A Bitcoin prospector, who became a billionaire following his involvement in cryptocurrency during the early stages of its life, has been forced to pay $5 billion to his deceased business partner’s estate.
Craig Wright, self-proclaimed co-inventor of Bitcoin, has been ordered to give half of his Bitcoin assets to the estate of his late business partner, David Kleiman.
David Kleiman’s estate sued Wright, an IT Security Consultant, for allegedly withholding shared bitcoin holding assets when Kleiman died in 2013.
The estate claims that the pair were business partners, mining Bitcoin together from its inception in 2009 through to 2013.
A US District Court in Florida agreed with the estate, decreeing that half of the mined Bitcoin and any other consequent intellectual property from the time should reside with the estate.
Although it is difficult to quantify and validate the exact amount of bitcoin owed to Kleiman’s estate, it is speculated that the number could rise to 500,000 Bitcoin, with an estimated value of more than $5 billion.
Since the ruling, Wright has alleged that he is unable to release a lot of the crypto assets to Kleiman’s estate until at least 2020.
Wright claims to have set up an untouchable encrypted file for the majority of the Bitcoin mined by the pair in 2009 and 2010 to avoid criminals involved with economic crime and drug trafficking from laundering their ill-gotten gains in cryptocurrency.
Furthermore, the blind trust and encrypted key was split into slices that will not be reassembled until January 2020; a claim the residing Judge was reluctant to give credibility.
This is not the first time encrypted keys have proved problematic during inheritance related issues. Due to the lack of legislation and regulatory concern regarding how bitcoins are passed on to beneficiaries following an investor’s death, it is estimated that 3.7 million bitcoins have been lost. At the current exchange rate, this is worth up to £18.5 billion.
Although cryptocurrency has seen erratic fluctuations over the past decade, it continues to be a lucrative investment, with one Bitcoin currently worth £2,600. For those that were mining these coins at the infancy of cryptocurrency, their digital wallets can be worth millions of pounds from very little initial investment.
Whilst many may have entered the digital version of the Wild West, few have considered the inheritance implications associated with this type of technology/currency.
Every investor in cryptocurrency deposits their bitcoin in a cryptocurrency wallet or ‘cold storage wallet’ if their wallet is stored on a hard drive outside of the internet, with each wallet requiring a private key to access the contents.
The private key equates to a permanent password, created when you open the digital wallet. However, the password is vulnerable as it is the only barrier protecting the online currency from attack. It should therefore be kept as secretly as possible to avoid theft which makes passing on this asset after death overly complex when using conventional methods.
Judge Bruce Rheinhart, presiding judge in the case, commented:
“During his testimony, Dr Wright’s demeanour did not impress me as someone who was telling the truth. When it was favourable to him, Dr Wright appeared to have an excellent memory and a scrupulous attention to detail. Otherwise, Dr Wright was belligerent and evasive.”
Whilst cryptocurrency is still so unknown, how difficult is it to effectively administer an estate with Bitcoin? Will these digital inheritance issues increase in the future?
