Judge Confirms Ruling: Craig Wright to Forfeit 50% of Bitcoin Holdings

A corroborating order has been filed in Craig Wright’s sanctions and contempt hearing.

In a court document published Tuesday

, Magistrate Judge Bruce E. Reinhart confirmed that Wright, the self-declared inventor of bitcoin, must forfeit half his crypto mined prior to 2014 to Ira Kleiman as well as half his intellectual property. Additionally, Wright is ordered to pay the attorney’s fees and related expenses incurred in this motion.

The court found Wright had argued in bad faith, perjured himself and admitted false evidence during the motion.

The ongoing trial began in 2018, when Kleiman – the brother of Wright’s late business partner Dave Kleiman – sued for half the bitcoin holdings in the so-called Tulip Trust, alleging that Wright defrauded the family's estate.

The magistrate said:

“Dr. Wright and David Kleiman entered into a 50/50 partnership to develop Bitcoin intellectual property and to mine bitcoin; (2) any Bitcoin-related intellectual property developed by Dr. Wright prior to David Kleiman's death was property of the partnership, (3) all bitcoin mined by Dr. Wright prior to David Kleiman's death ("the partnership's bitcoin") was property of the partnership when mined; and (4) Plaintiffs presently retain an ownership interest in the partnership's bitcoin, and any assets traceable to them.”

Accordingly, Wright’s argument – that the bitcoin is inaccessible due both to his former business partner’s death as well as a complicated encryption mechanism – was found to be in bad faith.

The sanctions are Wright's alone, Reinhart wrote.

"I find without hesitation that sanctions are not warranted against Dr. Wright’s counsel," the judge wrote, adding:

"Counsel has zealously and ethically advocated for their client. Counsel has unfailingly been candid with this Court, even when Dr. Wright’s conduct and conflicting statements have created awkward situations for counsel."

Jason Gottlieb, partner at Morrison Cohen LLP, said the ruling was “atypical” procedurally, and the district judge overseeing the trial may not accept Reinhart’s decision without amendment.

Previously, Wright’s testimony was declared to be “inconsistent” by District Judge Beth Bloom.

Kleiman was represented by Kyle Roche and Velvel Freedman of Roche Freedman LLP, while Wright was represented by Rivero Mestre LLP.

Kleiman must alert Wright of the appropriate costs due to him on or prior to Sept. 20. While this ruling does determine liability, further discovery for the trial may be underway.

Craig Wright image via CoinDesk archives