Craig Wright’s Pyrrhic victory proves that English libel law needs to be reformed, right now

Craig Wright, an Australian, claims to be Satoshi Nakamoto. Much of the world disagrees with this view.

Peter McCormack, Englishman, cryptotwitter and podcast rockstar, disagreed with it too, and, back in 2019, he said so in fairly coarse terms on Twitter. Wright sued Peter for defamation, in England.

By now, most of Bitcoinland has learned that Craig Wright prevailed in his lawsuit against Peter. Craig won £1 – that’s not one million pounds, or one thousand pounds, just plain old one pound, not enough to buy a bottle of soda in central London – in damages:

At issue in the case were Peter’s statements from Twitter in 2019 which said, in relevant part:

“Let’s go to court and prove once and for all that he is a liar and a fraud. Craig Wright is not Satoshi [Nakamoto.]

I can’t explain how much I want this to go to court. Craig Wright will lose as we have a mountain of evidence that he is a fraud and is not Satoshi.

Unfortunately, Peter (not being a lawyer) got the test wrong. We now know Craig Wright didn’t lose the case; he won. So the question turns to how, and why? Does this mean that Mr. Justice Chamberlain and the High Court of England and Wales have stamped their imprimatur on Wright’s claim to have created Bitcoin?

Wright boosters like Calvin Ayre immediately pounced on the ruling, saying that it vindicated Wright’s claim to be Bitcoin’s pseudonymous creator:

And in a press release from Wright’s lawyers, the man himself is quoted as having said:

“As anticipated, bit by bit the independent courts across various jurisdictions, including those with juries with the benefit of an examination of all the evidence, are concluding I am who I have admitted I am, since I was outed as Satoshi by media in 2015. However too little regard is paid to the impact my Aspergers has in my communications. I intend to appeal the adverse findings of the judgment in which my evidence was clearly misunderstood.

Or this, which claims that Peter’s statements about Wright are only defamatory if Wright is, in fact, Satoshi Nakamoto:

This is incorrect. The High Court did not in fact conclude that Wright was Satoshi Nakamoto. It concluded that Peter said nasty things about Wright and that those things were seriously injurious to Wright’s reputation, nothing more.

In England, a false statement of fact which injures the reputation of another which causes serious harm to that person’s reputation, is defamatory. 

It is a defense to a defamation claim to show that the alleged defamatory statement is substantially true. The issue with raising the defense of truth is that it is what we in the legal profession refer to as an affirmative defense. It must be raised and proved by the defendant, rather than the plaintiff. 

Peter McCormack said that he didn’t raise this defense because of the expense involved. Whilst I don’t represent Peter and don’t have a view as to what his counsel thinks, I should imagine that the problem he faced in raising the defense is that Wright didn’t need to prove that he was Satoshi Nakamoto in this litigation, and he didn’t try – all he needed to do was allege that McCormack made defamatory statements which were seriously injurious to his reputation.

To wholly evade liability here Peter, on the other hand, was tasked with proving the unprovable, proving a negative for which there is no physical or electronic evidence, which would have required huge amounts of disclosure and investigation costing millions of dollars against a claimant whose regard for the truth was called into question by the Court in the very judgment finding in Wright’s favor. Mr. Justice Chamberlain accused Wright of providing “deliberately false evidence” to attempt to win this case – see judgment at paragraph 149 – and under those circumstances one has to question the value of engaging in protracted evidentiary disclosure (for you Americans: “discovery”).

This hearkens back to the case of Kleiman v Wright in Florida in which Judge Bruce Reinhart of the Southern District opined, in a 2019 motion to compel:

To this day, Dr. Wright has not complied with the Court’s orders compelling discovery on May 14 and June 14. Rather, as described above, the evidence establishes that he has engaged in a willful and bad faith pattern of obstructive behavior, including submitting incomplete or deceptive pleadings, filing a false declaration, knowingly producing a fraudulent trust document, and giving perjurious testimony at the evidentiary hearing. Dr. Wright’s conduct has prevented Plaintiffs from obtaining evidence that the Court found relevant to Plaintiffs’ claim that Dr. Wright and David Kleiman formed a partnership to develop Bitcoin technology and to mine bitcoin.

Whilst this is not the sort of thing one can enter into evidence in an unrelated trial, it’s something Peter’s lawyers will doubtless have been aware of and attempted to plan around, given the budget available to them.

Disclosure in England and Wales is not like in America – it relies on all parties putting all of their cards on the table, including evidence which helps and harms their cases. If Wright were not in fact Satoshi Nakamoto, as is believed by many and presumably at one point was the theory of Peter’s case, and in discovery Wright failed to disclose this fact or to disclose convincing and irrefutable evidence to the contrary, e.g. a transaction signed with Satoshi’s private key, Peter could have spent mountains of cash trying to dispute every ounce of disclosure as irrelevant or deceptive. Or, he could try to resolve the case more quickly and efficiently.

This is the reason, I think, that Peter didn’t try to raise truth as a defense and instead tried to knock out an essential limb of the test for defamation, arguing that Wright’s reputation was not seriously harmed. Given the evidentiary issues the Mr. Justice Chamberlain alluded to in his ruling I can see why Peter’s counsel might have wanted, as a strategic consideration, to stanch the bleeding and resolve the case on a question which could be assessed more objectively, rather than embarking on continued evidentiary discovery.

If the £1 damages award is anything to go by, this strategy succeeded.

If the fact that a man accused of being a fraud can allegedly give false evidence in a related defamation case, fail to disprove his accuser’s essential claim and still win that lawsuit sounds insane to you, particularly as an American, it is – but it’s actually pretty consistent with how English law on speech protects those with political power and money, a hangover from hundreds of years’ worth of English law which has imposed liability for statements of facts which are certainly damaging to feelings and reputation, and oftentimes were also true.

Historically those rules include the crime of seditious libel – essentially “diet treason” for speech which damaged the Crown which attracted a lighter sentence than death – and the misdemeanor and tort of scandalum magnatum, whence modern English defamation law originates, a fake news tort concerning the spreading of false rumors about great men of the Realm.

True statements of fact can also be penalized today under a number of criminal statutes in England, including but not limited to numerous types of banned rhetoric under e.g. the Terrorism Acts, Section 1 of the Malicious Communications Act, Section 127 of the Communications Act 2003, and Section 5 of the Public Order Act.

Now, as throughout history, English law is stacked in favor of the state and public figures with power or money, and not in favor of their impertinent critics. England doesn’t have a lot of respect for freedom of speech, and it never has.

America, of course, has considerably greater protections for speech. Prior to the founding of the United States, the crime of seditious libel was nullified by a New York jury which found that statements defaming the Crown would attract no sanction provided that the statements were true in the famous trial of John Peter Zenger. The Founders later enacted the First Amendment to the U.S. Constitution – that’s the one about freedom of speech for any jurisprudential philistines out there – to forever abolish seditious libel and scandalum magnatum in the United States.

The law of defamation has charted a similar course, starting with the burden of proof in defamation cases. In the U.S., to succeed in an action for defamation, a plaintiff must prove that the statement was false, and where a public figure such as Wright is concerned, must also that the statement was recklessly or intentionally false, a standard known as “actual malice.” Put another way, Wright would have needed to prove he was Satoshi and that McCormack should have known he was Satoshi before winning even a penny of damages. Given that Wright’s claim to be Satoshi is, for the time being, factually unproven, the case he put forward against Peter would not have succeeded in American courts.

The English requirement, being the exact opposite – for the defendant to prove that the defamatory statement was true – presents considerable difficulty when faced with a plaintiff claiming to be an anonymous, possibly already dead, man with excellent opsec. If Wright is not Satoshi, the only person who can prove him wrong, under circumstances where Wright is not required to prove himself right, is either unwilling or unable to speak for him or herself. Given the structure of English defamation law this places Wright at a major tactical advantage in English courts. For this reason, it is my belief that Wright is suing English people in English courts not because that is where justice is best served, but because it is the only place he can win.

The judgment in Wright v. McCormack shows that you can claim to be an anonymous, possibly dead man, offer no proof, and still win an English defamation case against someone who claims you aren’t that anonymous man, if your budget is large enough.

Proving one is Satoshi Nakamoto – or at least proving one has access to his keys, which raises significantly the probability that one is the man himself – isn’t hard. As has been discussed extensively in the court of public opinion, there are myriad ways for Wright to do this. Only a trivial effort is required to, say, move a single sat worth of Satoshi’s coins. This is not a heavy lift, seeing as people move billions and billions of dollars of bitcoins every single day. So far Wright has been unwilling or unable to use any of the proposed cryptographically verifiable methods. Instead he has spent millions of pounds to win just £1 and stands accused by a second judge of conduct amounting to perjury. In the eyes of the public he seeks to convince, this result is unlikely to do his credibility any favors.

England has long been known for the practice of so-called “libel tourism” where well-heeled litigants from abroad use lax English standards to do an end-run around free speech protections in other places.

The High Court is limited by the law. In this instance, the law compelled the judge to reach the conclusion that Wright had been defamed because the truth of Wright’s claim was more or less presumed by the law the court was forced to apply. The fact that Wright’s very thin gruel – proof of harm but no proof of Satoshi – can still prevail, in this day and age, in an English court tells me that law reform in England, to bring the country in line with the rest of the civilized world, is long overdue.

The judgment in Wright v. McCormack is a profoundly unjust result. There is only one body, Parliament, capable of fixing it. It should do so immediately.