Craig Wright, self-declared inventor of bitcoin, arrives at federal court in West Palm Beach on Friday, June 28, 2019. Photographer: Saul Martinez/Bloomberg

An Australian entrepreneur who claims to have created bitcoin has been ordered to pay the attorney fees of the brother of his late cryptocurrency collaborator.

Federal Magistrate Judge Bruce Reinhart ruled that computer engineer Craig Wright should be sanctioned after delivering false testimony and misleading the court in a lawsuit brought against him in the U.S. District Court for the Southern District of Florida by Ira Kleiman.

The magistrate judge's order issued earlier this week could force Wright to award more than $5 billion worth of bitcoin to the plaintiff.

The suit alleged Wright had more than $11.4 billion in bitcoin assets from his collaboration with Kleiman. This ruling orders him to relinquish half of intellectual property and the bitcoin he mined in their partnership.

Reinhart did not make a determination on Wright's claim that he created the cryptocurrency.

The plaintiff's brother Dave had worked with Wright to mine cryptocurrency prior to his 2013 death. Kleiman filed suit as the personal representative of his late brother in 2018, accusing Wright of unlawfully assuming control of billions of dollars worth of bitcoin and intellectual property.

The case drew keen interest from watchers of cryptocurrency as the allegations against Wright intertwined with his own claims of being Satoshi Nakamoto, the purported pioneer behind bitcoin. Spectators said the case had the potential to settle once and for all whether or not Wright truly was the elusive Nakamoto.

However, Reinhart said Wright had engaged in "a sustained and concerted effort to impede discovery into his bitcoin holdings" and repeatedly acted in bad faith before the court.

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Read the order:

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"The evidence establishes that [Wright] has engaged in a willful and bad faith pattern of obstructive behavior, including submitting incomplete or deceptive pleadings, filing a false declaration, knowingly producing a fraudulent trust document, and giving perjurious testimony at the evidentiary hearing," the judge said. "Dr. Wright's conduct has prevented plaintiffs from obtaining evidence that the court found relevant to plaintiffs' claim that Dr. Wright and David Kleiman formed a partnership to develop Bitcoin technology and to mine bitcoin."

The judge explicitly declined to declare whether or not the admitted evidence established Wright is Nakamoto as he claims to be. Although Reinhart also refused to make a determination on how much bitcoin Wright controls, he ordered the defendant to relinquish half of the intellectual property and bitcoins he'd produced prior to the death of the plaintiff's brother.

"Plaintiffs presently retain an ownership interest in the partnership's bitcoin, and any assets traceable to them," Reinhart said. The judge held that Kleiman could pursue attorney fees against Wright as a sanction for violating discovery orders. He declined to penalize the defendant's legal counsel.

Wright's attorneys with the Rivero Mestre law firm did not return requests for comment by press time.

Matthew Kohen, the co-chair of Carlton Fields' blockchain and digital currency practice, said the court demonstrated "sophistication" with its order in light of the convoluted nature of bitcoin's history and the case.

"As the court recognized there were some inconsistencies with Dr. Wright's testimonies," Kohen said, calling the saga surrounding Wright, Nakamoto and bitcoin's origins "movie-like."

Carlton Fields attorney Matthew Kohen. Courtesy photo

Kohen said, "This magistrate judge, who I'm sure had no prior interaction with bitcoin prior to this case, picked up on a lot of the same things bitcoin commentators picked up on, which I'm sure is not a coincidence."

 

Kleiman's legal counsel, Andrew Brenner of Boies Schiller Flexner and Roche Freedman partner Vel Freedman, expressed satisfaction with the decision in statements to the Daily Business Review.

"After giving all parties a full and fair opportunity to present evidence, the court issued a thorough and well-reasoned opinion,'' Brenner said.

"The Kleiman family has waited a long time to recover assets that should have been returned to it shortly after Dave's unfortunate death in 2013,'' Freedman said. He called the ruling "an important step in the right direction.''

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