Alleged creator of Bitcoin accused of swindling ‘billions’ worth of world’s number one cryptocurrency.
The story reads as if lifted from the pages of a John Le Carré novel – a shadowy cryptocurrency developer is sued; accused of embezzling billions of Bitcoin currency, forging documents, and the mysterious death of the man whose family are now plaintiffs in the lawsuit. And while life may occasionally imitate art, real life investors are now worried what this kind of negative publicity can have on Bitcoin’s meteoric rise in 2017.
The defendant in the lawsuit is Dr. Craig S. Wright, an Australian computer scientist and businessman, currently chief scientist of blockchain technology research and development firm nChain. Over the years, he has also headed a number of other companies associated with cryptocurrency and online security. He is also the man who claimed to be the inventor of Bitcoin back in 2009. He also credits himself as the creator of the pseudonym of the now-famous (or infamous depending on your interpretation of events) Satoshi Nakamoto. He ultimately provided no tangible evidence to support his claims, eventually withdrawing this revelation days later. He even bamboozled renowned Bitcoin core developer, Gavin Andresen, into buying into his act.
Then on Monday news leaked that Ira Kleiman, brother of deceased Bitcoin pioneer Dave Kleiman and former business partner of Wright’s, had filed a federal lawsuit in the Southern District of Florida accusing Wright of acquiring, via nefarious means, some ‘hundreds of thousands’ of Dave Kleiman’s Bitcoins, along with ‘valuable intellectual property rights of various blockchain technologies.’ The lawsuit claims that the Bitcoins ‘stolen’ from Kleiman, alongside any of its associated intellectual property, are now valued somewhere between $5 to $10 billion USD.
Wright is also being blamed for composing fake documents with Kleiman’s forged signature, effectively giving him ownership of a company called W&K Info Defense Research LLC. Details still remain relatively scant as to whether Kleiman or Wright had any crucial aspect in Bitcoin's development, but it is confirmed that the duo did have access to mining tools that helped the company amass its high cryptocurrency value. As per the lawsuit, the plaintiffs allege that, following Dave’s death, Wright ‘forged a series of contracts that purported to transfer Dave’s assets to Craig and/or companies controlled by him.’ The complaint further alleges that Dr. Wright ‘backdated these contracts and forged Dave’s signature on them.’ Now, the cloak & dagger tale gets very tangled, indeed -- the death of Dave Kleinman.
Kleiman was a U.S. Army veteran, a paraplegic, and a computing wizard occasionally consulted by American television networks for his expertise in computer forensics and security. According to a month-long investigation by the online tech site Gizmodo published back in 2015, Kleiman was deeply involved with Bitcoin. The article went on to report that, ‘documents and on-the-record interviews obtained (by Gizmodo and Wired) in separate investigations show that Wright, whose home and office were raided hours after the stories were published, repeatedly claimed in private that he and Kleiman were part of Bitcoin’s creation’. The report also said that Kleiman may have been involved in the real origin of Bitcoin itself.
Prior to his mysterious death in 2013, Dave Kleiman had been suffering from years of declining health and had been infected with Methicillin-resistant Staphylococcus aureus (MRSA), a bacterium that causes infections in different parts of the body. At the time of his passing, Dave was living in abject poverty. According to reports provided by the Palm Beach County Medical Examiner Office, the scene of Kleiman’s death was gruesome. His body was found in a state of decomposition, with wheelchair tracks of blood and fecal matter covering the room. A loaded gun and open bottles of alcohol were also discovered by his side. Oh, and one other small detail -- police also discovered a bullet hole in the mattress where he was found. The official cause of death was listed as natural causes, and no autopsy or forensic investigation into his death was ever made.
The documents provided to Gizmodo include what appears to be ‘an unfinished draft’ of a trust contract showing Wright entrusting Kleiman with 1.1 million Bitcoins in 2011. It’s a sum worth billions today but, according to the contract, the money was to be returned to Wright down the road. Kleiman’s sense of honor may have kept him from accessing money he didn’t believe was truly his, even in the worst of circumstances.
However, after his brother’s death, Ira Kleiman now says Wright ‘concocted a scheme’ to, in essence, seize Dave’s Bitcoins; partially through seemingly fake backdated documents that included poor forgeries of Dave Kleiman’s ink signature.
The lawsuit also alleges that after Kleiman’s death, Wright emailed Louis Kleiman, Dave’s father, and claimed that he and Dave were two of the three key people behind the invention of Bitcoin. The Kleiman family claim this is the first time they had heard of Dave’s supposed involvement in the creation of Bitcoin. Ira contends that Wright ‘swindled us out of vast wealth’.
As the lawsuit filed February 14, 2018 states:
"…(It is) unclear whether Craig, Dave, and/or both invented Bitcoin. For reasons not yet completely clear, they chose to keep their involvement in Bitcoin hidden from most of their family and friends. It is undeniable, however, that Craig and Dave were involved in Bitcoin from its inception and that they both accumulated a vast wealth of Bitcoin from 2009 through 2013. In April 2013, mere months prior to Bitcoin’s entry into the mainstream, Dave died after a long battle with MRSA. At the time of his death, no one in his family was aware of the extent of his involvement in creating Bitcoin. Nor were they aware that he had accumulated, with Craig, an incredible sum of Bitcoins. Recognizing that Dave’s family and friends weren’t aware of this, Craig perpetrated a scheme against Dave’s estate to seize Dave’s Bitcoins and his rights to certain intellectual property associated with the Bitcoin technology."
Where this lawsuit, and its eventual fallout, leads from here is anybody’s guess. The cryptocurrency marketplace has been fraught with PR disasters from the get go. Drug trafficking, money laundering, hacks, scams, and a variety of other unseemly events have created a roller-coaster ride of up & downs for investors for the better part of the last ten years. But with the advent of block chain technology entering the sphere of traditional lending institutions, more ‘establishment money’ will find its way into the marketplace. Regulatory measures first issued in September 2015 by the New York State Department of Financial Services (aka BitLicense) were initially derided by the major cryptocurrency players. But, eventually, most fell in line or got out of the game entirely.
Whether or not Dr. Wright ends up in jail with the likes of other crypto-criminals, a la Charlie Shrem or Ross Ulbricht, remains to be seen. As of market close today, most cryptocurrencies are down. But positive rumblings continue as a new survey found that if Amazon created a cryptocurrency, millions of its customers would be open to using it opening up a whole new playing field to investor traffic targeting Bitcoin, et al. What many Bitcoin enthusiasts want us to remember is that while Bitcoin contains plenty of risks, so does anything. Stock markets have crashed. History tells us that traditional government currencies (see 1920’s German Deutschmark) have been hyperinflated until they are useless. The cast of characters who were the ‘Fathers of Cryptocurrency’ can never be described as boring.
After its massive 400% rise in market cap in 2017, Bitcoin has since experienced a sizeable market correction so far in 2018. It is still trading relatively favourably in comparison to the ‘bad old days’ of 2014 - 2016. Yet amid another looming scandal the crypto-marketplace shows no appearances of panic -- some softening, but mostly stable -- Bitcoin's market cap acurrently hovers around $150 billion USD.
The Venture Capitalists continue to show a bullish disregard for conventional investment strategies; a gold star for cryptocurrency to be sure. That, plus its ethical narrative, has many Bitcoin utopians talking about the radical potential of cryptocurrency to financially enable people in countries without stable governments, ‘2.5 billion adults in the world do not have access to bank accounts,’ says Michael Casey from the Wall Street Journal. ‘Technology like Bitcoin or cryptocurrency has the capacity to bring those people into the financial system.’
And it has brought vast fortunes to some, like Dr. Wright, who may have playing the long game…wrong.