Cryptocurrencies

Jury Deliberations Begin in Kleiman v. Wright Trial

MIAMI – After weeks of contentious testimony, a federal jury was asked Tuesday to decide whether Craig Wright, who claims to have invented bitcoin, was in a business partnership with the late Dave Kleiman.

Kleiman’s estate has alleged that a partnership existed and that after Dave Kleiman’s death, Wright transferred partnership assets to entities he alone controlled and forged documents to make it look as though Dave Kleinman consented to the transfers.

Plaintiffs’ attorneys asked for mind-blowing sums, including $36 billion (the value of bitcoin at issue) for Dave Kleiman’s estate and $126 billion (the value of intellectual property at issue) for a business entity in which they assert Kleiman had a stake. If the jury finds that civil theft occurred, damages could be tripled. The plaintiffs also asked for $17 billion in punitive damages.

After closing arguments, the jury was given the case Tuesday afternoon but didn’t come to a verdict by 5:30 p.m., when they broke for the U.S. Thanksgiving holiday. The proceedings are slated to resume Monday.

Read more: Kleiman v. Wright: Bitcoin’s Trial of the Century Kicks Off in Miami

The crux of the case

According to the plaintiffs’ attorney Velvel (Devin) Freedman, the award would still leave Wright with $17 billion in bitcoin, plus intellectual property, but the lawyer said “it’ll hurt.”

On Tuesday morning prior to the proceeding, Wright told CoinDesk that if his opponents were awarded a judgment, “They have to get it. There’s nothing in my name.”

The saga goes back to Oct. 31, 2008, when someone posting under the name Satoshi Nakamoto posted a white paper online that described how Bitcoin would work. The cryptocurrency eventually boomed in popularity, with a single bitcoin reaching an all-time high price of $68,990.90 per coin. Wright in 2016 claimed to have written the Bitcoin white paper, but has never moved bitcoin tied to Satoshi – a move that could quiet the many skeptics and help to prove his claim.

Though very few in the crypto community believe Wright is Satoshi, the lawsuit takes his claim at face value: It assumes he is Satoshi and thus seeks 1.1 million BTC plus intellectual property the plaintiffs say Dave Kleinman and Wright developed together. Because Wright’s claim to being Satoshi wasn’t at issue for the plaintiffs, it wasn’t exhaustively examined.

Read more: Why Are We Still Debating Whether Craig Wright Is Satoshi?

Similarly, the ownership of the bitcoin in question and the wallet addresses where the coins are held weren’t examined or verified by a forensic blockchain analyst in court.

Instead, the crux of the case revolved around whether the relationship between Dave Kleiman and Wright amounted to a partnership.

Dave Kleiman’s brother Ira Kleiman, on behalf of Dave’s estate, filed the lawsuit in 2018, alleging that Dave Kleiman helped Wright develop the cryptocurrency and thus the estate is owed assets that came from their partnership. The estate accuses Wright of breach of partnership, conversion (“a distinct act of control wrongfully asserted over another’s personal property in a manner that is inconsistent with the other’s right to that property”) civil theft, fraud, constructive fraud and unjust enrichment.

W&K Info Defense Research, a business that was incorporated by Dave Kleiman in Florida in 2011, is also a plaintiff in the case. The entity is one vehicle through which Wright and Dave Kleiman allegedly mined hundreds of thousands of bitcoins and created valuable blockchain intellectual property (i.e., software, etc.). W&K – which now lists Ira Kleiman as its manager – accuses Wright of conversion, civil theft, fraud, constructive fraud, breach of fiduciary duty and unjust enrichment.

‘Two different Craig Wrights’

In closing arguments, Freedman sought to create a clear narrative for the jury after a trial that was filled with dozens of characters, complex technology and conflicting information. He argued there are “two different Craig Wrights”: one who, before litigation began, admitted that Dave Kleiman was his business partner and another who, after the lawsuit was filed, swore Kleiman wasn’t his business partner.

Freedman ran through the testimony and exhibits from the three and a half weeks of trial, attempting to show clearly that Wright had emailed Ira Kleiman to tell him that Dave Kleiman was his partner, but after running into trouble with Australian tax authorities, moved assets into entities that only Wright controlled and forged documents to make it look as though Dave Kleiman had voluntarily given up his claims to the assets.

Freedman asked the jury whether they would let Wright get away with “lies he told to Dave’s grieving family,” forgeries and “the lies he told you when he looked each of you in the eyes for four straight days [claiming to be a] victim and bragging about how smart and how rich he is.”

In closing arguments for the defense, attorney Andres Rivero emphasized that the question is not whether Craig Wright is a liar or cheater but “whether there was a partnership to invent and mine bitcoin.”

He drew a line at Dave Kleiman’s death and suggested that, however mucked up the situation may have become after Kleiman’s death – Rivero admitted Wright had contradicted himself – while Kleiman was alive, “there was no evidence of a written agreement between these men.”

When Kleiman had been in another business, there was a clear paper trail. Rivero showed an email dated Feb. 1, 2011, from Wright to Dave Kleiman where he suggested the possibility of setting up a partnership – thus implying one didn’t exist at that time. Except for an early 2008 email with Wright mentioning to Kleiman that he was working on bitcoin, emails between the two men never used the word bitcoin again, Rivero said.

“It doesn’t make sense,” Rivero argued that Kleiman, who struggled to pay for his home and phone bill, who was confined to a wheelchair and spent most of the last year of his life in a hospital with grave health problems, would have kept his fortune so secret that he didn’t cash it in to pay debts or ever mention it to close friends.

Rivero said it isn’t logical to believe that, given his physical state, Kleiman had the ability to set up a bitcoin operation – which required huge racks of computers – or oversee it from his hospital bed. Rivero implored the jury to set aside any sympathy for Kleiman or distaste for Wright and focus on the hard evidence.

Given a few minutes to speak again before the case went to the jury, Freedman played clips from a Wright deposition in which he said he and Dave Kleiman purposely used internet relay chats and video chats that would not leave evidence. Freedman also said Kleiman wouldn’t have needed massive computer racks – bitcoin could have been mined on a home computer until 2013.

Instructing the jury

According to instructions the judge read to the jury, a partnership could be a based on a written or oral agreement and must include each of the following elements: a common purpose; a joint proprietary interest in the subject matter or purpose of the partnership; the right to share profits and the duty to share losses; and joint control or right of control over the partnership. Plaintiffs must prove each of those elements by a preponderance of the evidence.

If they find a partnership existed, the jury of three men and seven women will have to determine the value of the assets of the partnership that correspond to David Kleiman’s partnership interest, which would then belong to his estate.

Without an agreement otherwise, Kleiman would be entitled to half. U.S. District Judge Beth Bloom told the jury that any damages awarded should be based on the present value of any bitcoin or intellectual property they found was part of the partnership, or both.

Speaking just outside the courtroom doors Tuesday morning, Wright suggested to CoinDesk that even this long trial’s conclusion won’t put an end to the saga.

“I tried to tell people the only thing I own is the [bitcoin mined from the] first 15 blocks,” Wright told CoinDesk Tuesday morning. That would be worth an amount that is “not small” but not “horribly large,” he said, after a rough calculation. (The first 15 bitcoin blocks would have generated 50 BTC each. Multiply that by the recent all-time high of $68,990.90 per bitcoin and you get $51.7 million.) Wright testified last week that assets are in his wife’s name – she’s the multibillionaire, he had said. She has separate court actions pending against Kleiman and those would need to be resolved before Kleiman could get any of them, he suggested.

Wright said Kleiman would likewise have trouble taking possession of any award granted to W&K. “Trust me, he won’t have the majority of W&K,” he said. One-third of that company is owned by Dave Kleiman, one-third by a company of Wright’s and one-third by Wright’s ex-wife Lynn, he said.

Catch up on the trial thus far:

Kleiman v. Wright: Bitcoin’s Trial of the Century Kicks Off in Miami

In Craig Wright Trial, Plaintiffs Lay Out Pattern of Fraud, Deceit and Hubris

Day 4 of Kleiman v. Wright: Craig Wright’s Testimony Delayed

Day 7 of Kleiman v. Wright: Wright Tells Jury Kleiman Only Mined ‘Testnet’ Bitcoins

Kleiman v. Wright Trial: Craig Wright’s Flinty 4-Day Testimony Comes to an End

Kleiman v. Wright: The Trial Transitions From Plaintiffs to the Defense

Kleiman v. Wright: A Story of Physical and Financial Tribulation

Kleiman v. Wright: Defense’s Autism Expert Explains His Diagnosis of Craig Wright

Kleiman v. Wright: Craig Wright Takes Stand Again in Final Day of Testimony

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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