Magistrate Judge Bruce Reinhart just threw the book at Craig Wright, who claims to be bitcoin creator Satoshi Nakamoto.
“I give no weight to sworn statements of Dr. Wright that advance his interests but that have not been challenged by cross-examination and for which I cannot make a credibility determination. I have previously found that Dr. Wright gave perjured testimony in my presence,” the Magistrate Judge wrote in a scathing 14 page order.
Ira Kleiman claims that his brother helped Wright create Bitcoin. That means half of the 1.1 million bitcoins mined at the beginning of the Bitcoin project by Satoshi Nakamoto, as well as half of the Bitcoin intellectual property, should go to his family.
This lawsuit assumes that Wright is Nakamoto.
However, most of the cryptocurrency industry’s heavyweights share Judge Reinhart’s opinion of Wright’s trustworthiness, and don’t believe he created Bitcoin.
Distrusting but fair
Judge Reinhart’s ruling isn’t great news for the man who claims to be the author of the bitcoin whitepaper. But it does promise to give us a glimpse at the so-called “Tulip Trust III.” This is the latest in a series of trusts Wright said contains encrypted files that will unlock a $10 billion bitcoin fortune.
[Editor’s Note: It’s actually $5.8 billion at current prices.]
This is part of the pre-trial discovery process, which determines what will and will not get shown to a jury in the trial. That is currently scheduled for July, and will be argued in federal court for the Southern District of Florida in front of Judge Beth Bloom.
That said, Judge Reinhart is no pushover for Kleiman’s attorneys. While he ordered Wright to pay their fees due to bad faith and causing delays, he didn’t sock Wright with anything like the $650,000 penalty discussed in earlier rulings. On March 16, Judge Reinhart took an axe to the bill presented by Velvel Freedman, Kyle Roche, Andrew Brenner, and Stephen Lagos.
Instead of the $658,581.78 requested, Judge Reinhart awarded $165,800.09. That’s less than one quarter of what the four attorneys billed.
Wright must pay that bill by March 30.
The infamous courier
“On March 19, 2019, I ordered Dr. Wright to produce a list of his bitcoin holdings,” Reinhart says in his most recent filing. “He asserted that it was impossible for him to comply because the information necessary to generate that list was held by a blind trust that he could not access… I ordered him to identify the trust…. He subsequently testified that the information necessary to generate the bitcoin list might come to him by bonded courier in or about January 2020. Judge Bloom gave him a chance to produce the information.”
Kleiman’s team was allowed to ask Wright seven questions about the courier he said delivered the Tulip Trust III documents on Jan. 6. As he has done on a large scale in this case, Wright claimed attorney-client privilege on some of those question.
For one thing, he claimed the courier was an attorney, and therefore everything about the Tulip Trust III documents was privileged. Judge Bloom didn’t buy it, giving Wright 10 days to turn over the documents.
Now that’s a prenup!
The next section of the filing shows the complex nature of Wright’s various trusts. Although they first appeared to be a paranoid worst-case-scenario way to hide an encrypted file, this court case seems to make that paranoia seem warranted.
One of those seven questions asked Wright to give “a ‘detailed description’ of how he obtained the necessary information,” Judge Reinhart wrote. “He responded that his wife [Ramona Watts], who is the trustee of the Tulip Trust III, received the trust agreement in December 2019 from counsel for the Trust. Thereafter, she received an encrypted trust file. She then provided him with a file containing the bitcoin list.”
Then the judge summarizes Wright’s most recent arguments in court, before ruling against most of them.
“Dr. Wright asserts that the communications between his wife and the counsel for the Trust are protected by the attorney-client privilege,” Reinhart wrote. “He further asserts that the communications between him and his wife are protected by the spousal privilege,” according to the filing.
The lawyer barred
Wright’s responses to the Kleiman attorneys’ seven questions identifies the person who arranged the delivery of the encrypted file—the infamous “bonded courier”—and details his that person’s background.
Judge Reinhart now identifies the source of the bonded courier’s encrypted file as Denis Mayaka, a Fund Services Manager at Abacus (Seychelles) Limited. That is now identified as the firm who handled the Tulip Trusts.
The problem then becomes that Craig asserted attorney-client privilege both for himself and for his wife, a Tulip Trustee, but the judge doesn’t believe the story.
“To establish an attorney-client relationship between Mr. Mayaka and Ms. Watts, Dr. Wright introduced a sworn, un-notarized, Declaration of Denis Bosire Mayaka.”
The next part does look a little shifty. It hinges on Mayaka’s undergraduate degree in law from a University in Kenya.
According to Judge Reinhart, “The Declaration states, ‘I am lawyer [sic] and obtained my bachelor of law degree in 2007 from Moi University in Kenya.’” Wright included a printout of Mayaka’s LinkedIn profile.
Which, as of publication, literally has no photo and only lists Abacus Seychelles for work history.
It does not list his education. However, it did when Wright submitted a printout of the LinkedIn page.
“Dr. Wright also introduced a printout of a LinkedIn profile that reflects Mr. Mayaka having a Bachelor of Laws degree from Moi University,” Judge Reinhart added, “Dr. Wright also relies on his sworn responses to the Interrogatories, which assert that Mr. Mayaka is counsel to the Trust.”
The declaration claims that Mayaka has represented Wright since 2012, “including the Tulip Trust dated July 7, 2017.” Reinhart, however, tossed aside the entire declaration.
No, no, no
Judge Reinhart said that he does not take that declaration at face value since he believes that Wright perjured himself in the courtroom in the past.
The judge articulates his reasoning in three parts.
“First, as finder of fact, I disregard the Mayaka Declaration because it has not been adequately authenticated. Particularly given my prior finding that Dr. Wright has produced forged documents in this litigation, I decline to rely on this kind of document, which could easily have been generated by anyone with word processing software and a pen,” he said.
“Second, I accept counsel’s representation that Dr. Wright intended for his sworn interrogatory answers to affirm that Mr. Mayaka was the counsel to the Trustee of Tulip Trust III.”
This is where Judge Reinhart tore into Wright’s integrity, saying he gives “no weight to sworn statements of Dr. Wright” since he had “previously found that Dr. Wright gave perjured testimony in my presence.”
Judge Reinhart then strikes down any further claims of attorney-client privilege because the Trust itself doesn’t list Mayaka as counsel.
“Third, the Trust document does not identify Mr. Mayaka as counsel; he is assigned a different role,” Judge Reinhart ruled. “In sum, the record does not establish that Mr. Mayaka is counsel to the Trustee of the Tulip Trust. For similar reasons, the record does not establish that Dr. Wright and Mr. Mayaka have an independent attorney-client relationship.”
You promised the public proof
Judge Reinhart closed by denying Wright’s ability to assert attorney-client privilege over the Tulip Trust III documents since Wright’s wife, Ramona Watts, was the conduit of communications from Mayaka. She is a trustee and Wright is not.
“Finally, Dr. Wright lacks legal authority to assert an attorney-client privilege over communications between the trustee and counsel for the trust. He would not be the client; the trustee would be.”
But what about spousal privilege? There is court precedent that communications between spouses are private and privileged.
Here Judge Reinhart makes a blanket decree: none of this can be privileged because all parties agreed that this information would become public (i.e. we would get to hear about the Tulip Trust after the bonded courier arrived).
“The documents related to interests in property which will eventually become publicly known, the judge said
The Aussie jail question
On Feb. 13, Wright argued that he didn’t have the right to turn over documents, since many of them originated in companies in which he is not a director. Here again, the judge sided with the Kleimans using their maxim: if Wright has a document, they want it. If he has one over which someone else can claim privilege, they want it and Wright can’t assert that other person’s privilege.
“At the March 5 hearing, Dr. Wright argued for the first time that the assertedly-privileged documents were not in his care, custody, or control in his individual capacity, but rather in his capacity as agent/representative/bailee of the entities.”
Wright even asserted that handing over documents could get him thrown into an Australian jail. He included a sworn declaration from an Australian lawyer named Gordon Grieve.
However, Reinhart denied this claim as well. “Mr. Grieve’s Declaration does not demonstrate that ordering production of these materials would violate Australian law.”
He gave Wright until March 12 to turn over all documents that he’d held back before, and answer the rest of the seven questions for which he’d claimed privilege.
The big question mark
The tenor of Judge Reinhart’s order makes clear the court has run out of patience with Wright. If he wants to get on Reinhart’s good side, he will have to find a way to voluntarily produce document corroboration. His expert digital forensics witness will have to prove to a jury that the 2015 timestamp on the 2011 document was just a routine byproduct of optical character recognition (OCR) software.
However, the biggest “if” in this case is whether or not a jury will follow all of Kleiman’s arguments.
They may well prove that Wright owes the Kleiman estate some of the $10 billion trust.
But, so far, we have seen no evidence that Dave Kleiman was involved in creating bitcoin at all.