Craig Wright not in contempt over incomplete financial forms, US Judge Bruce Reinhart rules

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Magistrate Judge Bruce Reinhart has ruled that Dr. Craig Wright is now in compliance with a court order demanding that he fill in a judgment debtor form specifying his assets, declining to issue any of the sanctions requested by plaintiff Ira Kleiman.

Ira Kleiman, who unsuccessfully sued Dr. Wright in 2021, complained that Dr. Wright had failed to completely fill out a 1.977 form as ordered by the Florida court. A 1.977 form specifies a person’s assets in order to aid in the recovery of judgments owed by them. Even though Dr. Wright’s judgment is owed to W&K, which he part-owns, he was still required to complete the form. He did this, omitted some details, such as the address of his employer or information about his wife and children.

Unsatisfied with these omissions, Kleiman asked the court to find Dr. Wright in contempt of court for breaching the court order. Wright filed the completed form at the end of July, but Kleiman still insisted that the court sanction Dr. Wright.

This week, Judge Reinhart made a ruling: he said that Dr. Wright was now in compliance with the court order and had filed a 1.977 form to his satisfaction.

“I agree with Dr Wright that W&K has not met its burden of proving that the July 24 Form fails to comply with the Compulsion Order. In particular, W&K has not shown by clear and convincing evidence that the information provided by Dr Wright is currently inaccurate.”

He further ruled that Dr. Wright is not obliged to disclose bitcoin held by him on the blockchain.

“Because W&K has not shown non-compliance with the compulsion order, there is no basis for coercive civil content sanctions.”

However, he found that Dr. Wright was in breach of the court order for the period between the 1.977 form’s original due date (April 3) and the filing of the completed form on July 24. For this, Judge Reinhart referred the case to the higher trial Judge, Judge Beth Bloom so that she can determine whether Dr. Wright should be sanctioned for this period of non-compliance.

In what can only be taken as an indication of Judge Reinhart’s view of Dr. Wright’s omission, he said:

“I recommend that Judge Bloom exercise her discretion not to conduct criminal contempt proceedings related to the July 24 Form. Here, remedial sanctions are sufficient to cure any harm to W&K and to punish Dr Wright.”

The distinction—between criminal contempt and civil contempt—is important. Criminal contempt generally is used to punish for wrongdoing. Civil contempt is used to remedy the harm caused by the defendant’s behaviour. In this case, Reinhart’s focus is on the small period after Dr. Wright filed the incomplete form and before he filed the completed one—which given he now agrees Dr. Wright has complied with the court’s order, doesn’t seem likely to attract significant sanctions, if any at all.

To be clear, Dr. Wright has not been sanctioned by the court. Judge Reinhart has merely found that there was a period in which he was in breach of the court order to fill in 1.977 form, and has referred those facts up to the trial judge to determine if the conduct demands sanctions.

Between Reinhart’s own apparent ambivalence to Dr. Wright’s breach and the fact that Judge Bloom has already overturned sanctions issued by Reinhart in the past, it’s possible Judge Bloom exercises her discretion to decline to take the matter any further.

Erroneous reporting

Interestingly enough, media coverage of this episode has been especially ill-informed.

CoinDesk reported that Reinhart had granted civil sanctions against Dr. Wright over the incomplete form. This is incorrect: no sanctions have been issued against Dr. Wright. The only thing that Judge Reinhart was ruling on is whether the facts could amount to contempt and if so, refer the case to a higher judge to determine if sanctions should be issued. To the extent that Reinhart ruled on sanctions at all, he explicitly said that Dr. Wright is currently in compliance with the 1.977 order and that he would not refer those facts to Judge Bloom. The relatively short period of non-compliance—between April 3 and July 24—is the only facts that were referred to Bloom.

As Reinhart makes clear in his order, Judge Bloom may even exercise her discretion to not take the matter any further, saying that he is referring the facts to Bloom “for such further contempt proceedings as she deems appropriate.”

The same mistakes are repeated by Protos, whose reporting appears to be based solely on CoinDesk’s. Not only does Protos incorrectly say that Dr. Wright will now face ‘a number of civil sanctions’, it incorrectly says that the original Kleiman trial resulted in Dr. Wright being ordered to pay $143 million in damages to the Estate of Dave Kleiman. This is obnoxiously incorrect: the jury ruled that Dr. Wright did owe $143 million, but not to the Dave Kleiman estate—the judgment was awarded to W&K Info Defence only. And it turns out that W&K is owned by Dr. Wright himself.

So, despite the reporting: Dr. Wright has had no sanctions issued against him, and in fact has been determined to be in compliance with the court’s order to fill out form 1.977.