The Bitcoin billionaire

Sydney security expert Craig Wright seemed to be the elusive founder of a digital currency. But would he ever cash in?

THE WEEKEND AUSTRALIAN MAGAZINE, JUNE 24-25, 2017

STORY: ANDREW O’HAGAN

Ten men raided a house in Gordon, a north shore suburb of Sydney, at 1.30pm on December 9, 2015. Some of the federal agents wore shirts that said Computer Forensics; one carried a search warrant. They were looking for a man named Craig Steven Wright (pictured above, last year), who lived with his wife, Ramona, in St Johns ­Avenue. The warrant was issued at the behest of the tax office. Wright, a computer ­scientist and businessman, headed a group of companies ­associated with crypto-currency and online ­security. But he and his wife were gone, and the agents entered the house by force.

As one set of agents scoured his cupboards and emptied out his garage, another entered Wright’s main company HQ in nearby North Ryde. They were looking for originals or copies of material held on hard drives and computers; they wanted bank statements, mobile phone records, research papers and photographs. The warrant listed ­dozens of companies whose papers were to be scrutinised, and 32 individuals. The name “Satoshi Nakamoto” appeared sixth from the bottom.

Some of the Wrights’ neighbours say Ramona was friendly but her husband was weird — to one he was “Cold-Shoulder Craig” — and their landlord wondered why they needed so much extra power: Wright had what appeared to be a whole room full of generators at the back of the property. This fed a rack of computers he called his “toys”; he had taken them away the day before the raid. A reporter had turned up at the house and Wright, alarmed, had phoned ­Stefan, the man advising them on what he and Ramona were ­calling “the deal”. Stefan immediately moved the couple into a luxury apartment in Sydney’s CBD. They would soon be ­moving to England anyway, and all parties agreed it was best to hide out for now.

On December 9, after their first night in the new apartment, Wright woke to the news that two articles, one on the website Gizmodo, the other in the tech magazine Wired, had come out overnight fingering him as the person behind the pseudonym Satoshi Nakamoto, who in 2008 had published a paper describing a “peer-to-peer ­electronic cash system” — a technology Satoshi went on to develop as Bitcoin. Reading the articles on his laptop, Wright knew his old life was over.

Technology is constantly changing the lives of people who don’t really understand it — we drive our cars and care nothing for internal combustion — but now and then a story will break that captures the imagination of the general public. I was one of the people who had never heard of Satoshi Nakamoto or the blockchain — the invention underlying Bitcoin, which verifies transactions without the need for any central authority. It was news to me that this was the biggest thing in computer science, and that the banks were grabbing onto the blockchain as the foundation of a future “internet of value”. But to those who are much more invested in the world of tomorrow, the Satoshi story has the lineaments of a modern morality tale quite independent of stock realities.

A few weeks before the raid on Wright’s house, when his name still hadn’t ever been ­publicly ­associated with Satoshi Nakamoto, I got an email from a US lawyer called Jimmy Nguyen, looking to ­contract me to write a biography of Nakamoto. “My client has acquired life story rights from the true person behind the pseudonym Satoshi ­Nakamoto, the creator of the Bitcoin protocol,” he wrote. “The story will be [of] great interest to the public and we expect the book project will generate ­significant publicity and media coverage once Satoshi’s true identity is revealed.” Journalists, it turned out, had spent years looking for ­Nakamoto, who had disappeared in 2011. His identity was one of the great mysteries of the internet and a holy grail of investigative reporting.

I wanted to be careful. I had to find out exactly what these clients were looking for and why they’d come to me. This information came slowly, and I let the deal remain vague; I signed nothing while I worked out who they were.

The “Stefan” who was hovering during the raid on Craig Wright’s house and office is Stefan ­Matthews, an Australian IT expert whom Wright had known for 10 years since they both worked for the online gambling site Centrebet. In those days, around 2007, Wright was often hired as a security analyst by such firms, deploying his skills as a computer scientist (and his experience as a hacker) to make life difficult for fraudsters. Wright was an eccentric guy, Matthews remembered, but known to be a reliable freelancer. He told me that in 2008 Wright had asked him to look at a ­document written by someone called Satoshi Nakamoto, but Matthews had been busy at the time and didn’t read it for a while. He said that Wright was always trying to get him interested in this new venture called Bitcoin.

A few years later, however, Matthews realised the document he’d been shown was, in fact, an original draft of the famous white paper by Satoshi Nakamoto. (Like the governments they despise, bitcoiners deal — when it comes to ideas — in “white papers”, as if they were issuing laws.)

By 2015, Wright was in financial trouble: a number of businesses he had founded were ­failing, and he was embroiled in a dispute with the ATO. By then, Matthews had become friendly with Robert MacGregor, the boss of a ­Canada-based money-transfer firm called nTrust. ­Matthews encouraged MacGregor to come to Australia and assess Wright’s value as an investment opportunity. Matthews told ­MacGregor that Wright was almost certainly the man behind Bitcoin.

The maths behind the technology can be mind-boggling, but essentially Bitcoin is a form of digital money in which the flow and the integrity of the currency is guaranteed by its appearance on a shared public ledger, updated and refreshed with every ­single transaction, a “public history” that cannot be corrupted by any single entity. It works by consensus and is secured by a series of private and public encryption keys. Blockchain technology is a hot topic in computer science and ­banking at the moment, and hundreds of millions of dollars are being invested in such ideas. Thus ­Matthews’ proposal. MacGregor came to Australia in May 2015, and after initial scepticism struck a deal with Wright the following month.

MacGregor says he felt sure that Wright was Bitcoin’s legendary missing father, and he told me it was his idea, later in the drafting of the deal, to insist that Satoshi’s “life story rights” be included as part of the agreement. The plan was to take Wright to London, set up a research and development centre for him and complete the work on his inventions and patent applications — and the whole lot would be sold as the work of Satoshi Nakamoto, who would be unmasked as part of the project. Once packaged, Matthews and MacGregor planned to sell the intellectual property for upwards of a billion dollars. Wright would prove he was Satoshi by using cryptographic keys that only Satoshi had access to — those associated with the very first blocks in the blockchain.

At this point, nobody knew who Craig Wright was but he appeared, from the initial evidence, to have a better claim to being Satoshi Nakamoto than anyone else had. He seemed to have the technical ability. He also had the right social ­history, and the timeline worked. The big proof was up ahead, and how could it not be specta­cular? It was then, four weeks after my first meeting with MacGregor, that Wired and ­Gizmodo reported that he might be Satoshi.

Craig Wright’s father, Frederick Page Wright, was a forward scout in Vietnam, serving with the 8th Battalion of the Australian Army. “He lost all his friends,” Wright told me when we eventually started meeting in London, “every single one of them” — and before long he was drinking and Wright’s mother eventually left him.

Craig’s favourite place as a kid was his grand­father’s basement, a paradise of early computing. His family say Ronald Lyman received the first degree awarded by the Marconi School of Wireless in Australia, and served in the army as a signals officer. They also say he later became a spy.

Lyman had an old computer terminal and a Hayes 80-103A modem that was used to connect to the University of Melbourne’s network. To keep Craig quiet while he worked, Pop, as the children called him, would let him write code. “I found this community of hackers,” Wright says, “and I worked out how to interact with them. I started building games and hacking other people’s games. In time, I’d be pulling apart hacker code, and eventually I did this for companies, to help them create defences against hackers.”

His mother, when I met her in Brisbane in March 2016, told me he was sometimes picked on at school. “He struggled,” she said, “but after a while I sent him to Padua College” — a Catholic boys’ school in Brisbane — “and he shone there. I mean, he was different. He used to dress up and he had an obsession with Japanese culture. He had big samurai swords.”

When he was 18, Wright joined the air force. “They locked me in a bunker,” he told me, “and I worked on a bombing system. Smart bombs. We needed fast code, and I did that.” When he was in his 20s a melanoma appeared on his back and he had several skin grafts. “This was after he got out of the air force,” his mother told me, “and when he recovered he was off to university, and it’s been degrees, degrees, degrees since then.” He went to the University of Queensland to study computer systems engineering. And over the following 25 years he would finish, or not finish (or finish and not do the graduation paperwork for) degrees in digital forensics, nuclear physics, theology, management, network security, international commercial law and statistics. After our first full interview, he went home to work on an assignment for a new course he was taking at the University of London, a masters in quantitative finance.

The question of how to take Bitcoin forward has been riven with opposing views, and after Satoshi disappeared in 2011 there was no central authority to lead the discussion or calm the waters. By increments, the task fell to Gavin Andresen, a Princeton graduate with experience in Silicon ­Valley. Andresen only gradually accepted the role of lead core Bitcoin developer. This is not an official designation and he appears to have got none of the thanks and all the flak, but by general ­consensus he is the most level-headed thinker in the Bitcoin world.

Andresen had been in touch with Satoshi in the early days and would have records of their conversations. He would presumably be able to ask Wright questions that only Satoshi could answer. In December 2015, after Wired published the story about Wright possibly being Satoshi, Andresen told the magazine he’d never heard of Craig Wright. But he began to believe in Wright once he started corresponding with him by email in early April. Within a week, Andresen was sufficiently convinced to get on a plane to London. He was ready to see Wright sign a message to him using the original Satoshi cryptographic keys.

It was late one afternoon when Wright, in the presence of Matthews and MacGregor, finally logged on to his laptop to do for Andresen what he had already done for me in a proof session at his home: sign a message with the key and have it verified. At that point, Andresen reached over to his bag and took out a brand-new USB stick and removed it from its wrapping. He took out his own laptop. “I need to test it on my computer,” he said.

Wright suddenly baulked. “I had vowed,” he told me, “never to show the key publicly and never to let it go. I trusted Andresen, but I couldn’t do it.” Matthews’ blood ran cold. “It was the only time during all the years that I thought: ‘Jesus Christ, has he been spinning us the whole time?’”

MacGregor, too, felt this was a very risky moment. He glanced at Matthews. They all felt Wright’s behaviour was ludicrous: he’d demonstrated that he was Satoshi and only had to let this be verified on Andresen’s laptop. End of story. But Wright spoke to me later in a way that showed his cypherpunk suspicion had reared its head: What if Andresen was a plant? What if the whole thing was a plot to rob him of Satoshi’s keys and exploit him or deny him?

Then, a compromise. A brand new laptop was purchased and Wright demonstrated, again, that he held Satoshi’s private key.

May 2, 2016. The day of reckoning, the day the media could name Satoshi. At 8am, Wright posted a blog about himself as Satoshi. At the same moment, Gavin Andresen posted a message to his blog, titled “Satoshi”. “I believe Craig Steven Wright is the person who invented Bitcoin,” it began. By midday the blog was receiving the wrong sort of attention. A number of researchers had studied what Wright had written and noticed that the explanation was fudged — worse than fudged, it was faked. Something that he said was signed with the Satoshi key had, in fact, been cut and pasted from an old, publicly available signature associated with Nakamoto. It was astonishing and the buzz quickly grew fierce.

Wright must have known, having been a cryptographer all his adult life, that his fraud would be spotted immediately. But when I asked him about it he said it wasn’t a fraud, it was a mistake. “I cut and pasted something just for the time being but knew I would change it later,” he said. “But then it went up.” That rang hollow to me. I believed at that point that he had misled his colleagues and tried to get out of being Satoshi, which isn’t necessarily the same thing as not being him.

The next day, I turned up at MacGregor’s office and found him sitting with Matthews in a dark meeting room. MacGregor said they were going to “flood the blog with evidence” and get Wright to transfer some of the Satoshi Bitcoin in a way that only someone in possession of Satoshi’s private keys could do. Over the next 24 hours, Wright agreed to move Satoshi’s Bitcoin and his blog advertised the fact. It said, “Extraordinary claims require extraordinary proof” and he was set to provide it.

The next day, May 4, Matthews was at Wright’s house organising the movement of Bitcoin to Andresen and also to a BBC journalist. The new (and final) proof session was intended to blow away the doubts, but many felt it was too late. Wright was worried about a security flaw in the early blockchain that would make it risky for him to move Bitcoin, exposing him to exploitation or theft. My sources later said Andresen understood the problem and confirmed it had been fixed. But Wright continued to worry and showed great reluctance about offering the final proof. Then he left the room abruptly and didn’t come back.

The next day, he sent me an email. It linked to an article headlined “UK law enforcement sources hint at impending Craig Wright arrest”. The article suggested that the father of Bitcoin might be liable, under the Terrorism Act, for the actions of people who used Bitcoin to buy weapons. Under the link, Wright had written an explanation: “I walk from 1 billion [dollars] or I go to jail. I never wanted to be out, but if I prove it, they destroy me and my ­family. I am the source of terrorist funds as Bitcoin creator or I am a fraud to the world. At least a fraud is able to see his family. There is nothing I can do.”

I am still not sure if Wright was faking his fear of the FBI. He’d never mentioned them to me before, and there seemed little evidence they were seeking to arrest him. Indeed they never have.

That afternoon, he closed down the blog — the one that was intended to lead cryptocurrency fans into a new era — but left a final posting: “I’m sorry. I believed that I could do this. I believed that I could put the years of anonymity and hiding behind me. But, as the events of this week unfolded and I prepared to publish the proof of access to the earliest keys, I broke. I do not have the courage. I cannot. When the rumours began, my qualifications and character were attacked. When those allegations were proven false, new allegations have already begun. I know now that I am not strong enough for this. I know that this weakness will cause great damage to those that have supported me … I can only hope that their honour and credibility is not irreparably tainted by my actions. They were not deceived, but I know that the world will never believe that now. I can only say I’m sorry. And goodbye.”

MacGregor, Matthews and Andresen still believe he is Satoshi. To them, there is just too much evidence to accept Wright’s late attempt at deniability. But no matter. “The world is still going to think we got fooled, but I know the facts. He has the keys,” MacGregor told me.

Wright wanted to meet. It was a few weeks after the abortive “reveal” and I saw when I got to the cafe that he was happy again and ready to take on the world. He had lost a third share in a billion dollars but he felt unburdened. He was sorry to have let good people down but now he could work in peace.

One of the things I’d noticed during my times with him was that Wright hated claiming outright to be Satoshi and would spend hours giving credit to everyone who had ever contributed. It was odd: he was coming out as Satoshi, yet the claim embarrassed him and I have many hours of tape in which he deflects it. “Do you want to know what I think?” I said to him that day in the cafe. “What if you were 30 per cent Satoshi. You were there at its formation and you were part of a brilliant group. You coded and you synthesised other people’s work and you shared in the encryption keys. Then, sometime in the last year, you upgraded yourself to 80 or 90 per cent. You were already a lot more Satoshi than anybody else has been hitherto, but the deal, in your eyes, required you to be more and in the end you couldn’t carry that off.”

“No,” he said. And he flew off on a tangent about elliptical curves and the nature of the blockchain and how he never wanted to be a deity. I turned off my recorder at that point and stared through him.

Outside the cafe, he shook my hand. I knew I would never see him again. What he actually did may never be known. Either he’s one of the ­greatest computer scientists of his generation, or he’s a reckless opportunist, or he’s both.

Edited extract from The Secret Life, by Andrew O’Hagan (Faber & Faber, $29.99), out Wednesday.

 

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fintechcryptocurrencymining

Financial Technological Networker , developing Crypto Currency Mining enthusiast , here in an African Continent !! A participant in various FinTech Platforms Local and Globally !!

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