Scream These Facts’: Miami-Dade Attorneys Trade Barbs in $11.4 Billion Bitcoin Lawsuit
July 24, 2018 |
A case in Southern District Court of Florida spans continents, makes claims for billions of dollars, and centers on one of the most pressing mysteries among cryptocurrency users.
Neither side is holding back in a multibillion-dollar lawsuit playing out in federal court in Miami-Dade. Their pleadings are relentless — 52 in the last five months — and riddled with barbs in what has become one of the most visible fights over bitcoin in the United States.
Now, it is up to U.S. District Judge Beth Bloom to decide whether the complaint will survive a motion to dismiss. To help persuade her, each side sicced a team of litigators — and their best prose — on the problem.
“We do our best to put Plaintiff’s secondhand allegations into an orderly narrative, taking as true — only for purposes of this motion — the amended complaint’s meatless gruel lightly seasoned with hearsay, stolen emails, information published on unreliable internet web sites, and improperly leaked transcripts of secret Australian government investigative interviews,” defense attorneys from Rivero Mestre in Miami wrote in a motion asking the judge to throw out the lawsuit.
Plaintiffs counsel from Boies Schiller Flexner shot right back: Their pleadings call the defense’s argument an “overdone characterization” that ignored that the complaint’s allegations came largely from the defendant’s own admissions. They argue, for instance, that their client’s relative played a pivotal role in creating bitcoin in 2009 — a claim the defendant has publicly made for years.
So the Boies Schiller lawyers, Devin “Velvel” Freedman and Kyle Roche, penned a pleading to discredit the defense’s argument that the case does not belong in a Florida courtroom. “These arguments are classic red herrings,” they wrote in a memorandum in opposition to the defendant’s motion to dismiss the amended complaint.
The memorandum goes on to suggest Wright has repeatedly committed fraud, having taken “unconscionable advantage of plaintiffs through material omissions and false promises,” as well as allegedly proffering “false testimony to this court.”
The claims wagered by the plaintiff have been met by the defense’s own literary flourishes and accusations that Ira Kleiman only filed suit because he didn’t have the codes to access his brother’s bitcoins.
“The complaint and its exhibits fairly scream these facts, but plaintiff nonetheless tries to shakedown Dr. Wright for $11 billion or more,” one defense filing reads.
The litigation has sparked national interest.
“As this story unfolds, it will be amazing to watch,” said David Silver, a Coral Springs-based attorney who specializes in cryptocurrency litigation, but is not involved in the bitcoin suit. “I’m happy to grab my popcorn and see what happens.”
Who is Satoshi Nakamoto?
The suit centers on allegations that 47-year-old Australian entrepreneur Craig Wright asserted control of more than $11.4 billion in bitcoin, the best-known and most valuable digital or cryptocurrency — a fortune that should have allegedly gone to a South Florida computer security expert.
On the opposing side is the estate of Dave Kleiman, a technology security expert who died in 2013 of complications from a staph, or MRSA, infection.
In 2015, Wright identified himself and Kleiman as Satoshi Nakamoto, the oft-discussed but never-heard-from creator of bitcoin, which has dominated conversations about cryptocurrency. Some observers are skeptical, but attorneys following the litigation say the case has the potential to unmask Nakamoto, or disprove rumors the mysterious inventor was really a pseudonym for a two-man team.
“Forgetting the cryptocurrency aspect of this case, the allegations are simply fascinating as alleged,” Silver, founding partner at Silver Miller, told the Daily Business Review.
If the claim is true and the two men were Nakamoto, Kleiman should have been worth billions. But his relatives claim Wright took control of all the assets.
“What cannot be dismissed, however, is the fact that Mr. Wright and Mr. Kleiman were early adopters of bitcoin and business partners,” Silver said.
Kleiman’s brother, Ira, filed suit as his personal representative against Wright in the U.S. District Court for the Southern District of Florida. He alleged Wright absconded with billions of dollars in bitcoin and intellectual property that would have belonged to Kleiman. In a court filing dated May 14, Kleiman’s estate alleged Wright wrongfully took control of the assets and committed fraud in order to retain oversight. The suit claims that when he died, Kleiman was entitled to up to 1.1 million bitcoins, worth more than $11 billion.
Given the amount of money at stake, the suit has become tense. Allegations of perjury and disagreements over jurisdiction were flying freely.
Wright — through his attorneys Andrés Rivero, Jorge Mestre, Alan Rolnick and Daniel Sox of Rivero Mestre — has moved to dismiss the lawsuit. His motion describes the suit as “inherently and fatally infirm,” claiming that the plaintiff lacks standing, has not adequately asserted jurisdiction over Wright, and that Kleiman’s estate and attorneys have not provided conclusive evidence of a partnership between Wright and Kleiman.
But the complaint levied against Wright holds that he and Kleiman jointly mined bitcoin together from 2009 until Kleiman’s passing about four years later. To help bolster its argument that the U.S. District Court is the correct jurisdiction, it adds that the men mined the coins in part through an American business — W&K Info Defense Research, a limited liability company that Kleiman formed in Florida.
“Regardless of its exact ownership structure, the purpose of W&K was clear,” the complaint reads. “Craig and Dave created it to mine bitcoin and develop intellectual property.”
Plaintiffs counsel, Roche, said the case is where it belongs — before a U.S. federal judge.
“Dr. Wright’s motion to dismiss goes out of its way to use hyperbolic language deriding the allegations in the complaint and to claim the case belongs in Australia,” Roche told the Daily Business Review. “But he fails to appreciate that the amended complaint is largely supported by his own admissions and that his supposed Australian witnesses know nothing about the relevant issues in the case, which are all centered in Florida. … At bottom, the claims are asserted by Florida citizens, in Florida, over assets created in Florida, for injuries occurring in Florida, and for breaches of fiduciary duties owed to Florida citizens. The case clearly belongs here.”
The suit alleges that following Kleiman’s death, Wright “instituted an elaborate scheme to assert dominion over Dave’s and W&K’s bitcoin and intellectual property” in order to claim research and development tax credits in his native Australia.
The Australian Tax Office had been conducting a yearslong investigation of Wright for potential fraud and tax evasion when he allegedly claimed control of Kleiman’s W&K assets and the company’s intellectual property in filings with the Australian government. During this period, the Florida plaintiff claimed, Wright forged Kleiman’s signature on documents that ostensibly transferred his W&K assets to Wright. The complaint also alleges that Wright reached out to Ira Kleiman in order to mislead him about his late brother’s stake in W&K, as well as use him as a pawn in his fight with the Australian Tax Office. Shortly thereafter, Australian tax authorities raided Wright’s home on Dec. 9, 2015. He has resided in London ever since.
Plaintiff pleadings suggest Wright perjured himself during those proceedings. They allege Wright contradicted himself in two sworn statements to different courts. In Australia, he claimed in documents to hold a 50 percent stake in the company, and also identified himself as W&K’s “lead researcher.” But to derail Kleiman’s claim in Florida, he later said he was never a shareholder in the company.
“Craig’s boldfaced misrepresentations and perjury before this court constitute a continuation of his grand fraud to unlawfully take plaintiffs’ assets,” the complaint reads. “Said differently, Craig’s latest fraud on this Florida court is simply one more action he’s taken … to defraud Dave’s estate and W&K.”
However, despite immense dollar-value assigned to the litigation, this case is likely to remain insular in its impact, despite cryptocurrency emerging as a hot-button issue and largely unexplored area of law.
“All of the lawsuits I’m involved in … are about investors in cryptocurrency technology who have been misled about the technology they invested in,” Silver added. “This is just two people fighting.”
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Scream These Facts’: Miami-Dade Attorneys Trade Barbs in $11.4 Billion Bitcoin Lawsuit
