Former Twitter CEO Jack Dorsey Launches Bitcoin Legal Defense Fund
SAN FRANCISCO — Former Twitter CEO Jack Dorsey on Wednesday announced the creation of a nonprofit legal defense fund geared towards defending Bitcoin developers from litigation.
Dorsey announced the fund in a mailing list for Bitcoin developers and said its purpose was to aid software developers in lawsuits related to their activities related to the cryptocurrency Bitcoin. The fund is intended to help developers with obtaining defense counsel, generating litigation strategies and paying for legal bills.
Dorsey is joined in forming the fund by Alex Morcos, co-founder of Chaincode Labs, and Martin White, a professor of computer science in the Department of Informatics at the University of Sussex. Chaincode Labs is a research and development group for Bitcoin and helped with the development of Bitcoin Core, software that helps users keep track of and verify which blockchain ledgers contain valid transactions.
“The Bitcoin community is currently the subject of multi-front litigation. Litigation and continued threats are having their intended effect. Individual defendants have chosen to capitulate in the absence of legal support,” Dorsey said in the announcement. “Open-source developers, who are often independent, are especially susceptible to legal pressure. In response, we propose a coordinated and formalized response to help defend developers. The Bitcoin Legal Defense Fund is a nonprofit entity that aims to minimize legal headaches that discourage software developers from actively developing Bitcoin and related projects, such as the Lightning Network, Bitcoin privacy protocols, and the like.”
The fund will be free for any Bitcoin developer wishing to use its services and will begin operating with a group of part-time and volunteer lawyers, Dorsey said. On Jan. 3, the Commodity Futures Trading Commission ordered event-based binary options markets operator Blockratize Inc. to pay a $1.4 million fine for violating the Commodity Exchange Act and CFTC regulations in failing to identify itself as a designated contract market or register as a swap execution facility.
Similarly, the person-to-person crypto-products trading platform BitMEX agreed to pay a $100 million settlement with the CFTC and the Financial Crimes Enforcement Network in August for failing to conduct sufficient checks on its customers. BitMEX came under fire for failing to report suspicious activity and not instituting a regulation-compliant anti-money laundering program as well as a customer identification program.
The CFTC, along with the Securities and Exchange Commission and the Department of the Treasury, began handing out more than $120 million in penalties last year to cryptocurrency exchanges for failing to comply with anti-money-laundering requirements and federal markets regulations. While several instances of litigation efforts involving Bitcoin have sprung up since, Dorsey said the fund will start its work by spearheading the defense of Tulip Trust’s lawsuit over the hacking and theft of crypto from the now-defunct Mt. Gox exchange.
Tulip Trust is suing 16 Bitcoin developers in a multibillion-dollar case for their part in allegedly misappropriating Bitcoins and destroying documents and electronic data that would have contained the private keys needed to access the cryptocurrency. The plaintiffs allege W&K Info Defense Research LLC mined bitcoins now worth billions of dollars that were destroyed by Ira Kleiman, managing member of W&K, to prevent its members — including Tulip Trust — from obtaining them.
“The fund’s first activities will be to take over coordination of the existing defense of the Tulip trading lawsuit against certain developers alleging breach of fiduciary duty and provide the source of funding for outside counsel,” Dorsey said. “At this time, the fund is not seeking to raise additional money for its operations but will do so at the direction of the board if needed for further legal action or to pay for staff.”
Reece can be reached at [email protected]