Dr Wright’s dealings with the ATO formed a significant part of his life from 2010 to 2016, and they were important to his finances. Indeed, in August 2014, the ATO estimated that 94% of the income he had received in the previous two years had come from tax refunds to his companies {ATO Submission at {L9/274/9}, [36]}. This forms the backdrop for Dr Wright in 2015 needing money and receiving a bailout which involved him staking a claim to be Satoshi.

These dealings may be divided into two phases. First, from early 2010 he was subject to enquires in relation to his personal tax return for the 2008/9 tax year, which were resolved by agreement in early 2013. Secondly, he had contentious dealings with the ATO over the period from 2013 to 2016 which primarily concerned (a) claims for repayment of goods and sales tax (“GST”) in business activity statements (“BASs”) for several companies; and (b) claims for R&D credits by various of his companies. It is in the second set of dealings that Dr Wright first appears to have made claims of mining and dealing in Bitcoin. It was also in these claims that he said he had worked on business ventures with Dave Kleiman, a US computer forensics expert (who died on 26 April 2013).

As regards Dr Wright’s first set of dealings with the ATO, he calculated his capital gain for the 2008/9 year by claiming a CGT event resulting from sale of IP to related parties (Information Defense Pty Ltd and Integyrs Pty Ltd) for sums totalling AU$ 2,235,000. The IP sale contract on which he relied in relation to the sale to Information Defense Pty Ltd referred to IT security projects entitled Spyder, Redback, TripleS and Black Net, and cited a DeMorgan R&D plan {L4/462/1}. This is significant because Dr Wright later produced documents (which I have found to be forged) to suggest that his Spyder and BlackNet projects involved elements of Bitcoin, whereas this and other contemporaneous documents show that they did not.

The ATO decided that Dr Wright’s dealings with his companies carried no actual liability and were attempts at wash transactions. It also rejected claims for deduction of various work-related expenses. It imposed administrative penalties for recklessness in completing the tax return and for false and misleading statements {Interim Report at {L7/431/119}. Dr Wright submitted notices of objection, which were rejected by the ATO, including on the basis of failure to substantiate the IP sales {Reasons for Decision at {L7/431/9}. He applied for review to the Administrative Appeal Tribunal. The result was that the ATO agreed to lift the administrative penalty and to allow various expense deductions {letter from the ATO dated 15 January 2013 {L8/117/1}, but it does not appear that the CGT issue was specifically addressed.

Dr Wright’s second set of dealings with the ATO (from 2013) involved a number of companies, some established in 2013, and they included claims relating to dealings in Bitcoin. The outcome of these dealings was a set of decisions in which his claims for GST refunds and R&D tax offsets were refused, and a number of his companies were wound up.

In 2013, Dr Wright applied to the ATO for private rulings, including one application by which he claimed to have begun mining Bitcoin in 2009 and to have invested in computer equipment for that purpose. The application appears to have been for decisions on the tax treatment of transfers of Bitcoin {decision letter dated 23 December 2013 {L8/305/1}}. In early 2014, he made a further application for a ruling as to the viability of a tourist tax refund of GST in relation to sale to him of rights in a Bitcoin address by Hotwire PE (one of his companies) for US$19.5 million. The ATO decided against him {letter of 28 February 2014 {L8/422/1}}.

In cross-examination, Dr Wright claimed that the ATO private ruling was based on material he had provided to them between 2009-10 and that it positively showed that he had been mining Bitcoin then {Day7/58:25}. That is a total fabrication, as the ATO private ruling was in response to a request of June 2013 and based on assumed facts as set out in the request {L8/309/2}. There is no evidence at all that Dr Wright told the ATO before 2013 that he had been mining Bitcoin in 2009/10, as set out in the request at {CSW/67.1/2} (which makes clear that Dr Wright’s mining claim was an assumed fact put forward by him in 2013) and as also made clear in the ruling.

For the tax quarter ending September 2013, Dr Wright’s companies submitted claims for GST refunds: AU$2.8 million in respect of Cloudcroft Pty Ltd; AU$3.7 million in respect of Coin-Exch Pty Ltd; AU$4.1 million in respect of Denariuz Pty Ltd; and AU$3.4 million in respect of Hotwire Pre-Emptive Intelligence Pty Ltd. These related to supposed acquisition of rights to software held by the Wright Family Trust (trading as DeMorgan). Dr Wright subsequently claimed that all consideration for the acquisition of the software had been given by transfer of equitable interests in a Seychelles trust (the Tulip Trust), whose trust property comprised 650,000 BTC.

He and his advisers described a complex scheme involving Dr Wright acquiring software and IP rights from W&K Information Defense Research LLC (“W&KID”) (a company founded by himself and Mr Kleiman) and another company; the software and rights being subject to repeated assignments in return for rights in Bitcoin; and the assignments being ultimately financed by a Bitcoin loan dated 23 October 2012 from the Tulip Trust to Dr Wright (with the loan agreement executed by Dr Wright’s associate, Uyen Nguyen, for a company acting for the trust). The ATO took the view that this scheme involved various sham transactions {ATO Decision at {L16/456/1}; Preliminary GAAR Submission dated 29 August 2014 {L9/274/1}}.

Dr Wright’s corporate tax issues from 2013 included claims in relation to the 2012/13 year for C01N Pty Ltd. The claims of over AU$ 7 million were ultimately rejected in a detailed decision of 11 March 2016 {L11/354/1}. The principal claims were (a) for sums supposedly paid to W&KID for operating a supercomputer; and (b) AU$ 2 million for materials and assistance supposedly received from Professor David Rees, a UK-based mathematician and veteran of Bletchley Park.

812.1.

As to the former claim, Dr Wright sought to establish proof of payment by describing a byzantine set of equity and loan transactions with related entities and the Tulip Trust. In that connection, he provided two copies (dated 24 June 2011 and 17 October 2014) of an email from David Kleiman attaching a document under which Mr Kleiman supposedly agreed to hold 1.1 million Bitcoin on trust for Dr Wright. The ATO found a series of anomalous features in this account and Dr Wright’s documents.

812.2.

As to the latter claim, Dr Wright maintained that payment had been made to Professor Rees by way of Bitcoin rights. However, evidence from Professor Rees’s daughters established a series of falsehoods in the claim. For instance, they told the ATO that, at the time when Dr Wright claimed Professor Rees had made a Bitcoin transaction (after 28 June 2013), Professor Rees was in a nursing home and had stopped using a computer at all. None of the daughters was aware of Dr Wright and they all disputed the notion that he had sold research documents. It is noteworthy that, since 2013, Dr Wright has maintained a claim that Professor Rees gave him notes which assisted in his work on Bitcoin more generally {see Dr Wright’s book, “Satoshi’s Vision”, published in 2019, at {L15/96/18}}. In cross-examination, Dr Wright attempted to maintain his account that he had engaged Professor Rees for consulting services without any of his family being aware. Dr Wright sought to evade the question when it was put to him that Professor Rees was in a nursing home, in poor health and not using a computer when Dr Wright had supposedly made a Bitcoin transaction with him {Day7/61:15} - {Day7/65:20}. It is also telling that Mr Yousuf, a director of C01N, had never heard of Professor Rees, who had supposedly provided valuable and costly consulting services to the company {Day9/135:5}.

Dr Wright’s corporate tax disputes also included a number in relation to tax returns of his companies for the 2013-14 year. These were rejected in a series of decisions of March and April 2016, concerning respectively C01N Pty Ltd, Denariuz Pty Ltd, Zuhl Pty Ltd and Integyrz Pty Ltd. The disallowed claims totalled nearly AU$30 million. In broad terms, they included (a) R&D activities involving supposed payments for provision of computing services from a facility located in Panama; (b) expenses supposedly incurred for acquisitions from Prof Rees; and (c) losses due to reduction in value of Bitcoin assets. In his dealings with the ATO, Dr Wright claimed to have mined 1.1 million Bitcoin in 2009 and to have transferred it to Mr Kleiman. Once again, he told a story of the Tulip Trust entering into a deed of loan (executed by Uyen Nguyen). He also said that the Bitcoin could be accessed under a Shamir Secret Sharing Scheme, whereby private keys were split into segments (held by Dr Wright, Mr Kleiman and Ms Nguyen) and needed to be reconstituted. It appears to have been in these tax claims that Dr Wright first claimed to have been involved in Bitcoin from a very early stage.

In his dealings with the ATO, Dr Wright was found to have backdated documents. For example, he supplied a Deed of Assignment and Charge and “invoice” documents bearing the ABN of Wright Family Trust (trading as DeMorgan) from a time before the date when it had been allocated an ABN {ATO Decision at {L11/362/10}, at [52ff]}. Dr Wright sought to explain this on the basis that “the trustee entered into the transactions on the understanding that an ABN had been obtained prior to that date”, though he later accepted backdating the invoices {{L9/140/29} at line 8: “I ended up doing the backdating because I thought it was correct”.}.

On Dr Wright’s own account, the ATO investigations led to him running up very large legal bills with the Australian firm, Clayton Utz, which he has put at over £1 million. In July 2015, Clayton Utz ceased acting for Dr Wright on the basis that he had submitted apparently false copies of emails with the ATO {email from Clayton Utz to Ramona Watts, forwarded to Dr Wright on 4 July 2015 {L10/66/1}. See also letter from the firm to Dr Wright dated 6 July 2015 {L10/68/1}}. The differences between the emails submitted by Dr Wright and the copies held by the ATO were “intended to support the position Craig wanted to advance.”

Under cross-examination, Dr Wright attempted to explain away the ATO’s findings by saying that “people sent in false information and fabricated documents to them” {Day7/98:10}, but this explanation is not convincing at all bearing in mind that the problem with the emails was a conflict between emails held by ATO officials and versions submitted by Dr Wright. He tried to explain away the fact that his own solicitors (Clayton Utz) lost confidence in him by saying that Mr Sommer had not shared that view, but that was not consistent with the fact that Mr Sommer wrote the email expressing his serious concern about Dr Wright’s conduct, as well as writing and signing the letter confirming the firm ceasing to act {Day7/98:6} - {Day7/102:3}.