‘They will drain all I have if they can’: the ATO and the bitcoin ‘billionaire’
Years after the ATO raided his Sydney home, a London court has found Dr Craig Wright was not the founder of bitcoin, despite allegedly claiming otherwise.
“They lost evidence and use my temper against me. I hate their lies. I did everything right and I am STILL punished,” wrote Wright in a 2012 email in reference to the ATO.
The email was referenced in a US lawsuit between Wright and Kleiman’s brother, Ira Kleiman, who claimed he was entitled to a half-share of the 1.1 million bitcoin (worth approximately $120 billion today) believed to have been owned by Dr Wright.
According to the minutes of a 2014 meeting between the ATO and Wright’s bookkeeper, Wright’s 1.1 million bitcoin represented “around 10 per cent of all the [b]itcoins out there,” adding “Mr Kleiman would have had a similar amount.”
It has been claimed that only the creator of bitcoin – referred to as ‘Satoshi Nakamoto’ – could have ‘mined’ (or generated) so large a stake.
For years, Wright had stoked rumours he was Nakamoto and that he had authored bitcoin’s founding document - the ‘Bitcoin white paper.’
Recently, a conglomerate of cryptocurrency companies, the Crypto Open Patent Alliance (COPA) brought an action in the UK against Wright to prevent him from continuing to benefit from his self-proclaimed inventor status.
Jonathan Hough KC, who represented COPA, argued the claim was a “brazen lie and elaborate false narrative supported by forgery on an industrial scale.”
Justice James Mellor, the presiding high court judge, issued a flash oral verdict pending a further written judgment, in which he claimed the evidence was “overwhelming” that Wright was not Nakamoto.
In the US case, however, Wright found some success, as Ira Kleiman was denied his claim over the bitcoin stash.
Had Wright been unsuccessful, he likely would have had to have proven his control over the stash by splitting it with the Kleiman claimants. While the outcome might have favoured Wright, the lawsuit exposed damaging allegations of fraud and dishonesty in his dealings with the ATO.
Ira Kleiman alleged, for example, that Wright “provided fraudulent contracts to the ATO in an attempt to substantiate his ownership of bitcoins and IP assets that belonged to [David Kleiman].”
Further, though a jury voted against awarding half the 1.1 million Bitcoin to Ira Kleiman, it did award $100 million in IP rights for a joint venture between Kleiman and Dr Wright. An additional $43 million has since been added to the award amount.
In late 2015, the AFP issued warrants to the ATO to allow their officials to search Wright's Sydney home and offices. A spokesperson said the raid was not triggered by the Nakamoto claims.
Wright was associated with three technology companies, all of which have since been wound up.
According to documents obtained by The Australian Financial Review Weekend, the ATO audited and rejected approximately $3.3 million in research and development tax claims made by those companies, in addition to a $2 million penalty to one firm.
Wright denied the ATO's allegations though, the Financial Review reported a spokesperson said he did not contest the ATO’s winding up of the claiming companies.
That spokesperson said that no prosecution had been brought following the ATO raid as far as they were aware, despite an ATO investigator having referenced a criminal investigation related to a person of the same name as Wright to Kleiman’s lawyers.
“The ATO has infinite resources and has had ample opportunity to pursue the allegations in the intervening period but has not done so,” said the spokesperson.
As of 2022, over one million Australians owned at least one form of cryptocurrency according to research from Roy Morgan. ASIC said it is the second most common type of asset held in Australia, behind shares.
Last year, the Federal Government released a proposed framework for digital asset platforms regulation. The idea is that digital asset platforms would be integrated within the existing financial services regulatory framework.
The ATO requires that tax is generally paid on cryptocurrency in the form of CGT, given it is seen as an asset and not money. That said, the ATO has yet to make a definitive ruling on its regulatory approach, which raises questions over enforceability.
Senator Andrew Bragg, chair of a 2021 cryptocurrency senate inquiry, said it was crucial to strike a balance between innovation and consumer protections. This model of moderate regulation has largely defined Australia’s regulatory approach.
That said, many believe that regulation is needed to facilitate growth in the Australian crypto market. As noted in the inquiry’s final report, a comprehensive regulatory framework lends a sense of certainty to market participants.
In January, ASIC deputy chair Sarah Court said the watchdog would continue to prioritise protecting consumers from risky cryptocurrency trading, adding it would “test the full boundaries” of the consumer laws.
Last week, the Federal Court rejected claims by ASIC that Finder Wallet’s crypto ‘Earn’ product was a debenture requiring a financial services licence and therefore existed “without the benefit of important consumer protections,” said executive director Tim Mullaly.
ASIC has not confirmed whether it will appeal the decision.
