Executive Summary Details surrounding the identity of Satoshi Nakamoto and the origins of Bitcoin have emerged from a Florida court case, Kleiman v Wright. The plaintiff, Ira Kleiman, is suing the defendant, Craig Steven Wright (CSW) for the rights to Bitcoin tokens and Bitcoin related intellectual property. Ira alleges that his deceased brother Dave Kleiman was CSW’s partner in the development of Bitcoin and Bitcoin related IP. Implicit in this allegation is that CSW created Bitcoin and has access to Satoshi’s Bitcoins currently valued ~$10B. CSW has made it clear that his intention is to sell his BTC in favor of his preferred version of Bitcoin, BSV, which is more aligned with the original design. If this occurs it will have massive market ramifications on the order of hundreds of billions of dollars. Court case details support CSW’s claim to be Satoshi. This contrasts the opinion of many industry leaders who don’t believe that CSW is Satoshi or that he can follow through on his threat to sell BTC for BSV. The conflict around the Satoshi identity ties into a larger conflict about the purpose of Bitcoin and the role of law in Bitcoin. Background Information What is Bitcoin? What is BTC? Bitcoin is a revolutionary peer-to-peer network and electronic cash system. Over its 10 year history, Bitcoin tokens have appreciated from being effectively worthless to having a market cap of over $315 billion. BTC is the predominant ticker symbol of the Bitcoin token. Others, like BSV and BCH exist through a process called forking. These forks have a shared common history with each other until they split into distinct coins. Because of this, at times use of “Bitcoin” can refer to all three ticker symbols. Some believe (us included) that the Bitcoin network will fundamentally reshape how the internet works and help solve some of the most fundamental problems of its current design. Who is Satoshi Nakamoto? Satoshi Nakamoto is the pseudonymous identity of the creator of Bitcoin. The identity of Satoshi is hotly debated since he invented a revolutionary technology, helped steward its early years, and then disappeared. It is likely that in 2017, at the peak value of the Bitcoin token, that Satoshi was one of the richest people on Earth. However, he never made any Bitcoin transactions with any of his approximately one million Bitcoin tokens despite them being valued at over $20 billion, further adding mystery to his identity. No identity for Satoshi has been formally confirmed and widely accepted as valid to date. Who is Craig Wright? Craig Steven Wright (CSW) is an Australian computer security expert with decades of experience in information technology, critical infrastructure and cyber security, and digital 1 forensics. He also has an accomplished academic background with degrees in statistics, information technology, commercial law, networking and systems administration, and even theology. His credentials also include dozens of professional certifications in IT and computer security from organizations like GIAC (Global Information Assurance Certification). Most Google searches on CSW will yield information about his association with Bitcoin and his claim to be Bitcoin’s inventor, Satoshi Nakamoto. What is Kleiman v Wright? Kleiman v Wright i s an ongoing court case in Florida which involves the identity of Satoshi Nakamoto. The plaintiff, Ira Kleiman, is suing the defendant, Craig Steven Wright (CSW) for the rights to Bitcoin tokens and Bitcoin related intellectual property. Ira alleges that his deceased brother Dave Kleiman was CSW’s partner in the development of Bitcoin and Bitcoin related IP. The Bitcoin and IP in question are the famed “Satoshi Million” bitcoin. CSW claims that he invented Bitcoin alone without any formal help from Dave Kleiman who he insists was a friend and not a partner in Bitcoin’s development. In short, this case is over the identity of Satoshi Nakamoto: CSW and Dave Kleiman, or just CSW? Likely Outcomes of the Trial It is uncertain who will win the court case. That said, we believe that either outcome will show that CSW played a role in the creation of Bitcoin as Satoshi Nakamoto and that CSW will be able to use his substantial Bitcoin related assets to promote BSV at the expense of BTC and BCH. We think it is likely that CSW will win the court case based on the difficulty to achieve the burden of proof required for Ira Kleiman and the lack of clarity from existing exhibit documents and testimony we have reviewed. However, we think that the resolution of this court case, regardless of which party wins, will be more significant for the broader market than the exact details of the legal outcome. ------------------ What is the significance of Kleiman v Wright? The conflicting stories and unanswered questions of a legal battle have the ability to make almost any case compelling. Typically the satisfaction of getting a concrete answer to relevant questions is reserved for after the decision and dependent on the determination of the judge and jury. In the ongoing Kleiman v Wright court case in Florida, we have all this usual excitement but also the satisfaction of resolving a major mystery prior to the end of the case: unmasking the identity of (at least part of) Satoshi Nakamoto, Bitcoin’s pseudonymous inventor. 2 By examining the initial legal complaint, submitted documentary exhibits, and witness deposition testimony made public as part of discovery in the Kleiman v Wright court case in Florida, it has become clear that the infamous Australian computer scientist and IT security expert CSW will likely be vindicated in his claim to being Satoshi Nakamoto. The pending ruling expected this October will determine whether CSW’s associate and friend Dave Kleiman was a partner in Bitcoin’s invention and development and is thus due assets and IP. However, given all the available information, CSW’s role in Bitcoin’s invention is now much harder to dispute as it is corroborated by virtually all evidence in the case, including evidence that benefits the plaintiffs. If CSW is likely at least a part of Satoshi Nakamoto, why does the consensus sentiment and the prices of relevant publicly traded assets reflect the opposite: the popular claims that CSW is a fraud and that his vision of Bitcoin is absurd and worthless? To understand this confusion the information released in this court case needs to be contextualized within a higher level picture of the invention and development of Bitcoin. It is our contention that for years CSW has had the ability to provide ample public evidence of his role in Bitcoin’s invention but has opted not to for strategic reasons, namely in order to maximize the value of his assets and further his ability to realize the vision of Bitcoin he has had since its inception. It is also possible that being widely recognized as Satoshi could bring CSW legal trouble because of Bitcoin’s early association with criminal activity and the tax implications of mining billions of dollars of early Bitcoin. Synopsis of Kleiman v Wright The multi-year Florida legal battle between Ira Kleiman and Craig Steven Wright (CSW) will soon be coming to an end. Although most people don’t currently know these names, it is probable that the outcome of this trial will have a significant impact on the long term value of hundreds of billions of dollars of capital and could potentially lead to the addition of a new name in our history books alongside the likes of Thomas Edison and Nikola Tesla. In this court case, Ira Kleiman is suing CSW for the rights to half of the intellectual property and the “Satoshi Million” Bitcoin owned by Satoshi Nakamoto, Bitcoin’s famously mysterious inventor. The reason for Ira’s lawsuit is that he alleges that his deceased brother Dave Kleiman was a partner with CSW in the creation of Bitcoin. CSW claims there was no such partnership and he invented it alone (refer to the recently submitted “Joint Neutral Statement of Case” for this synopsis.) The uncertain outcome in this case is not whether CSW invented Bitcoin, on this both parties agree, but instead whether Ira Kleiman has the rights to Bitcoin and IP through his deceased brothers estate. Although this legal outcome remains to be determined, the information already presented during the years-long discovery process can give us a look inside one of the most significant inventions of the past decade and something that has the potential to change the future as much or more than the invention of the internet. What have we learned from Trial Discovery? The existence of disputed documents and contradictory witness testimony is not unusual for a contentious legal dispute. However, for those more interested in the identity of the inventor of Bitcoin than details over who owns what rights to assets, its noteworthy that a plethora of 3 exhibits submitted by both the plaintiff (Ira Kleiman) and defendant (CSW), regardless of which side they support in this litigation, place CSW at the founding of Bitcoin. Again, according to both parties, the dispute in this case is over whether CSW did so alone or in a partnership with Ira’s deceased brother, Dave Kleiman. Some of these exhibits include: ● Joint neutral statement of case between the plaintiff and defendant both agreeing that CSW developed and released the original Bitcoin protocol ● ATO (Australian Tax Office) documents and testimony about CSW’s 2009 Bitcoin R&D spend ● Deposition and documentary evidence which paint a picture of a complex structure of legal entities formed between 2009 and 2015 by CSW and related parties ● 2011 IP Licensing Agreement paid for with ~3% of total BTC supply (over 200,000 BTC) (page 20) ● 2012 Deed of Loan documents collateralized by 650,000 BTC from CSW owned entities (page 11) ● 2013 contracts for equity in Bitcoin related companies in exchange for 323,000 BTC (page 1) ● Testimony from various witnesses (testifying on behalf of plaintiff and defendant) who place CSW talking about and sending documents pertaining to Bitcoin before and shortly after its release ● The 2017 Tulip Trust Document which owns the rights to all of CSW’s assets which he will become eligible to control after June 2020 (page 27) These exhibits are noteworthy in both their dates and Bitcoin quantities. For example, in 2011 very few people had access to 200,000 BTC other than Satoshi Nakamoto, placing CSW among a small subset (possibly single digit) of potential Satoshi candidates. Today the value of 650,000 Bitcoin is over $6.2 Billion USD. Many of the transactions in these contracts can be independently verified via Bitcoin chain analysis. Tulip Trust Document Revealed One of the primary documents to emerge from this case is the Tulip Trust (page 27), a 2011 Seychelles trust that owns the rights to over one million bitcoin and valuable Bitcoin related intellectual property. The document has allegedly been updated four times, with its most recent version dated July 6, 2017 (page 27). Portions of this trust document remain redacted but the readable portions give us the following key information: ● The trust is set up to promote the work of Dr. Craig Wright (named alongside his alias Satoshi Nakamoto), to progress the legal nature of Bitcoin, and to build a scaled financial system on top of bitcoin that can achieve over 1 trillion transactions per second ● The trust grants its trustees access to Wright International Investments and Tulip Trading Ltd assets 4 ○ Wright International Investments: the “Satoshi Million” Bitcoin mined before 2010 can only be spent after a full meeting of members between the dates of December 2019 and the end of 2020 ○ Tulip Trading Ltd: Any recoverable assets owned by the CSW related entities including the Bitcoin purchased in 2011 which originally capitalized the companies ● The trust has an activation date in January 2020 ● The trust was set up by CSW but access to the document was explicitly withheld from him during the period of July 10 2017 until December 15 2019. CSW will be able to become a trustee by a vote of members ONLY AFTER June 2020. Possible Outcomes of Trial We think the evidence provided in this case by both parties paints a clear picture of CSW being key to the invention of Bitcoin, as a part or the whole of Satoshi Nakamoto. Despite the primary source information being accessible today, the dominant public narrative that CSW is a “scammer” and a “fraud” has drowned out meaningful comprehension of the submitted exhibit and testimonies. While lengthy deposition transcripts or submitted contracts and emails currently contain this information, we think the same information packaged as a resolution to this case (occuring in October 2020), and cosigned by a judge and jury will be a more digestible and persuasive delivery mechanism. If CSW’s role as Satoshi Nakamoto is confirmed in a legal context, we think the information will have a dramatic impact on the Bitcoin markets. Interestingly enough, this confirmation of CSW’s role in/as Satoshi Nakamoto can come with either a win or loss in this litigation. Similarly, although the exact mechanism for what happens after a decision is made is dependent on who wins, the outcomes for Bitcoin market participants might be similar. CSW Wins If CSW is victorious in October 2020, we think he will capitalize on his public and legal vindication as Satoshi Nakamoto as well as his ability to access all owned assets as a trustee of Tulip Trust to make good on his advanced warnings of dramatically moving the cryptocurrency markets. On October 29, 2018, months after the litigation against CSW was initiated, he shared the following “long term advance notice”: 5 His intention to time a dump of the trust’s BTC holdings with a reward halving may have been rendered legally impossible by the continuation of the litigation past the recent May 2020 halving date. Because trust assets are in dispute in this case it is possible that any movement of coins during the proceedings is legally untenable. Perhaps anticipating his inability to follow through on his initial notice, in July 2019 he updated it and gave a “final advance notification”: 6 The second notification is more vague but signals CSW’s intention to maximize the value held in the trust and is aligned with the trust purpose described in the Tulip Trust document. The indication that CSW “In 2020...will only have BSV” indicates that he plans on selling all of his other bitcoin forks (primarily BTC and BCH) prior to the end of the year. In a subsequent public message CSW elaborated on this liquidation process. 7 If his desire is to do this prior to the end of 2020 and the trial is currently scheduled for October 2019, it would give him less than three months to sell or reassign rights to his BTC/BCH holdings after he wins and gains access to the assets in the trust. Due to the size of the trust’s holdings these transfers would have a dramatic impact on the price of BTC, BCH, and BSV. If these sales/transfers come in addition to CSW’s public legal vindication as Satoshi Nakamoto we imagine this will be the biggest and quickest market movement in the 10 year history of Bitcoin and one of the largest public market financial opportunities in history. It is also possible that there is no such freeze on CSW access to the assets held in the Tulip Trust. If this is the case then the importance of the trial outcome is further diminished. If access to these assets is a function of the terms of the trust and indifferent to the legal outcome then CSW will presumably have access to the Satoshi coins “after June 2020”. CSW Loses If CSW loses the court case the assets under his control will be diminished but the market outcome should be similar. With the plaintiffs arguing that CSW created Bitcoin as part of a Satoshi partnership, a loss for CSW would likely mean that Ira Kleiman wins access to a portion of the Tulip Trust’s assets. The transfer or reassignment of rights from CSW to Ira would likely have a similar impact on public perception and the Bitcoin markets as if CSW were to transfer/reassign rights by his own accord as part of a private sale. Either way, CSW moves/sells early Satoshi Bitcoin. Once litigation is over and CSW is able to become a trustee 8 of the Tulip Trust and freely use the trust’s assets, his desire to exit BTC and BCH in favor of BSV with his own remaining assets would no longer be restricted. If he wins he has more assets to transfer, if he loses he has less but the sum would likely be in the range of 10 to 11 figures USD regardless. A CSW loss also raises the question of what Ira Kleiman would do with his portion of the Satoshi Bitcoin. With imitate knowledge that CSW invented Bitcoin it is possible/likely that Ira would make a bet on the currently undervalued version of Bitcoin, BSV. With the ability to effectively 100x his “Bitcoin” position by transferring his BTC for BSV, Ira would be able to bet on the version of Bitcoin that CSW supports which has been discredited because of a widespread understanding that CSW is lying about his role as Satoshi Nakamoto and thus that he doesn’t understand Bitcoin. It is also possible/likely that Ira will want to protect or use his newfound wealth by selling the, now extra-fragile, BTC for cash. Regardless of the outcome of this trial, a vindication that CSW is a part or whole of Satoshi Nakamoto is dangerous for BTC and its supporting narrative which has invested a lot of time and energy into discrediting CSW and his ideas about Bitcoin. We think that any resolution of this ligation that accomplishes the following will result in extreme and sudden downward price movement for BTC and BCH and long term massive upward movement for BSV: ● CSW is confirmed as key to the invention of Bitcoin (as Satoshi, either in part or in whole) ● Assets held under Tulip Trust are free to be moved and used by CSW ● Assets held under Tulist Trust are required to be transferred/reassigned to Ira Kleiman ● CSW or Ira Kleiman receive a lump sum transfer of liquid Bitcoin (BTC/BCH/BSV) ● CSW provides cryptographic evidence of his control over Satoshi Bitcoin (after June 2020, possibly in court in October) Broader Context on the Case: Our Theory of the History of Bitcoin On a high level, the history of Bitcoin is a conflict between ideologies: anti-government vs pro-law. Many of Bitcoin’s early proponents represented the former and developed Bitcoin’s initial use cases which attempted to use Bitcoin to evade law enforcement and proliferate online black markets. CSW’s professional and academic background which involves decades of information technology, critical infrastructure and cyber security, digital forensics, commercial law, and even christian ministry aligns him with the latter. CSW claims that he developed Bitcoin as a tool for improving the internet by enabling native micropayments and reducing major security holes of the existing network. An internet built on Bitcoin as imagined by CSW would not help the extralegal use cases favored by many early Bitcoiners. To the contrary, the original design of Bitcoin would make that type of criminal enterprise much more difficult. But, the disproportionate interest in using Bitcoin as a means to commit crime from Bitcoin’s initial users and use cases threw the vision of Bitcoin described by CSW into jeopardy. Once Bitcoin was 9 known as a criminal network it would be less likely that legitimate enterprise would leverage it to the benefit of the average internet user. Disillusioned by the direction of the project, CSW claims that he stopped communicating with the “Bitcoin community” as Satoshi because he no longer wanted to be associated. In April 2011, Satoshi sent one of his final communications indicating that he “moved onto other things.” 2011 is the same year that CSW and his now wife Ramona Watts initiated the first Tulip Trust. The Trust Purpose section of the Tulip Trust (page 30) describes its objectives as to “promote the work of Craig Wright” and in particular to “promote the legal nature of Bitcoin”. It goes on to describe Bitcoin as a “peer-to-peer ledger, credit and/or money system that makes the use of the system for large scale crime difficult at best”. The focus on law aligns well with the direction of CSW’s current project, Bitcoin Satoshi Vision or BSV. CSW and his company nChain have dedicated their time and resources to furthering a legally compliant and enterprise friendly vision for Bitcon. A bedrock of this vision is that bitcoin must technically scale in order to accommodate these enterprise level use cases and become a foundational protocol to the internet. Outside of discussions about Satoshi Nakamoto, this discussion about scale is what defines BSV and a key part of what brought CSW to become a public figure in the recent history of Bitcoin. For the past several years, Bitcoin has been mired in a technical and economic debate about “block size”. The gist of the debate is that one faction (“small blockers”) wants to limit the amount of data that the Bitcoin database can process in order to preserve its “decentralization” and “censorship resistance”. These are widely recognized as features which enable Bitcoin to be immune from effective interference from law enforcement. The other faction (“big blockers”) wants bitcoin to allow an unbounded amount of data to be processed in order to achieve enterprise level scale of over a billion transactions per second. Since he began speaking publicly CSW has been adamantly in support of big blockers, and resolute about the need to scale. Much of the cryptocurrency consensus (large crypto organizations, “experts”, and media outlets) disagrees with this opinion and prefers preserving decentralization and censorship resistance at the expense of scale. For many people following Bitcoin, the understanding of this scaling debate ends here. However, in the context of Bitcoin’s battle between extra-legality and legality the debate becomes much clearer. The way that CSW frames the scaling debate is as a technical manifestation of this disagreement. The small blocker faction positioned against scale is concerned about the necessary legal compliance that large enterprise network participants would require. They want to restrict scale and preserve decentralization and censorship resistance so that they continue to use Bitcoin for extra-legal ends, the same reason that caused CSW as Satoshi to initially leave the project. CSW and the big blocker faction’s desire for scale indicates their desire to realize Bitcoin as a revolutionary and massively scaled network that will, as the Tulip Trust says, make “large scale crime difficult at best.” 10 What CSW alleges is that the people who desire Bitcoin to be an extra-legal money, have engaged in a years-long smear campaign against him in order to discredit him and his vision for a crime-preventing Bitcoin and internet. This smear campaign would have started around the time that CSW was outed as Satoshi Nakamoto. It is widely, but incorrectly, believed that CSW came forward as Satoshi Nakamoto under his own volition. In reality, publications like Wired and Gizmodo o uted him as Bitcoin’s inventor which kicked off a series of events that included police raids on his Australian home and his ultimate moving to the UK. Eventually CSW publicly embraced the claim that he was Satoshi Nakamoto. As part of this public acknowledgement CSW did private cryptographic proof sessions for influential members of the Bitcoin developer community, namely Gavin Andresen, the individual who Satoshi passed the project off to after leaving in 2011. At the time, Gavin said he was convinced that CSW was the same Satoshi he had been in communication with prior. Gavin was deposed in February 2020 as part of the Kleiman v Wright proceedings and again testified (page 73) that he was “convinced that (CSW) had taken one of the early blocks (block 10) and signed a message using its private key”. When the time came for CSW to do a public cryptographic proof session the results were less convincing. CSW released a convoluted blog post which insufficiently provided cryptographic proof to having access to the Satoshi coins. After this the public perception around CSW had consolidated around him being a liar, a fraud, and the “faketoshi” nickname appeared. These claims have since stuck and a Google search of CSW will largely yield articles promoting this frame. In the context of Bitcoin as a battle between extra-legality and legality, this bungled proof session makes more sense. In the years since, CSW has suggested that providing cryptographic proof of access to coins is an insufficient and dangerous precedent to set for confirmation of ownership of coins or confirmation of identity. A major component of the extra-legal vs legal debate in Bitcoin has to do with the substitution of code for law. For those seeking an extralegal money, code and cryptography is imagined to be a viable replacement for law in legal matters like determining ownership. A popular phrase among proponents of this extra-legal Bitcoin ethos is “not your keys, not your coins.” This is a fundamental reversal of private property rights and laws around ownership. For instance, if someone steals your car keys they do not own your car. And when you lose those keys you do not cease your ownership of the vehicle. CSW’s position would suggest that merely using cryptography and code to prove he owns something or is someone would be of this extra-legal mindset. It is for this reason that we think it is possible he will provide some cryptographic evidence of access in the upcoming court case as part of a larger legal process that he supports. Once Bitcoin is framed as a battle between underlying anti-government and pro-law ethoses CSWs role as Bitcoin’s inventor becomes much more clear. The consistency of this framing and its ability to connect disparate things like CSW’s academic and professional background, Satoshi’s abandonment of the project, the creation and purpose of the Tulip Trust, the emergence of a heated scaling debate, CSW’s support of the big block vision for bitcoin, and BSV’s raison d'etre is compelling. Its ability to offer an explanation for the broader 11 cryptocurrency/blockchain spaces fundamental misunderstanding of this case is similarly compelling. The Consensus View of CSW as “Faketoshi” Despite being the consensus explanation and typical angle of the cryptocurrency media, the “faketoshi” narrative as an explanation for CSW’s actions make little sense. A typical consensus understanding of CSW as Faketoshi suggests that at some point prior to 2016 CSW decided to pretend to be Bitcoin’s inventor, Satoshi Nakamoto. Explanations for this decision include CSW’s desire for notoriety and fame or vague mentions of a plan to get rich off of the identity. Absent from this explanation is how or when CSW will finally capitalize on the con. Since 2016 CSW has largely spent his time developing intellectual property and filing patents. He refrained from launching his own token during the 2017 ICO (initial coin offering) boom when individual projects were successfully raising billions of dollars from retail investors. To our knowledge, CSW has never accepted money from any retail investors and his business is not publicly traded or actively fundraising. The fame CSW has attracted is mostly infamy. He is now widely recognized as a liar and fraud and on multiple occasions people have contacted his former schools to alert these institutions about accusations of CSW’s alleged plagiarism. CSW regularly claims that his desire is to work on his projects and file his IP rather than seek the public spotlight. When it comes to the consensus explanation of Kleiman v Wright, things get even more confused. A typical understanding of the lawsuit is that CSW is being sued for fraud because he is clearly a liar. The fact that the fraud that is being alleged in Kleiman v Wright presupposes his role in the invention of Bitcoin is usually omitted or not known. While some disinformation may be motivated by a desire for an anti-government Bitcoin, the incentive to discredit and ignore CSW for less conspiratorial means is clear. Because CSW is adamantly opposed to the cryptocurrency consensus vision of BTC and cryptocurrency he is a threat to the investment of hundreds of billions of dollars of capital. He has been highly critical of projects like BTC, Ethereum, and virtually all ICOs. His criticism can lack grace, perhaps due in part to his Asperger’s syndrome. If CSW’s criticisms of this system are correct and his pro-law vision wins out, the finances of the average cryptocurrency investor are at risk. The financial motivation for average investors to discredit or disparage CSW combined with a more articulated understanding and opposition to the ethos of Bitcoin and society that CSW promotes creates fertile ground for poorly articulated complaints about why CSW is bad and wrong. Conclusion After reading this summary and background on Kleiman v Wright, CSW, and Bitcoin it would be insightful to Google these topics and juxtapose what you learn here from what the consensus explaisions are. Look specifically for explanations of this ongoing litigation and see if these reports understand the foundational assumption of the case which is that CSW invented Bitcoin 12 either alone or with Dave Kleiman. We hope this compilation of available information has been compelling and useful. Please feel free to contact us at dave [at] unboundedcapital [dot] com. 13
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