Despite Essentially Losing the Case, Craig Wright Breaks Settlement Agreement With Kleiman Estate and the Trial Is Back on for March 2020

November 6, 2019 / by Zachary Mashiach

At the end of August, it appeared the biggest Bitcoin (BTC) related court case in history was coming to an end, but now Craig Wright has pulled out of a settlement agreement with the heirs of Dave Kleiman, and the trial is set to continue in March 2020. This is surprising since Wright basically already lost the case, with the judge viciously shooting down Wright for perjury, and Wright was the one to initiate the settlement. We’ll explore the facts of this case, and how this failed settlement makes Wright’s position even worse, in this article. 

In the earliest days of Bitcoin (BTC) Wright and Kleiman together mined one million Bitcoins (BTC), now worth nearly $10 billion. There is even some speculation that Wright or Kleiman, or both, were Satoshi Nakamoto. Indeed, Wright claimed to be Satoshi on the stand during this case, forcing the judge to declare that the court is not going to decide whether Wright is Satoshi or not, and that is not what this case is about. 

Indeed, regardless of Satoshi’s identity, the matter being adjudicated in this case is that Wright never gave the heirs of Kleiman any Bitcoin’s (BTC) after Kleiman’s death in 2013. Apparently, Wright did approach the heirs of Kleiman at one point to offer their share of Bitcoins (BTC) but ultimately backed out, causing the heirs of Kleiman to initiate the lawsuit. 

During the court proceedings, the judge found that Wright’s testimony was fraudulent, convoluted, and contradictory. The judge ordered Wright to produce a list of his Bitcoin (BTC) holdings at the time of Kleiman’s death, and Wright stalled the court for months while hinting that he would provide a list of the holdings only to produce nothing at all. 

Wright claimed that the Bitcoin (BTC) holdings had been put into the Tulip Trust, which consisted of an encrypted file which utilizes Shamir’s Secret Sharing Algorithm and that the key shares had been distributed to different people across the world. Wright claimed that he does not have access to the Bitcoins (BTC), nor access to the information on how many Bitcoins (BTC) are in the Tulip Trust until a courier arrives with another key share in January 2020. 

The judge considered this story inconceivable and did not believe that Wright would risk $10 billion on the arrival of a courier at a distant point in the future, let alone give up access to the $10 billion to begin with. 

Ultimately, the judge ruled that Wright was in contempt of court, and declared that Kleiman’s heirs are owed half of Wright’s (BTC) holdings and intellectual property.

This judgment was not finalized, however, and Wright initiated a settlement agreement with the heirs of Kleiman instead. Wright declared that he had the means to finance a settlement and reached a non-binding agreement with the Plaintiffs on Sept. 11. It seemed the settlement negotiations were in good faith, so the heirs of Kleiman stopped active litigation and ceased the discovery process. 

However, without any warning, Wright declared on Oct. 30 that the settlement could no longer be financed. Wright’s new angle on the case is that James Wilson, the Chief Financial Officer of Wright’s companies, will testify that Kleiman received a share of Wright’s companies in exchange for all of his Bitcoin (BTC). 

This seems like a dirty trick for multiple reasons. First off, this new argument did not come up at all during the months of court proceedings that already occurred, and basically the argument is that Wright owes the heirs of Kleiman nothing since supposedly Kleiman gave up all of his Bitcoins (BTC) for a share in Wright’s companies, none of which still exist. Basically, Wright is saying he owes nothing to Kleiman’s heirs. 

Further, the two-month delay caused by the settlement negotiations, which were clearly initiated by Wright in bad faith, has brought the case close to the discovery cutoff. Basically, Wright delayed the case so long that there is practically no more time to collect additional information from Wright, and Wright has brought forth an entirely new argument based on the testimony of a new witness right before it is too late for the heirs of Kleiman to interview this witness and investigate the claims. 

Also, the heirs of Kleiman spent a significant amount of money on lawyers for the settlement as well as domestic and international tax specialists. 

Thus, Wright has broken a settlement that he initiated and has continued to change the story while stalling the court and the heirs of Kleiman, despite already being found in contempt of court. 

Interestingly, the trial is set to continue in March 2020, which is after the courier is supposed to arrive with the key share in January 2020. Therefore, all of Wright’s testimony will collapse upon himself if the key share supposedly does not show up. If the key share does show up, then half of those Bitcoins (BTC) will be given to the heirs of Kleiman. 

Ultimately, it seems all but guaranteed that Wright will lose the case although it appears it will be difficult for the heirs of Kleiman to get any money even if they win a final judgment. During the entirety of the court proceedings Wright has proven himself to be a master of evasion, and there is no sign that this trend will stop.