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You are here: Home / Bitcoin Industry News / Kleiman v. Wright: Bitcoin’s Trial of the Century Kicks Off in Miami

November 2, 2021

Kleiman v. Wright: Bitcoin’s Trial of the Century Kicks Off in Miami

MIAMI — The civil trial of Ira Kleiman vs. Craig Wright kicked off in Miami on Monday to perhaps answer one of Bitcoin’s greatest mysteries: Who is Satoshi Nakamoto and what happened to the estimated 1.1 million BTC in his possession?

Wright, an Australian computer scientist and early cryptocurrency pioneer, has been claiming to be the pseudonymous creator of Bitcoin since 2016. This suit posits that Wright did not act alone. According to Ira Kleiman, his late brother David – a fellow computer expert and longtime friend of Wright – was the co-creator of Bitcoin and is entitled to a share of a trove of bitcoin currently valued at $66 billion.

The suit alleges that David Kleiman and Wright formed a partnership and established an entity called W&K Info Defense Research, LLC, that they used to mine bitcoin and organize their intellectual property, including the Bitcoin source code.

Ira Kleiman believes that his brother was solely responsible for mining Satoshi’s treasure trove of bitcoins, and has accused Wright of swindling them through a combination of forgery and deceit from David’s estate after his death.

Wright denies the allegations and says that, while David Kleiman was a friend and confidante, the two were never partners and that he alone is Satoshi Nakamoto.

A panel of 10 jurors selected Monday will have three weeks to hear the evidence and decide the fate of Satoshi’s fortune.

‘Partnership’ paper trail

In his opening statement on Monday, Kyle Rosche, an attorney for the Kleiman estate, established a timeline for the jury that aimed to demonstrate Wright’s conflicting statements about the nature of his relationship with David Kleiman.

According to emails shown to the court on Monday, Wright repeatedly referred to David Kleiman as his “partner” and his “business partner” until after the latter’s death in April 2013.

Rosche told the jury that after David Kleiman’s death, Wright’s story began to change: he continued to call David his partner but started to distance himself, and claimed that David had transferred their shared intellectual property into Wright’s possession.

According to Rosche, Wright’s relationship with Kleiman’s surviving family members began to sour sometime in 2015, when Ira was informed by Australian tax authorities that he fraudulently claimed to pay David Kleiman approximately $40 million for materials belonging to their shared company, W&K Info Defense Research, LLC.

Rosche told the jury that after 2018, when Ira Kleiman filed suit against him, Craig Wright began to deny that he and David Kleiman had ever been partnered – or that he’d ever had a partner at all, aside from his wife Ramona Watts.

In deposition footage dated April 4, 2019, Wright said, “He was never my partner. … I hate the whole concept of partnership.”

Inside the defense

Wright’s defense seems to largely hinge on two factors: his diagnosis with Autism Spectrum Disorder and the lack of a written agreement between him and David Kleiman.

In her opening statement, Amanda McGovern, counsel for Wright, claimed that Wright’s autism made him difficult to communicate with, overly literal and combative. Rather than pushing back against the veracity of the plaintiff’s timeline, McGovern instead attempted to convince the jury that Wright and Ira Kleiman simply have a different understanding of the word “partner.”

McGovern painted a picture of Wright’s lifetime of social difficulties, claiming that he came from “a very difficult home,” had “very few friends in his childhood” and “he was considered strange … even by his sister.”

“At thirteen, he wore a ninja outfit to a playground and all the other kids called him a freak,” McGovern said.

For Wright, math and cryptography became a refuge away from bullying at home and at school.

According to Rosche, however, Wright’s diagnosis with autism is a recent development: he was diagnosed sometime after 2018 by Dr. Ami Klin, director of the Marcus Center for Autism – and an expert witness for the defense. Rosche told the jury that Wright was diagnosed over the phone by Klin who had, at the time of diagnosis, never met Wright in person.

Will the real Satoshi please stand up?

While both the plaintiffs and the defense posit that Craig Wright – either alone or alongside David Kleiman – invented bitcoin, reality is murkier.

Despite Wright’s claims (as well as his history of lawsuits against his detractors) he has not been able to definitively prove that he is Satoshi Nakamoto.

After announcing in May 2016 that he would move Satoshi’s bitcoin – proving that he had access to Satoshi’s private keys and was therefore Satoshi – Wright failed to do so, writing, “I do not have the courage. I cannot,” in a now-deleted blog post.

The cryptographic proof he provided instead has been accused of several high profile cryptography experts as being fraudulent.

Past accusations of document forgery and other fraud repeatedly came up during the first day of trial, as the plaintiffs’ attorneys showed the jury examples of doctored emails from Wright that added and deleted sentences from David Kleiman, changed dates and more.

Follow the money

If the jury finds in favor of the plaintiffs and Ira Kleiman is awarded his brother’s share of Satoshi’s bitcoins, the question remains whether the court has any way of retrieving them.

The still-unsolved mystery of Satoshi Nakamoto’s identity, and Wright’s seeming inability to retrieve the coins in his wallet, mean that recovering the coins may not be possible. If Wright is not Satoshi – or, if he is and has somehow lost access to the wallet – it is unclear how Ira Kleiman will get his hands on half of Satoshi’s stash.

Furthermore, there are some in the crypto community who question whether the 1.1 million bitcoins at the heart of this case even exist. In a blog post from 2018, Tokyo-based software developer and self-proclaimed “Bitcoin archaeologist” Kim Nilsson traced wallet addresses supposedly held by Wright, tying many of them back to the 2014 Mt Gox hack.

Author: Cheyenne Ligon

Filed Under: Bitcoin Industry News

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Ty Sagalow head shotTy Sagalow's unique background in legal, underwriting, policy drafting and claims – and his designation as a “qualified insurance expert” by the United States District Court for the Southern District of California – offers attorneys an unparalleled resource in D&O, E&O and Cyber insurance coverage disputes. He was also named "Most Helpful Expert" in a recent $8.7M coverage decision.

Mr. Sagalow served as Chief Underwriting Officer and General Counsel for AIG Executive Liability (formerly National Union Fire Insurance Company of Pittsburgh, PA), the world’s largest carrier of Directors and Officers Liability and Professional Liability Insurance. As General Counsel, Mr. Sagalow personally wrote or led teams that wrote all the D&O policies and many of the professional liability policies that AIG produced between 1988 and 2000 – policies which continue to serve as the foundational wording for the D&O and professional liability policies in the market today. As AIG Executive Liability’s Chief Underwriting Officer, Mr. Sagalow was charged with all underwriting interpretations and decisions for AIG D&O/E&O policies. In 2009, Mr. Sagalow headed up the team that rewrote all D&O policies for Zurich North America.

Ty is a cum laude graduate of Georgetown University Law Center and holds a LLM from New York University School of Law.

Bitcoin Insurance

Combining his talents as a network security insurance expert and an insurance product development expert, Ty Sagalow is the leading expert on the unique risk and insurance needs of the bitcoin industry.

With the successful sale of BitSecure(tm), the first bitcoin theft insurance policy in February of 2015, he is the first to create a sustainable, robust insurance policy to cover the theft of bitcoins and other virtual currency backed by an A-Rated, global “top 10” Property and Casualty insurance company.

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Innovation Insurance Group is an insurance consulting firm and insurance brokerage founded by 30-year insurance executive, Ty R. Sagalow, former Chief Underwriting Officer, General Counsel and Chief Innovation Officer at AIG, and former Chief Innovation Officer at Zurich, NA and Tower Group. IIG focuses on three core practice groups: product development, expert witness services (primarily in the Management and Professional Liability areas), and bitcoin industry brokerage services.

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