February 27, 2018

Kleiman v Craig Wright: The bitcoins that never were

Today some news landed about a $10B lawsuit against Craig Wright (the Australian man who claimed to be Satoshi Nakamoto, the pseudonymous inventor of Bitcoin), and it is an interesting read, but unfortunately for anyone involved, its claims have little basis in reality. The lawsuit purports that Wright fraudulently acquired large number of bitcoins owned by Dave Kleiman through forging various documents, but the very existence of those bitcoins in the first place is just another fantasy.

I had previously seen some of the material included as exhibits in the lawsuit, and my opinion was that all the documents that made specific testable claims as to owning bitcoins were relatively easy to debunk as simple backdated forgeries (possibly for use in Wright's alleged tax fraud schemes). I Am Not A Lawyer, but it seems somewhat fitting that Wright now finds himself sued by someone taking many of those claims at face value, as Wright's seemingly only defense would be to allow those prior claims to be proven false.

The lawsuit

The lawsuit, brought by Dave Kleiman's relatives (Kleiman passed away in 2013) largely recounts the story as presented by Craig Wright (in public or privately), that Wright and Kleiman together were involved in the creation of Bitcoin and owned a large number of bitcoins, taking these claims at face value. At the same time, the lawsuit represents Wright as fraudulent and untrustworthy, having forged a number of documents for various financial gains.

Ultimately, this is a case of self-serving reasoning that doesn't hold up to scrutiny; if Wright falsifies and invents facts to suit his own purposes in one part, why would he be considered a trustworthy source for the other information? Most of Wright's narrative is full of holes and provably false, and the lawsuit spends much of its time recounting Wright's numerous lies over time. Time to connect the final dots and include the so called 1,100,000 bitcoins in the list of falsehoods.

The bitcoins that never were

Throughout the many included exhibits, here are some of the many bitcoins that are in one way or another claimed to have been part of Wright's and Kleiman's alleged involvement in Bitcoin:

  • 1933phfhK3ZgFQNLGSDXvqCn32k2buXY8a: ~110,000 BTC (exhibit 4)
    Claimed to "held in escrow" as part of a transfer of BTC from Kleiman to Wright in exchange for shares in a new company. However, this is just a withdrawal address associated with an entirely unrelated user of MtGox, and has nothing to do with either Kleiman or Wright:

    b169b66e-023c-462e-8ae4-9cb2db3f2219,e70f4a61-b6d2-43e0-aebb-7472ad034904,"2011-07-04 17:53:45",withdraw,-2841.45
    b169b66e-023c-462e-8ae4-9cb2db3f2219,08134fa1-52c7-4c4a-9916-5a78a7344ec5,"2011-07-05 15:09:19",withdraw,-1495.5
    b169b66e-023c-462e-8ae4-9cb2db3f2219,f8e186b0-d8ee-4064-be64-054258ca631c,"2011-07-05 19:00:10",withdraw,-1495.49999999
    b169b66e-023c-462e-8ae4-9cb2db3f2219,e5888c99-fc43-4bf0-82f0-9daa5fbbb28f,"2011-07-05 22:59:49",withdraw,-1530.98062227
    b169b66e-023c-462e-8ae4-9cb2db3f2219,426a0007-3797-4c81-8e37-f8fa2e835ed6,"2011-07-23 22:37:24",withdraw,-727.33370629
    b169b66e-023c-462e-8ae4-9cb2db3f2219,b02c1405-9cce-4b77-b7e5-237515027252,"2011-08-02 04:17:27",withdraw,-1
    b169b66e-023c-462e-8ae4-9cb2db3f2219,2308d9b6-1ee6-457f-966a-c198237cf449,"2011-08-02 04:45:24",withdraw,-1
    b169b66e-023c-462e-8ae4-9cb2db3f2219,7e128c5c-1e88-45f1-a17d-aded6c4b16e4,"2011-08-02 04:46:23",withdraw,-1776
    b169b66e-023c-462e-8ae4-9cb2db3f2219,168a83ac-a3a8-4051-b687-7b6f3bdb2dcd,"2011-08-02 12:36:03",withdraw,-232.1959
    b169b66e-023c-462e-8ae4-9cb2db3f2219,49c6387c-5d2d-4d42-b523-5c8844a16a97,"2011-08-02 22:32:58",withdraw,-933.91
    b169b66e-023c-462e-8ae4-9cb2db3f2219,1c361be6-e6eb-4040-b81a-e9386ca91f7e,"2011-08-03 01:23:48",withdraw,-1043.13305585
    b169b66e-023c-462e-8ae4-9cb2db3f2219,04f33017-b0a6-4c2d-b924-96fde5323e5c,"2011-08-06 14:54:49",withdraw,-5419.53237126
    b169b66e-023c-462e-8ae4-9cb2db3f2219,26d4c3a8-2211-466f-94d8-eb8dda1e7180,"2011-10-27 12:50:14",withdraw,-15000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,cfe0a762-0ae9-49b1-98ee-9594dcee823a,"2011-10-28 17:59:13",withdraw,-1913.98495583
    b169b66e-023c-462e-8ae4-9cb2db3f2219,8a4b61f5-bb43-437d-82d4-d231bcec77ae,"2011-12-20 19:01:54",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,9fab3a11-0df4-45b4-bb56-ccbf25297e70,"2011-12-20 19:02:10",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,6bfce163-1133-45b7-8c58-8645f204f7a7,"2011-12-20 19:02:27",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,ce39ef5c-3657-4d92-a4d4-b3dbb21d86b3,"2011-12-20 19:02:52",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,e5562d1b-6932-4384-b5f9-debcfb03e911,"2011-12-20 19:03:14",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,10d69fbb-9f00-43e8-b445-5ccac706a9f1,"2011-12-20 19:03:24",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,61633710-e0be-4743-b8e2-945c2b302983,"2011-12-20 20:07:48",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,88146b9d-aceb-485c-b97b-d9b92e8a76fb,"2011-12-20 20:08:03",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,02802191-765b-4785-85fe-495f0742852f,"2011-12-20 20:08:12",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,3ad45bfe-69bf-439e-8d81-110c5b496b5c,"2011-12-20 20:08:25",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,e5beca8d-503b-4030-839c-b84d8490c369,"2011-12-20 20:08:39",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,01925733-af3d-4678-91dc-3044dcb567c4,"2011-12-20 20:08:48",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,206142fe-c6e2-44dc-9056-4dadd6561168,"2011-12-20 20:08:58",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,c03a05f6-87cb-4f96-9a96-d3b4de6f820f,"2011-12-20 20:09:15",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,3a1848c9-6dbd-40e5-aa6e-7cd1e35b273d,"2011-12-20 20:23:54",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,3cb1dc9d-a1cc-40c2-a684-30ced7a69f5d,"2011-12-20 20:24:07",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,34848e93-b754-4e0c-a1cd-b64f0932fcf4,"2011-12-20 20:24:18",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,027cc3b3-bcbd-4291-a254-5c896424e181,"2011-12-20 20:24:27",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,2ac84f8c-ca47-466a-a23c-ed70d9775341,"2011-12-20 20:24:38",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,f4bd5345-d519-4f12-8283-b46a4270eea0,"2011-12-20 20:24:50",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,ef2ce22a-f0c7-4eee-a196-329b3c5757bc,"2011-12-20 20:25:00",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,397a5929-f8b0-4241-a8ff-b8870d5faf61,"2011-12-20 20:25:10",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,53835d67-04c3-4914-8db4-d2c6dfa7f598,"2011-12-20 20:26:51",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,e74837c9-2be2-437b-8bb5-5d14de0952a2,"2011-12-20 20:27:00",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,234018b0-d8d4-452c-b10d-05ba50e9b1cb,"2011-12-20 20:27:55",withdraw,-1000
    b169b66e-023c-462e-8ae4-9cb2db3f2219,34fa39dd-8d36-4c28-ba99-d1e2d06f54be,"2012-08-25 20:52:05",withdraw,-3.12606703
    b169b66e-023c-462e-8ae4-9cb2db3f2219,c8087502-b81b-4861-b707-b9556e591334,"2012-11-15 06:30:16",withdraw,-94.1574241

  • 12hRmmSda9qSSEH656zBaKEbeisH6ZhdTm: ~335,000 BTC (exhibit 10)
    Claimed to be owned by Wright and supposedly used to lend Kleiman 50,000 BTC as part of a software development licensing and financing agreement. However, this is actually an internal MtGox address, descending directly from Mark Karpel├Ęs' famous 424,424.42424242 proof-of-solvency transaction in 2011:

  • 12C9c9VQLMrLi4Ffzq2wDvwrKnUPaAaNFp: 250,000 BTC (exhibit 10)
    Same as above, claimed to be owned by Wright and supposedly used for a 250,000 BTC loan. However, this address actually belongs to original MtGox founder Jed McCaleb:

    Here the document even gets the transaction it's referring to backwards, reinforcing the idea that Wright was not familiar with the transaction but merely found it on the blockchain, including its details in a backdated document to suggest foreknowledge (and hence ownership).

  • Various addresses amounting to 650,000 BTC (exhibit 11)
    Claimed to be held by Uyen Nguyen and lent to Craig Wright. Let's go through them one by one and see what we know about these from blockchain analysis:

    Edit: This list originally contained several named users, but after receiving objections as to their accuracy and requests to remove such claims, I have deleted all such mentions. It is my belief the point should still carry across without having to jeopardize the privacy or safety of unrelated individuals.

    Even with many of the address owners unnamed, this is clearly not a list of assets held in some trust. Even a single address claimed but apparently belonging to someone else would be a big red flag, and here we have more than a handful of cases I can very confidently state have nothing to do with Wright.

    Further, several of the addresses did not yet exist or hold any bitcoins as of the purported date of this document (October 2012), with many of them not showing up until mid-2013.

    The MtGox cold storage addresses are the same that became known as the lost and found 200,000 BTC. Also notably, the 1Feex... address was the direct recipient of the first major MtGox theft, where 80,000 BTC was taken out of the hot wallet just before Jed McCaleb handed over the company to Mark Karpel├Ęs. Effectively, Wright/Nguyen seem to be claiming to have robbed MtGox.

  • Speaking of MtGox, both Wright and Nguyen had accounts there: #433804 and #465042 respectively. Wright registered and used his account for a bit in order to buy bitcoins in April 2013, which he later withdrew and sent a few thousand dollars' worth to Nguyen, and a few hundred dollars' worth to the 1933ph... above (possibly an attempt to make a blockchain connection). Nguyen's account was registered later in 2013; its only BTC deposits are from Craig Wright. By any standard both of these accounts are small and unremarkable compared to most big bitcoiners.

In conclusion

Most of these addresses actually have only one thing in common, which is a big clue to why they're in the list: they at some point held significant amounts of bitcoin in them.

This isn't some grand conspiracy of having stolen a million bitcoins, it's some guy browsing a "blockchain rich list", picking out a couple of addresses at random and saying "I own those" for whatever reasons, while offering no evidence except for some clumsy document backdating. These claims would never have gotten past an actual specialist.

While the lawsuit is a nonsensical fight over unrelated funds that never belonged to either party, it offers the rest of us a valuable reminder of how you'll easily get taken advantage of if you don't follow the #1 rule of Bitcoin:
Don't trust. Verify.
Put simply, extraordinary claims require extraordinary evidence. Fortunately, thanks to Bitcoin, that's now as easy as a single cryptographic signature.

Funny how Wright has never provided one?