Trial of the century: Kleiman v Wright begins in under 2 weeks

Trial of the century: Kleiman v Wright begins in under 2 weeks

It’s been almost four years since Ira Kleiman filed suit against Dr. Craig Wright over the fortune of digital assets and intellectual property which Kleiman says must surely be held by Bitcoin’s inventor. Now, after countless delays thanks to the COVID-19 pandemic, the biggest trial in the history of digital assets is days away.

It’s not about who invented Bitcoin: Ira already knows the answer. He has poured millions of dollars into prosecuting this suit on the basis that Dr. Wright is indeed Satoshi Nakamoto. Ira Kleiman says that as the inventor of Bitcoin, Dr. Wright has more than a million bitcoins and other forked assets, together with highly valuable intellectual property developed across the time that Bitcoin was invented and released to the world. But Ira is claiming that Dr. Wright didn’t invent Bitcoin alone: he did it with Ira’s brother Dave Kleiman and as a result, half of the Satoshi fortune now belongs to Dave’s estate—Ira.

There are billions of dollars at stake, including a vast trove of digital assets which has long been speculated to be large enough to disrupt the market entirely. In as soon as a month, we’ll know the outcome.

In the meantime, CoinGeek is taking stock of the case so far to bring you up to speed in anticipation of next month’s blockbuster event, which will begin November 1 in Miami.

What is Dr. Craig Wright being sued for?

The lawsuit concerns the ownership of hundreds of thousands of bitcoin and intellectual property rights associated with blockchain technologies. At the time of the claim, the value of the assets at issue in the case “far exceeded” $11.4 billion, and at the maximum value was over $27 billion; both of these valuations came before BTC and various other digital assets hit their all-time highs and neither include the prospect of punitive or treble damages.

According to Ira Kleiman, Dr. Wright did not invent Bitcoin alone but with a partner: Ira’s late and estranged brother, Dave Kleiman. That Dave and Dr. Wright had a relationship isn’t in dispute in the case: according to Dr. Wright (and evidenced by correspondence between the two), he and Dave were very close, having been brought together by their shared interest in cryptography decades ago.

According to the suit, the two mined and accumulated a vast wealth of coins and blockchain related intellectual property between 2009 and 2013. Following the death of Dave in 2013, Dr. Wright then allegedly took sole ownership of all of the bitcoin and IP, including “those that were held in trust for Dave,” by allegedly forging and backdating a series of contracts to transfer the assets from the partnership (more on this shortly) to himself.

Dr. Wright says there was no partnership: that despite Dave being a close friend and occasional collaborator, the story spun in Ira’s lawsuit is an “elaborate fiction.”

It is on this point that the entire lawsuit rests: the question to be determined at trial is whether or not such a partnership existed to mine bitcoin and develop intellectual property.

The exact details of this partnership alleged by the lawsuit are murky, even among the plaintiff’s own filings. The lawsuit filed by Ira says that this was done via an oral partnership and a more formal arrangement through a company called W&K Info Defence LLC (W&K), but it also admits that the ownership structure of W&K is “unclear.”

Ira is relying on emails allegedly exchanged between both he and his brother Dave on one hand and Dr. Wright on the other in addition to pages of information from various sources which corroborate Dr. Wright’s claim to the Satoshi Nakamoto name. According to Ira’s testimony, the most he ever heard from his brother directly about Bitcoin was a dinner table conversation from 2009, recounted by Ira, in which Dave apparently drew for him the Bitcoin logo. Testimony from Dave’s family, friends and business associates all agree that Dave never mentioned anything about Bitcoin or Dr. Wright to them. Extensive discovery in the case has turned up no other evidence which implies that Dave Kleiman knew about Bitcoin at the time he was supposed to have been inventing it with Dr. Wright.

What’s the real question here?

In many ways, the case is a complex one to solve. One of two men who could have confirmed or denied Ira’s narrative died after a long battle with his health eight years ago. The other, perhaps his best friend, is the defendant in this suit. As the executor of Dave Kleiman’s estate, it’s Ira who is bringing the suit, but having an apparently non-existent relationship with his brother while alive, he has struggled to produce evidence concerning the alleged partnership beyond supposition.

This has been a constant theme throughout the lawsuit, and has at times has been addressed in court directly. The lawsuit is not actually being brought by Ira personally: he is acting on behalf of the estate of Dave Kleiman and is a co-plaintiff with W&K Info Defense Research LLC. W&K is a vital part of this story because it is the one of the view pieces of evidence germane to Ira’s story which is also contemporaneous to it. After all, this is supposed to be the company through which Bitcoin’s inventors did their business. Ira’s lawsuit is open about the fact that he doesn’t know much of anything about W&K, and there wasn’t any evidence about the company’s structure or founding introduced into evidence—until one of the company’s shareholders turned up with proof of the ownership interest in W&K and a request that the court declare that Ira has no authority to use her company to sue one of its directors (Dr. Wright).

Out of procedural necessity, that court declined to rule on that request pending the outcome of the earlier suit filed by Kleiman, but it is illustrative of the challenge in this case—which has been raised repeatedly—that Ira Kleiman is suing over events he has no first-hand knowledge of.

There’s also frustratingly little evidence from the time the partnership allegedly was in operation. This makes sense if your position is that no such partnership existed, but for Ira it’s more problematic. The lack of evidence is made worse by the fact that Ira, by his own admission, did not preserve any of his brother’s hard drives after his passing: on the contrary, Ira wiped and continued to use the hard drives after taking possession of them, meaning that the most likely trove of evidence (and, if Ira is right, hundreds of millions of dollars’ worth of bitcoin) has been rendered useless in the litigation (something which saw Ira on the receiving end of his own lawsuit).

Similarly, despite Ira’s lawsuit painting Dave Kleiman as the co-inventor of Bitcoin, there is significant disagreement between the parties about elements of Dave Kleiman’s character.

Dave Kleiman was a successful computer forensics expert and author, as well as an Army veteran. He was rendered a paraplegic by a motor accident in the 90s. Ira’s lawsuit assumes that Dave Kleiman was able to contribute to this supposed partnership which produced millions of dollars’ worth of blockchain-related intellectual property. The plaintiff’s side has portrayed Dave as a driven computer engineer and have attempted to exclude the introduction of evidence to the contrary.

The defense, however, has pointed out that Dave neither possessed the skills necessary to play a role in any Bitcoin project nor was he in good enough health to do so. Indeed, Ira Kleiman’s lawsuit itself accepts that Dave was hospitalized in 2010 and spent much of the time between then and his death in 2013 in ill health. Expert reports also indicate that Dave’s quality of life had been in severe decline: he checked out of hospital against the advice of his doctors, and apparently had no interest in outpatient care. When his body was found in 2013, there were blood and feces tracked through the carpet of the apartment by Dave’s wheelchair, open bottles of alcohol through the apartment, a loaded gun found by the body, and a bullet hole in the bed.

More interestingly, and probably more relevant to Ira’s case, is that Dave also seemed to have been in significant financial strife, with documents showing that he had defaulted on his mortgage and had been denied a payday loan on the day of his death. Discovery in this case produced no evidence that Dave did anything to try and gain access to the enormous wealth of bitcoins that he should have if Ira’s version of events are to be believed, despite clearly needing money. Nor is there any evidence that Dave took steps to make his fortune available to the friends and family he left behind.

The exact nature and extent of Dr. Wright’s relationship with Dave Kleiman isn’t clear, but the correspondence between the two which exists on the court docket (as well as emails from Dr. Wright to Ira describing that relationship) portray a close personal friendship. Certainly, Dr. Wright was more familiar with Dave than Ira was during the time period that the lawsuit is concerned with: filings made by Ira himself admit that he has a “lack of first-hand, contemporaneous knowledge of almost all of the relevant facts that occurred during Dave’s lifetime.” The aforementioned expert report regarding Dave’s health also pointed out that during his stay at hospital shortly before his death, there was no evidence of in-person visits from friends or family and that “this important element of support was lacking.”

Another difficulty, also arising from the fact that the suit is being brought long after the events it concerns and by somebody who was not involved until years later, is that the authenticity of items in the mountains of evidence submitted in the case have been called into question by both sides.

Ira had at one point filed a sanctions motion against Dr. Wright, accusing him of forging evidence and perjuring himself, but this attempt was denied by the Judge. For Wright’s part, he has not only maintained that there are documents in the case which are inauthentic or have otherwise been tampered with; he originally tried to have an expert authenticator introduced into the case as a witness, but Ira successfully had this witness excluded from trial.

All things considered, the only person involved in this case who can be said to be anywhere near either Dave Kleiman, W&K or the founding of Bitcoin is Dr. Wright. This adds another level of confusion to the lawsuit: it’s well-established (including by expert reports admitted in this lawsuit) that Dr. Wright has autism spectrum disorder (ASD) which affects the way he communicates information and otherwise may inform his conduct. Lawyers for Dr. Wright were keen to have this taken into consideration at trial; despite an attempt by Ira to have such testimony ruled inadmissible, the court agreed that it should be put to the jury. 

Game on

Despite being fraught with uncertainty, Ira will get the chance to present his case against Dr. Wright starting November 1. He will have to convince the jury that his late brother entered into a partnership with Dr. Wright to create and mine Bitcoin, that a share of that output belonged to Dave despite Dave dying in financial ruin with no attempt to access his fortune of millions, and that Dr. Wright took the chance of his best friend’s death to steal hundreds of millions worthy of his property.

New to Bitcoin? Check out CoinGeek’s Bitcoin for Beginners section, the ultimate resource guide to learn more about Bitcoin—as originally envisioned by Satoshi Nakamoto—and blockchain.

[id^="_form"]
[id^="_form"]
[id$="_submit"]
[id$="_submit"]
[^;]
[^;]
[?&]
[?&]
[^&#]
[^&#]
[(d+)]
[(d+)]
[elem.name]
[elem.name]
[+_a-z0-9-'&=]
[+_a-z0-9-'&=]
[+_a-z0-9-']
[+_a-z0-9-']
[a-z0-9-]
[a-z0-9-]
[a-z]
[a-z]
[el.name]
[el.name]
[id^="_form"]
[id^="_form"]
[id$="_submit"]
[id$="_submit"]
[^;]
[^;]
[?&]
[?&]
[^&#]
[^&#]
[(d+)]
[(d+)]
[elem.name]
[elem.name]
[+_a-z0-9-'&=]
[+_a-z0-9-'&=]
[+_a-z0-9-']
[+_a-z0-9-']
[a-z0-9-]
[a-z0-9-]
[a-z]
[a-z]
[el.name]
[el.name]