The Tulip Trust
Dr Wright claimed that, by August 2011, he was facing the full force of the ATO investigations and, due to his concerns about them seizing his assets (including IP rights), he decided to put them out of his direct control. He says he did this by putting in trust all these assets, including bitcoin he claims to have mined since 2009 {Wright1, [138-140] {E/1/26}}. He claimed that he stored “terabytes” of research data on a hard drive and put it beyond his control by encryption with a Shamir Sharing Scheme involving 15 key slices held by various individuals, with eight slices needed to give access.
It is not necessary to relate Dr Wright’s various accounts about the Tulip Trust in full. Suffice to say that I agree with COPA’s submission that his account of the Tulip Trust appears to have been refashioned successively in the ATO proceedings, in Kleiman, in Granath and in this action. His evidence about the Tulip Trust in cross-examination {{Day6/179:2} - {Day6/182:9} and {Day7/8:5} - {Day7/54:12} in particular} was very confused and contradictory and parts were incredible.
For example, the materials provided to the ATO to demonstrate the existence of the Trust were the two versions of the supposed email (with trust document attached) from Mr Kleiman dated 24 June 2011 {L7/382/1} and 17 October 2014 {L9/218/1} respectively. A different Deed of Trust dated 23 October 2012 and supposedly between Wright International Investments Ltd and Tulip Trading Ltd was relied upon by Dr Wright in the Kleiman litigation {L8/17/1}.
In the course of the ATO investigations, Dr Wright was asked to prove his control of several tranches of Bitcoin addresses, using the message signing feature of Bitcoin Software. He failed to do so, and came up with a series of excuses, involving transfers and loss of keys {Decision concerning C01N Pty Ltd of 21 March 2016 {L9/382/45}, at [247-261]}. Dr Wright told the ATO that Bitcoin in three addresses supposedly lent to him had not been spent and had been returned to Tulip Trust, including Bitcoin in an address known as 16cou {Decision concerning C01N Pty Ltd of 21 March 2016 {L9/382/49}, at [266.2 and fn. 241]}. On 16 May 2019, the owner of that address signed a message on social media stating that the address did not belong to Satoshi or to Dr Wright and “Craig is a liar and a fraud” {L17/382/46}.
In Kleiman, Dr Wright was ordered (several times) to produce a complete list of all bitcoin that he mined prior to December 31, 2013. Dr Wright claimed he was unable to comply because the information was in the Tulip Trust, encrypted using a Shamir Sharing Algorithm, which he could not decrypt since he did not have all the necessary decryption keys. After an evidentiary hearing, Magistrate Judge Reinhart had to rule on whether Dr Wright had proved he was incapable of complying with the Court’s Orders. His ruling dated 27 August 2019 {L15/207/1-29} relates how Dr Wright changed his evidence on (a) the creation of the Tulip Trust (and the Judge found the supposed Deed of Trust document presented by Dr Wright had been backdated), (b) the nature of the trust (that it was a ‘blind’ trust and he was not a trustee, yet three weeks later he stated in a sworn declaration that he was a trustee (of a blind trust!), (c) the trust assets (whether the trust contained bitcoin or, as he later asserted, the trust contained an encrypted file with the keys to the bitcoin, not the bitcoin itself), and (d) how the trust assets could be recovered. Dr Wright had given evidence that he had given away a controlling number of the key slices to David Kleiman (by then deceased), which was why he could not decrypt the file that controlled access to the Bitcoin. According to Dr Wright’s evidence, unlocking the file depended upon a bonded courier appearing on an unknown date in January 2020 with the decryption keys, and if the courier did not appear, then Dr Wright would have supposedly lost billions of dollars’ worth of bitcoin, a story which Judge Reinhart considered ‘Inconceivable’ {L15/207/19}. Generally, Judge Reinhart did not believe Dr Wright and also found that documents presented by Dr Wright to support his position in the litigation had been altered and were fraudulent. Other documents conflicted with his evidence. On the evidence he heard, Judge Reinhart found the Tulip Trust did not exist {L15/207/21}.
COPA made it clear that they did not rely (and did not need to rely) on Judge Reinhart’s findings, but on his ruling as a record of Dr Wright’s story.
By way of a further example, in a sworn declaration he made in Kleiman, Dr Wright identified David Kleiman as one of the trustees of the Tulip Trust {L15/51/2, at [7]}, yet under cross-examination before me, he said he was not {Day7:21:8}. When I put the inconsistency to him, he came up with a story about being ordered by Judge Reinhart to answer the question even though he did not know {Day7:21}.
Other glaring inconsistencies in Dr Wright’s evidence about the Tulip Trust were the following:
The existence of different Trust documents (mentioned above).
His claim that a requisite number of key slices were reassembled in early 2016, giving access to a part of the drive containing private keys to the early Bitcoin blocks (or perhaps an algorithm from which those keys could be produced) {Wright1, [187] {E/1/33}}. This claim was necessary to make his ‘trust’ story consistent with his participation in the 2016 proof sessions, yet is completely at odds with his evidence in Kleiman about having to wait until January 2020 for the bonded courier to arrive with the key slices.
The fact that the Trust document relied upon in Kleiman dated 23 October 2012 was supposedly between Wright International Investments Ltd and Tulip Trading Ltd, yet Dr Wright only acquired Tulip Trading Ltd as an aged shelf company in 2014.
His claim to have put all his assets (including bitcoin and IP in research documents) beyond his own use, yet, on his account, both he and the staff in his companies (including nChain) continued to have access and to use all these documents. For example, it was never explained how he and his staff could have continued to use (and thereby supposedly be responsible for altering the metadata of) the documents which Dr Wright produced as precursor work to the Bitcoin White Paper, when they necessarily would have been assets in the trust supposedly beyond his use.
Finally, if all the research prior to 2012 had been put beyond his use, one might have thought that he would have had to have mentioned this in 2015 when securing funding from Mr MacGregor for the continuation of his research activities at nChain. Of course, nothing to that effect was mentioned and the existence of the trust did not appear to have posed any barrier at all.
Mr Madden found a number of Tulip Trust and Tulip Trading Ltd documents to be ‘inauthentic’ or, as COPA put it, to bear signs of having been forged in 2014/2015 {see Appendix PM14}.
Overall, there is strong evidence and I find that the Tulip Trust was another invention of Dr Wright’s, initially as part of an attempt to shield assets from a possible bankruptcy in Australia. Having invented it, he attempted to use it in Kleiman to avoid having to identify the bitcoin he supposedly owned, yet that attempt failed.