Tether Kraken funding Wright lawsuit
Cryptocurrencies,  People

Craig Wright accuses Tether, Kraken funding $10B Bitcoin lawsuit against him [Updated]

Would-be Bitcoin creator claims they ‘seek to shut me down’ to protect their ‘Ponzi’ scheme. How the stablecoin issuer and the exchange benefit from Wright losing 550,000 BTC to the Kleiman estate is unclear

Not to be missed in the ongoing lawsuit between the estate of Dave Kleiman and his one-time partner, self-proclaimed Bitcoin creator Craig Wright, are his accusations about who is funding it. 

Tether Kraken funding Wright lawsuit
Craig gives his word (Photo: Brendan Sullivan)

In this matter, Wright recently stated unequivocally, in a sworn deposition, that stablecoin-issuer Tether and U.S. based cryptocurrency exchange Kraken are funding the Kleimans’ drawn out litigation.

After this story was originally published, both Kraken and Tether told Modern Consensus they are not financially supporting the Kleiman estate’s lawsuit.

Wright also denied that online gambling gazillionaire Calvin Ayre, who is the money behind Bitcoin SV (BSV) cryptocurrency developer nChain—where Wright is chief scientist—is funding his side.

In typical civil litigation, each side tries to bleed each other of resources until they have no choice but to negotiate a settlement. However, when wealthy companies have a stake in a game with a $10 billion pot, things get drawn out

[Editor’s Note: It hasn’t helped that Wright has delayed, misrepresented, and flat out lied throughout the pretrial fact gathering phase, according to Ira Kleiman’s lawyers—and the two judges hearing the case.]

Over the years I’ve spent interviewing Craig Wright, the most important thing I’ve learned is “read everything at face value three times.” I am not an attorney, but it is possible that either the Kleimans or the Wrights sold a stake in the outcome and used that money to stay afloat. Neither would, in my opinion, induce Craig Wright to say that the proceeds from this intellectual property sale (for example) constitute “funding the lawsuit.”

Modern Consensus reached out to representatives of Tether and its sister company, Bitfinex, and to Kraken. We will update this article with any responses.

…pants on fire

Kraken Digital Asset Exchange has had no involvement “in any legal matters related to the Kleiman estate,” a Kraken spokesperson told Modern Consensus in an email.

The spokesperson also chimed in with: “Sorry, who is Craig Wright?”

[Editor’s Note: Given that Kraken was one of several major exchanges to delist BSV last year after Wright began suing members of the crypto community who publicly said his claim to be Satoshi Nakamoto was a lie, it seems likely that comment came firmly tongue in cheek.

Calling Wright’s behavior “completely antithetical to everything we at Kraken and the wider crypto community stands for,” the exchange said in an April 16, 2019 blog post it acted following a Twitter poll in which more than 70,000 participants voted 10-to-one to give BSV the old heave-ho.]

Neither Tether nor its sister company, the cryptocurrency exchange Bitfinex, are financially supporting the Kleiman lawsuit, Bitfinex General Counsel Stu Hoegner said via email.

“Craig Wright’s express claims to be Satoshi Nakamoto have been rejected by many in the cryptocurrency space,” Hoegner added. “Tether and Bitfinex also reject them. Wright has had myriad opportunities to prove that he is Satoshi and has not definitively done so.”

Wright: BTC intellectual property is mine

The 114 page deposition of Craig Wright dropped on May 18, 2020 and was mostly overlooked.

During the deposition, Velvel Freedman, an attorney for the Kleimans, asked if Wright’s company nChain was funding his legal bills. The question came up when they showed a “Power of Attorney” form that nChain makes employees fill out for patent reasons. “So you did execute this document,  Dr. Wright?” 

CW: “Yes. Every employee of nCrypt does something similar, or now nChain.” 

VF: “It authorises nCrypt Limited to act in your name and on your behalf in relation to any intellectual property devised by you and owned by or assigned to nCrypt?” 

CW: “Yes, this is a standard intellectual property agreement between employees and their employer.”

VF: “Dr. Wright, does nChain have a lot at stake in this litigation?”

CW: “No.” 

Wright’s attorney, Andrés Rivero, intervened: “Object to the form.” 

Kleiman’s attorneys rephrased the question, “Does nChain have ability to control this litigation with respect to the intellectual property?”

That’s when Wright dropped another wild card.

Lawyers, crypto and money

Wright replied, “No. nChain is not involved in any way in this litigation. I know that the people funding Mr. Kleiman at the moment, including Tether and Kraken [Modern Consensus’ emphasis], seek to shut me down because their whole existence in their Ponzi requires that I be seen as a fraud, but quite simply nChain has no, and I mean no—I will reiterate that no—involvement in this case whatsoever. No funding, no anything.”

[Editor’s Note: Wright has previously called Bitcoin itself—and crypto generally—a Ponzi scheme. That is likely what he was referring to here.]

In addition to denying Wright’s claims, Tether’s Hoegner addressed Wright’s Ponzi scheme comments, even though they were likely directed at Bitcoin. The USDt stablecoin’s market capitalization has skyrocketed since April, more than doubling from $4.2 billion to $9.5 billion, according to CoinGecko. It is now the third-largest cryptocurrency, behind only bitcoin and ether.

Saying that “Tether remains committed to offering a secure, stable, and useful stablecoin,” Hoegner pointed to recent growth by other stablecoins, although no competitors have come close to Tether, which is by far the dominant digital asset in this segment of the cryptocurrency market.

He added that “users wishing to buy other digital assets and using stablecoins as a low-friction on-ramp” when purchasing, selling, or moving Bitcoin and other cryptocurrencies is a possible reason for this demand. “In any event, we are gratified by the recent market demand for USDt, which remains the most trusted, liquid, and popular stablecoin in the ecosystem.”

Hoegner also referred, albeit indirectly, to questions raised over the past three or so years about Tether’s assertion that all USDt’s are backed one-to-one by a reserve of U.S. dollars. “We have made public various documents validating our reserves over the years, and our commitment to such measures is ongoing,” he said.

The company is still fighting a lawsuit brought by New York’s attorney general after Tether loaned sister firm Bitfinex as much as $700 million after an alleged con man siphoned off $900 million. Bitfinex quickly paid off that loan, but demands for a more in-depth audit have persisted.

Craig Wright’s partner is…

After Wright’s accusations about Tether and Kraken, Freedman asked, “Dr. Wright, who is paying for your legal Defense in this case?”

“My legal Defense is paid to my 13 lawyers through myself.”

“Dr. Wright, you pay your lawyers directly for this representation?”

Rivero intervenes again, “Your Honour, I object on relevance grounds here, and also on questions of confidentiality. It is no way relevant to litigation how we are paid.”

This is a wild case that has gone on for over two years, but Rivero and his partner Zaharah Markoe are good at narrowing all material to focus on just one question: Was there any proof of a partnership between Dave Kleiman and Craig Wright? 

“[T]here is absolutely no relevance to the questions in this case, which are whether there was a partnership between Dr. Wright and Dave Kleiman, Judge,” Rivero continued. “It was seven years ago. How we are paid could have no bearing on that whatsoever, certainly not enough relevance to overcome the confidentiality in our relationship with our client.”

Since this action was brought against Craig Wright, the question of how he paid his lawyers could be argued irrelevant—since paying his lawyer one way or another doesn’t change what did or did not happen seven years ago between Craig and Dave.

Still, both sides have an interest in finding out how deep the pockets are behind them. Could litigation go another two years? Four? 

“Dr. Wright, is Calvin Ayre funding this litigation?”

“Objection! Same objection as before.”

Judge Reinhart allowed him to proceed. “I will allow him to answer that. It is a yes or no question as to whether Mr. Ayre is funding the litigation.”

Craig Wright gave a final answer, “No, he is not.”

Updated at 11:10 p.m. to add comments from Kraken.

Updated at 4:02 p.m. on June 16, and 9:59 a.m. on June 17, 2020 to add comments from Tether.

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Brendan Sullivan is a writer, producer, and author of the memoir Rivington Was Ours: Lady Gaga, the Lower East Side, and the Prime of Our Lives. Disclosure: he owns cryptocurrencies. Follow him on Twitter.