controls access to the bitcoin.” 

7.    “His only hope is that a bonded courier arrives on an unknown dated [sic] in January 2020 with the decryption keys.” If the courier does not appear, Dr. Wright has lost his ability to access billions of dollars worth of bitcoin, and he does not care.”

It is, Reinhardt concluded, “inconceivable.”

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Leo Jakobson, Modern Consensus editor-in-chief, is a New York-based journalist who has traveled the world writing about incentive travel. He has also covered consumer and employee engagement, small business, the East Coast side of the Internet boom and bust, and New York City crime, nightlife, and politics. Disclosure: Jakobson has put some 401k money into Grayscale Bitcoin Trust.