‘Suing developers’, Mt Gox connection, and other misinformation follow Craig Wright’s legal notices

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Much misinformation has floated around the internet in the wake of Dr. Craig S. Wright’s letters before action to Bitcoin (and its related forks) protocol developers. One is the unproven claim that the BTC in one of Dr. Wright’s wallets was connected to thefts from defunct exchange Mt. Gox before it shut down in 2014. That claim has already resulted in another threat of legal action against Dr. Wright on behalf of BTC entrepreneur Danny Brewster, who claims to have lost BTC in the Mt. Gox hack.

What Dr. Wright’s letters are… and aren’t

The letters sent on Dr. Wright’s behalf warned developers that he is moving to establish legal ownership and enforce recovery of BTC stolen from his computer in 2020. Should a court decide in Wright’s favor, developers would be legally compelled to take action to assist in the recovery of those coins.

The notion that blockchain developers have the ability to recover (or assist in the recovery of) stolen coins has prompted a large backlash online—due to the misconception that it is impossible for them to do so.

Several news outlets, including long-time industry journal CoinDesk, claimed developers would need to “hand over the keys” to lost BTC, and that it would “require the multi-million (if not billion) dollar endeavor of reorganizing Bitcoin’s blockchain history with a 51% attack” to recover the coins. Neither of these claims is true. Bitcoin is a ledger that uses triple entry accounting.

Additionally, Dr. Wright is not “suing” developers, as many headlines and tweets across the BTC sphere have claimed, and repeated. Developers themselves are not liable to pay any damages to Dr. Wright and would only face problems if they refuse to obey a court order.

He has claimed in the past that, in the event of a large theft, developers could broadcast a message to transaction processors (or miners) notifying them to freeze UTXOs related to the stolen coins. This would render them unmoveable until their legal owners were identified, upon which the UTXOs could be reassigned to the owners’ addresses.

Rather than representing a threat to Bitcoin (and its forks), a legal recovery process would actually make these networks more secure and attractive to large, enterprise, and institutional investors—the type Bitcoiners have been courting for years in the hope it would increase the value of both their coins, and the networks themselves.

Resisting such a move would appear counter to BTC’s interests in gaining mainstream appeal, and brings into question the motives of those who wouldn’t want such actions enforced. Would they prefer to see stolen BTC stay stolen, without redress?

Brewster’s letter

Today’s letter from Danny Brewster warning Dr. Wright of legal action came from Anderson Kill P.C., a law firm with a history of representing clients in cases against Wright. The letter claims Brewster (and others) have an “equitable interest” in the BTC contained in an address commonly known as the “1Feex address”, from its first five characters.

Attorneys Preston Byrne and Stephen Palley claimed in the letter that independent security auditor WizSec found that “Mt. Gox’s hot wallet was completely drained to” the 1Feex address in March 2011, and warned Wright to retain all evidence regarding that address in case further action was warranted.

pic.twitter.com/JQZZeKdspf

— Danny Brewster (@BtcDanny) February 25, 2021

WizSec is a Tokyo-based IT security firm that has performed forensic analysis on publicly-available data pertaining to the Mt. Gox affair. Brewster was the founder of an early attempt at a “Bitcoin bank” called Neo & Bee, based in Cyprus, that collapsed amid controversy in 2014. 

Dr. Wright has made a previous statement that the BTC in the 1Feex address do belong to a company connected with him—but were purchased legitimately from a Russian exchange as an OTC exchange for Liberty reserve dollars on March 1, 2011. He said there have been no claims by Mt. Gox liquidators or regulatory investigators that the 1Feex address was involved in the Mt. Gox hack, and no authorities have requested any information on the matter from Dr. Wright over the years.

Nevertheless, Brewster’s tweet about his letters prompted pile-on of congratulatory replies from BTC and blockchain supporters. They suggest few in the Bitcoin community have any understanding of what’s really going on here… or what is even realistically possible.

Brewster’s claim was echoed by none other than disgraced CEO of Mt. Gox himself, Mark Karpeles, who said it meant Dr. Wright’s claim was “fraudulent”:

Someone is finally calling Craig Wright's bluff regarding the 1Feex bitcoins. I have no doubt those coins were stolen from MtGox in 2011, which means CSW's alleged ownership is invalid and some would call his claim fraudulent. Read the actual letter: https://t.co/WiG2h9hgLx

— Mark Karpelès (@MagicalTux) February 25, 2021

Since Dr. Wright as CEO admits to Tulip Trading Limited owning (in some way) the 1Feex address and purchasing the BTC in it from a Russian exchange, Karpeles’ suggestion indicates the funds were stolen before moving to that address—an odd claim.

Karpeles was detained in Japan without trial for a year after the Mt. Gox fiasco, and eventually charged with and convicted of data manipulation surrounding the hack. Dr. Wright has alleged in the past that Karpeles himself was responsible for the missing 650,000 BTC, or that his actions allowed the theft to take place.

A sad reflection on BTC and the blockchain industry

The various responses to Dr. Wright’s latest action show how quickly misinformation can spread online… and how readily it is accepted as fact by an uncritical audience that either doesn’t understand Bitcoin, or is interested only in attacking Wright and the movement he represents.

Their repetition of factually incorrect, misguided, and irrelevant material represent instead more a misinformed rabble than serious commentators. Their immediate dismissals of any statement made by Dr. Wright, or cheerleading of any claim or action against him (without even the slightest attempt to clarify facts) damage the blockchain industry’s reputation.

Even those who are better-informed of the issues (both legal and technical) have participated in this mob behavior, though choose their exact words more carefully. While they are also capable of being misguided, there are also those among them who are clearly worried and panicking, with their own political and legal motives for attacking Dr. Wright’s reputation.

Whether you believe, or agree with, everything Dr. Wright has said over the years is unimportant. He clearly has a deeper understanding of Bitcoin and its surrounding issues than most. The only way to have an educated opinion is to read all the material available, including that written and presented by Dr. Wright, before making an objective judgment. Unfortunately, most out there have clearly not done this.