A different way to defraud: The lessons from the trial of Bitcoin's origins

The technology was Bitcoin, and the pretender is Craig Steven Wright. The prize he claimed was the legacy of Satoshi Nakamoto itself.

Some perspective

You may have read about Wright’s claims. Now thoroughly proven false, they were followed closely on social media and covered widely in the press. In claiming to be Satoshi Nakamoto, Wright created a story from whole cloth, and promoted it for nearly a decade. It all came to a head at a trial in spring 2023, resulting in a judgment of nearly 400-pages finding that his story was a fiction from the start; but the fiction was supported by hundreds of forged documents and thousands of lies, piled one upon the other into a campaign of mendacious litigation.

Mendacious indeed, because the targets were not just commercial enterprises. Bitcoin is a layered system, and people at different layers have very different experiences and interactions with the system. The traders who operate through applications at the top layer may be day-trading for profit, or buying in because they believe in the philosophy, or anything in between. But they needn’t know what’s going on under the bonnet at all - it’s a coin. On the other hand, at the very foundational layer, the protocols and cyptography of the system are handled by individuals – people who contribute their effort to an open-source system freely. At that layer, the system doesn’t resemble a currency so much as a cryptographic exhchange protocol - the bits underlying the coin.

All financial systems see some level of fraud, but it’s usually carried out by moving money around - at the top layer. But in this case, the attack was targeted at the fundamental layer, the open-source development itself. No doubt that seemed to be the most vulnerable part of the system. It turned out to be much stronger than it seemed.

There are some serious lessons to be learned, but between the excruciating detail of the judgment and the lighter touch of the news reporting, it’s easy to overlook them. Even those who followed the twists and turns of the case - those of us who read the evidence, and thumbed through the daily reddit memes - a sense of perspective is difficult, as the case became more and more detached from reality.

History repeats itself

As always, there’s precedent in history to give some perspective. This isn’t the first time someone has tried to gain a legacy by defrauding the courts themselves. We have to step back far to find it though - over a century, to the 1860s: when the Royal Courts of Justice were just a sketch on paper, and five years before the cornerstone was laid. Around that time, one man came forward from a small town, Wagga Wagga in the depths of Australia – claiming to be Roger Titchborne, the heir to the ancient Titchborne estate in Hampshire. Roger was long thought to have died at sea, and his legacy passed to others in his family. Yet this man ‘Titchborne’ came back years later, claiming Roger’s estate, the family fortune, and the titles that came with it – together with Roger’s name itself. In a trial lasting weeks, this new ‘Titchborne’ was wholly unseated as being in reality Arthur Orton, a butcher from Wagga Wagga, whose claim was based on lies and forgeries.

The Titchborne case was hot news at the time, and Orton’s fraud has been written up in several books, including recently Zadie Smith’s 2023 bestseller, aptly titled The Fraud (and which is a great read).

And so history repeats itself: In 2016, Craig Wright came forward as ‘Satoshi Nakamoto’, Bitcoin’s unknown inventor. Over the course of 8 years, he sued journalists, commentators, researchers, developers and companies claiming the legacy of Satoshi - in the form of assets he valued at hundreds of billions of pounds.

Like Orton, Wright came out of rural Australia, claiming to be a lost celebrity. His trade was not butchery, but IT services. And he claimed to be a person long disappeared, the heir to a grand fortune. Like Orton, Wright’s claim continued for many years, and culminated in a weeks-long trial in the Chancery Courts in London.

Now, unless the Court of Appeal gives permission to appeal on factual grounds – a rare occurrence indeed – the case is now finally at an end, and we can begin to reflect on what has happened, and prevent history from repeating again.

Wright’s claims themselves

While Wright’s long game to wrest power through the justice system isn’t a unique strategy, it is unique in its scale and execution.

This was no mere investment fraud, or abuse of trust. The claims were promoted through a campaign of litigation that touched three continents. After initial troubles in Australia, Wright moved to the UK and began to sue commentators and journalists who spoke out against him. He also issued a case against the pseudonymous owner of the bitcoin.org domain. All were individuals who could not seem to afford the risks represented by the pressures of a fraudulent suit. Wright later moved on to companies, eventually suing the open-source developers of Bitcoin itself for ownership of untold value in Bitcoin, and even suing exchanges claiming rights to the word “Bitcoin” as a brand. He issued broad and specific threats of legal action even against those who hosted copies of the archetypal Bitcoin White Paper.

In parallel with his legal disputes, Wright published online widely, and worked with others to set up a new competing cryptocurrency called BSV, which stood for ‘Bitcoin Satoshi Vision’ (and it was originally promoted as the vision of Satoshi in the guise of Craig Wright). A hard fork of BCH (Bitcoin Cash, itself a fork of the first Bitcoin project) this (according to its founders) was the ‘real’ Bitcoin - and was positioned by them as the only ‘bitcoin’ deserving of the name.

As is now established in the judgment, Wright was also busy in other ways: that time was also spent creating and backdating documents, which would later be relied on in court as evidence of his claims.

The start

To combat these threats, Bird & Bird on behalf of COPA brought a claim against Wright to prove his claim to be fraudulent. He would have to put forward his best evidence, or back down. Wright instructed several large legal teams - teams larger than COPA’s - who fought hard for him. He supported his case with many documents, put forward as evidence and in disclosure.

First, he began by nominating his 100 best documents dating back to the days when Satoshi was active: through months of effort, we proved that every one of them was either irrelevant, or forged.

Digital documents were backdated, with metadata edited and many traces of manipulation covered up: these were exposed by the analysis of Patrick Madden, a forensic investigator.

Hard copy documents had been artificially aged with splashed coffee stains, their staples rusted up in record time.

Notepads had been covered from top to bottom in handwritten notes and backdated to 2007-8: but the notepads themselves were more modern, and would not be created until well after 2010 (facts established through shoe-leather investigation over the course of months).

Forger strikes back

Faced with this evidence, Wright struck back. He set aside his previous ‘best’ documents and set about a second time, creating new forgeries to cover his tracks. His 100 documents were replaced with a new 100, planted on a USB drive among gigabytes of other material. He applied to the Court to delay the trial so that this could all be investigated, claiming that it was of such importance that a fair trial would be impossible without it: a matter of human rights.

Wright had learned from the first analysis, and the same signs of forgery weren’t present in the new material. But the investigation did not go well for him - new techniques that he hadn’t faced before were employed, showing that his second batch of evidence was made up of recent creations, backdated and apprantly planted.

Some of the evidence was even created by generative AI: traces of ChatGPT’s perky helpfulness shone through in some versions of the evidence, hastily deleted but not wiped thoroughly enough to prevent Madden from recovering them. “Certainly, here’s the code you requested…”.

The experts agree again

All this was covered in expert evidence, with innumerable pages of analysis, reports, exhibits, and examination of the documents themselves. And the experts on both sides agreed: Wright’s own experts considered it carefully and came to the same conclusion.

The Trial

The trial was six weeks long. Wright gave evidence on oath for over a week; after him, witnesses gave evidence from all over the world, from Wright’s former colleagues to Satoshi’s collaborators. The Court had evidence from eminent cryptographers, inventors of C++, and even from Wright’s former statistics professor - and of course, the experts themselves.

The forgery wasn’t over yet. During trial, there was even a third take: more forged documents were revealed, created while the trial was already underway and backdated to cover the falsity of the accounting records, themselves also backdated and relied on in multiple court cases. Wright was recalled to the witness box again, and sworn in to answer for these documents also.

By the end of trial, a thousand people were tuned in to a live stream of proceedings, and the evidence was overwhelming. After the final arguments, the Judge stood up before a packed courtroom and made the formal declaration:

“Craig Wright is not Satoshi Nakamoto”.

Attacking an entire industry

And so it was done.

With that short summary of a hard battle is a flavour of what did happen. But what might have happened otherwise, if Wright had won his cases?

Well, the risks were myriad, and Wright’s own filings valued them in the hundreds of billions of pounds. Some of them included:

Copyright in a symbol: First, Wright claimed ownership of Satoshi Nakamoto’s copyright in the Bitcoin White Paper. Restricting the document itself wouldn’t have stopped bitcoin from flowing of course. But hosting it is an icon of freedom and participation in a wider industry. When Wright asserted that copyright against bitcoin.org’s owner, they couldn’t respond without revealing their identity - and so Wright won, and bitcoin.org had to remove access to the White Paper from bitcoin.org. The decision has since been unwound.

Elements of the blockchain itself: But similar claims would have had an effect on the blockchain itself. Since the White Paper has been embedded within (at least) the BTC blockchain, downloading the blockchain itself involves making a copy. And since the BTC Core software requires download of the entire blockchain to function fully, there could in theory be serious knock-on effects.

Beyond that, Wright claimed ownership of functional elements of bitcoin: allegedly, rights even in the file format in which transactions are stored. This claim, on the very edge of copyright, was first rejected as unarguable before being reinstated as potentially arguable. Possible control over functional elements of that nature could have required serious changes, if upheld.

The word Bitcoin itself: Wright launched multiple claims against a wide range of individuals and companies seeking control over the word “Bitcoin” as a trade mark. This relied on the law of ‘passing off’, on the basis that Satoshi (alleged to have been Wright) owned a protectable goodwill in the bitcoin ‘brand’. Success in a passing off case would have allowed Wright to claim control over the word bitcoin as applied to any cryptocurrency or service, and attempt to restrict its use, or claim that he should be paid licence fees by anyone wanting to do so. It may also have allowed forks of bitcoin (for example, BSV) to be positioned differently from other versions (such as BTC or BCH).

Bitcoins themselves: Through a company, named ‘Tulip Trading’, Wright sued many individual developers, seeking to force software changes in bitcoin by legal means. The basis of the claim was an alleged ‘hack’, by which Wright said many bitcoins in his possession had been taken from him. This story was falsified in the COPA trial, as the accounting records and other documents relied on were exposed as forgeries (without needing to touch on other deep problems with the story).

There was a deeper threat than just a financial one: The attack was directly aimed at forcing through legal changes to bitcoin’s protocols, and holding individual developers to account for doing it. The philosophical problem is obvious: that goes against everything that bitcoin represents.

Open-Source Licence liability: From the earliest days of free software, licences have excluded liability to the developers. The bargain has always been that the software can be taken and used, but it can also be examined. No more functionality should be expected than what can be seen in the code. If you spot an error, you can fix it: these licences are permissive, and allow you to create your own thing derived from what you’ve pulled: the tools are there.

And so most (or all) major open-source licences spell out, in block capitals, that no reliance should be placed on the software even for the purpose that it’s released - and this is true of the permissive MIT licence used by Bitcoin.

But Wright argued against this. His claims included a claim against developers on the basis that they owed a duty of care. That claim was first rejected, but later reinstated: And there is at present, a court of appeal decision which spells out why that court considered that an argument, though difficult, was not impossible. Whether or not you agree with the logic, that will remain on the books, and will be a concern to users and developers of open-source software. That risk will remain unceratin, at least until it is overtaken by legal argument in court one way or the other; or until the government legislates.

UK or wider? Strictly speaking, each of these risks was brought under English law, and decisions would apply only to England and Wales (or the United Kingdom). But the risks are really wider than that, for three reasons:

First, because cryptocurrencies operate internationally: they’re spent (or traded) internationally, and the blockchain is broadcast and validated internationally. Legal limitations in one place could affect the system as a whole. As a minimum, dealing with that takes time and effort to understand and address.

Secondly, because UK law is (still) one of the popular governing law choices in agreements between companies and governments operating across jurisdictions. A finding in UK law is likely to have at least some effect on business overseas.

Thirdly, because many of the principles of the issues don’t apply to crypto alone. Bitcoin is unusual and legally novel enough to allow the argument to be taken to extremes, but the potential liability of FOSS developers is a general point.

Awareness and community

There are some positive lessons that come from this case, too, and the strongest is about the community that underlies the industry itself.

One is about the value and strength of the open-source community. The case might not have been successful without the efforts of the people who lent their time, money and effort to the cause of defeating the fraud. Nobody asked to be involved in the case, but when they were approached, many answered the call. Beyond that, the developers themselves must have undergone intense stress, being sued multiple times. Beyond that, there was nothing but the force of principle to make COPA, a nonprofit entity, step in and bring a defensive action.

Others who were not directly affected also gave up their time and effort to assist, providing copies of previously-secret documents, or donating their time to provide witness statements and attend trial to give evidence. That too is a stressful experience. Each of them was independent, but happened to have knowledge which exposed one lie, or several; one forgery, or several. If it wasn’t for the effort of a community, the case could have been over before it began.