Kleiman v Wright: W&K was awarded $143 million, but who owns W&K?

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The Florida court overseeing the cleanup from 2021’s Kleiman v Wright trial has just refused a motion to strike the newly appointed attorney of W&K, the company used illegally by plaintiff Ira Kleiman to sue Bitcoin creator Dr. Craig Wright.

The attorney, Paul Huck of The Huck Law Firm, had been appointed by the owners of W&K, Lynn Wright and Ramona Ang (the latter on behalf of the Tulip Trust which has a stake in W&K) who both say that Ira Kleiman improperly reanimated the defunct company in 2018 without their permission. As a result, they say Ira’s decision to use the company as a vehicle to sue Dr. Wright was made without authorization. W&K also fired Freedman Normand Friedland (formerly Roche Freedman) and Boies Schiller Flexner, the law firms who represented Ira Kleiman under the guise of W&K.

Freedman Normand Friedland and Boies Schiller Flexner asked the court to strike this appointment, claiming that as representative of his late brother’s estate Ira Kleiman was authorized to act on behalf of W&K due to the fact that Dave Kleiman held a 50% interest in the company. Both Lynn Wright and the Tulip Trust in their capacities as members of W&K objected to this, arguing that even if Dave did own 50% of W&K (something they dispute), Florida law requires a majority vote by members before corporate action is taken and in any case, that member interest does not pass to his estate upon death.

“At the time Ira Kleiman initiated this lawsuit, W&K was defunct. Ira Kleiman – with the aid of, and likely at the behest of, Roche Freedman – reanimated it for the sole purpose of joining it as a party here, to maximise his and the law firm’s ability to profit from the Estate of the brother Ira barely knew. He then named himself the company’s managing member and, with the help of Roche Freedman, spent the next five years purporting to control it,” reads the Tulip Trust’s filing.

“[Ira Kleiman’s] years of acting like he alone owns and runs W&K are a lie, and a lie doesn’t become the truth merely by retelling.”

This week, Judge Reinhardt denied Kleiman’s request to strike the new W&K attorney. He noted that he ‘not surprisingly’ could find no precedent for the situation, and that given there is other pending litigation which directly addresses the question of W&K’s ownership (both Lynn Wright and the Tulip Trust are suing Ira Kleiman in separate litigation over his misuse of the company and seek a declaration as to its true ownership) the question is better left to those cases.

This question matters: not only would it mean that Ira seized control of a company that wasn’t his in order to launch a multi-year litigation against one of its owners, W&K was also the only party to the Kleiman v Wright litigation to be awarded anything at all: $143 million, to be exact. The estate of Dave Kleiman, a co-plaintiff also represented by Ira, got nothing.

Where did W&K come into the picture?

The company was defunct in 2018 and according to Ira it had originally been set up jointly between Dave Kleiman and Dr. Wright in order to mine Bitcoin (though Ira initially claimed to the court that Dave was the sole member of the LLC).

However, evidence produced by Dr. Wright show that the company was formed to apply for research grants from the U.S. Department of Homeland Security—which necessitated partnering with a U.S. citizen hence Dave’s involvement.

Regardless of W&K’s original purpose, in gearing up to sue Dr. Wright for the Satoshi fortune Kleiman unilaterally resurrected the company and appointed himself as managing member—something which is trivial for any person to do so long as it can be kept below the radar of the LLC’s true members. He then sued Dr. Wright arguing that half of this Bitcoin fortune—which includes Bitcoin-related intellectual property—belongs to him as representative of the Dave Kleiman estate. He did this in two capacities: one, as the executor of Dave Kleiman’s estate, which he is. Two, via the W&K company, which Ira initially told the court that Dave was the sole member of. After trial, the jury awarded the estate nothing and sent the entirety of the $140 million award to W&K.

It’s clear from Ira’s changing version of events that he had no idea what the true ownership structure of W&K looked like, at least when he initially filed the lawsuit. In the first version of the suit, Ira Kleiman represented to the court that his late brother Dave was the sole member of the W&K entity, and that the company was used to mine early Bitcoin. In later filings he revised this to Dave holding a share of ‘between 50% to 100%’ and then eventually settled on describing the company’s ownership as ‘unclear’ but that in any case the Dave Kleiman estate holds 50% of W&K.

As became apparent after the lawsuit was filed, the situation isn’t that unclear after all.

Lynn Wright, who was married to Dr. Wright during the time of Dr. Wright and Dave Kleiman’s association, nonchalantly confirmed in her pre-trial deposition that the company was set up between her, Dr. Wright and Dave Kleiman. She was even able to confirm that the ‘W’ in W&K refers to her, while the K refers to Dave Kleiman and the ‘Info Defense’ component refers to Dr Craig Wright.

Further evidencing this, Lynn Wright made a filing against the estate of Dave Kleiman in July 2020, seeking a formal declaration as to W&K’s ownership and in particular a ruling that Ira Kleiman was never authorized to sue Dr. Wright.

Around the same time, another of W&K’s proper owners—the Tulip Trust, which is owned by Dr Wright and is the successor of his 1/3 founding interest in the company—made a similar filing, suing Ira Kleiman directly over his misuse of the company and again asking for a declaration as to the ownership of W&K.

Both those cases have been stayed pending the outcome of Ira Kleiman’s appeal. It is in these cases that the court is likely to make a determination on the formal ownership of W&K.

But interestingly, even if Ira’s latest version of W&K’s ownership were to be true, he’d still be out of luck. Ira acknowledges in his latest filings that no matter which way you slice the formation of W&K, Dave Kleiman can’t have had more than a 50% interest in the company. Under Florida law, companies without an operating agreement are governed by the Florida corporate code. That requires a majority vote of the company’s members in order to act—so even the 50% share claimed by Ira wouldn’t have been enough to authorize the suit against Dr. Wright.

That’s assuming Ira can even convince the court that the Dave Kleiman estate still holds (or ever held) that interest. In addition to the refutations of the only living members of W&K, under Florida law where a company member dies their estate can only exercise rights in the company for the purposes of settling the estate. Wielding the company to launch a multi-billion dollar lawsuit against one of its founding members clearly does not qualify.

In any case, the net result of Ira’s years-long litigation is effectively zilch. Neither he nor his brother’s estate will get any money, while Dr. Wright effectively owes $143 million—to himself.

What about Ira’s lawyers?

The W&K saga shines an interesting light on the Ira Kleiman-appointed lawyers, especially given that the Tulip Trust indicated it was their idea for Ira to resurrect and take control of W&K.

Though they characterize Lynn Wright and the Tulip Trust’s filings as “a transparent and desperate attempt to prevent W&K from ever collecting on that nine-figure judgment,” it turns out that Ira’s attorneys may not have been all that interested in collecting the judgment in the first place. In January, Ira Kleiman wrote to the court complaining that the representation he’d received from his lawyers was ‘inadequate’ and said that a year out from the jury’s verdict, Roche Freedman had made no attempt to recover the money on behalf of W&K. He said that “at this point, I honestly don’t believe they want to recover the W&K judgment.”

There are a number of potential reasons for this. The simplest is that after the appearance of W&K’s actual membership, the attorneys recognized that the $140 million doesn’t belong to either of the Kleimans at all.

Then there’s the much-discussed Crypto Leaks scandal, in which leaked videos show Kyle Roche (the attorney in charge of Ira’s representation) bragging about using sham plaintiffs to go after ‘crypto’ competitors on behalf of one of the firms clients, in which Roche Freedman partners had a vested financial interest. Certainly, Ira fits the bill: in a 2019 deposition it was clear that Ira had very little understanding of his own lawsuit and how it was being funded. As it turns out, the lawsuit was being funded by a third party funder known as Parabellum, so Roche Freedman was always getting paid no matter what. That the firm never had any real expectation or motivation to recover millions of dollars for Ira Kleiman seems like a natural conclusion to draw.