Looking the other way
Not everything of my story is good and positive. In creating Bitcoin and all the derivative systems, I looked away from a lot of things. In 2009, I talked to the Australian government and the tax authorities, but I guess explaining how you are going to replace low-level auditors with CAATs-based software, that is computer-assisted audit technology, due to an immutable ledger and a few of the other things I’ve been talking about lately probably isn’t the ideal starting point.
I’m a little bit better now at dealing with people, but general interactions when things are not as I see them remain not my forte.
I’m definitely not going to tell everyone everything about all I own, and nor should I. You see, privacy doesn’t mean telling the world. I shall, though, start to say more than I need to. Much of it is not something that I find pleasant. If you don’t like the fact that I tell things in my way, too bad it is my way. You are not giving me anything, and I’m not making you buy anything or promising you anything. If you don’t like it, too bad I don’t need you to like it nor me.
In the original family trust is something I set up a long time ago. Beyond anything you’ve seen reported. The earliest company is one I won’t even note, and if you want to find it, I’m not stopping you, but I’m not helping you. It was mentioned with bank accounts in a 2004 Australian court case, so for the more nosy of you, evidence exists under stock and makes it easy.
One of the two primary companies I set up for my trust was one called Wright International Investments Limited. It’s still running, it has assets, and it has been structured in a manner that allows me to manage my wealth efficiently. Nothing from it goes into buying luxury goods for general consumption, rather it uses all of the structures to further my end goal. And my end goal is finalising my creation.
I set the company up back when I was first trying to bring things back into Australia. It had not been hiding them or moving them out of the country, but rather I actually wanted to bring things back into Australia and repatriate some of the things that I had been working on before. It didn’t work; I ended up with an audit that lasted several years in a charge of recklessness from the tax office.
Both things worked out in my favour, you could say. In 2013, everything was finalised, and it turned out I had underclaimed. I had someone at the tax office actually want to take another action against me for recklessness claiming that I had recklessly underclaimed tax. But the case was thrown out before it even began; I guess the government doesn’t want a policy decision that results in people claiming as much as they can.
The 2009 audit led to the two companies I had constructed and set up to develop Bitcoin being placed into liquidation. I didn’t owe any money, and I paid every creditor 100 cents in the dollar. Doing so nearly broke me. The liquidation process would’ve allowed me to walk away and not pay people, but that’s not what I do.
So, I spent over $1 million fighting a tax claim where I had actually “recklessly underclaimed.” It took me four years, and I won a very Pyrrhic victory. You see, you don’t get costs even when you win fighting a tax audit.
For such a reason, I said I’d have another company, again in the Seychelles, to move everything back. The company is registered with company number 093344.
I wanted to repatriate my wealth into Australia on terms that would not leave me bankrupt. The thing is, I don’t want to spend the vast amount of my money on consumption and luxury goods. I spend it testing my ideas and building capital.
So in 2011, I set up structures in a number of countries, not just the Seychelles. The difference is that I knew enough to do so before I founded anything. Most people don’t realise what’s necessary until it’s too late. Such companies and others remain active, I do not control them directly, but they are set up in trust for my family.
Everything you see in the media and to do with things such as the Ira Kleiman lawsuit involves structures that happened after 2011. It’s provable, and the evidence is available that my friend David Kleiman was never involved in such organisations. Dave had his own including in Panama and Costa Rica.
One of the things I did was to create gaming software. Much of it I did for licensed casinos such as Lasseters Online Casino in Australia. We had been in contact with Playboy gaming many many years ago. My company was involved with building what was going to be a massive international online casino for them, before the Australian government put a moratorium on licensing new online casinos and the US government started cracking down.
I was left with a lot of software. It was the early days in the gaming industry. It’s not like now, when gaming software is a dime a dozen. Back then, it was valuable.
Dave became involved a lot more in 2011. He’d helped review and edit a lot of my work for not only Bitcoin but many other things for many years. In 2011, I was running extremely low on funds and was unable to keep paying the lawyers, auditors, and accountants. Such is the reason why I started moving assets back into Tulip Trading and other companies. I wasn’t going to let the Australian government, or at least a few ignorant people involved with it, stop what I was trying to build.
Dave had helped as I built things over the years, and I rarely questioned.
I did two things very well that funded what I did. It wasn’t the Silicon Valley version of convincing venture capitalists or, as I called them back then, vulture capitalists. What I did, and that I could, was make them a lot of money. I was always too gruff to get VC funding.
The two things I did well included building gaming software and very-low-level coding. I am okay with C and that family of languages, but I am much better with MASM, Forth, and other base-level systems. The first part of how I brought money and investment into my ideas incorporated the development of exploits, covert channel software, and reversing malware and documenting it.
Dave handled a lot of it. I didn’t really care as long as everything worked and I had access to the machines I needed and occasional tasks to be completed.
Some of my exploits ended up being sold to parts of the US government, certain elements in the UK and other related organisations. Zero-day exploits can be extremely valuable.
Many of the people that Dave used are now in prison. At least the kingpins, many of the lower-level ones remain free. Dave sold many of my exploits in order to fund things that I was doing. I had no idea how much he made or what any of them turned over. It was sufficient that in 2013, when Bitcoin was still relatively unknown and companies were small, I had an operation in Australia that had around 50 staff, some of whom were extremely high level and all of whom happened to be paid well. At least so was the case until everything went belly-up in the bitcoin market.
The Australian operations mostly paid for things overseas using negotiable instruments, credit letters, and euro bonds. The top price for a zero-day exploit can exceed USD1 million. Some of my covert-channel software went for more. I created a distributed covert channel that allowed multiple streams to be aggregated through the Chinese firewall. I didn’t install or run it, I sold the system to other people.
It worked by taking sites such as nicovideo.jp, amazon.de, bomboradyo.com, and tvr.ro and integrating a fast flux DNS system. It allowed access to gaming sites or for that matter anywhere that was configured by the operators at incredibly fast rates.
I had been engaged early on to investigate one of the earliest versions of router-based malware. I learned how to not only stop such malware but how to subvert it allowing others to use it as a peer-routing algorithm. The result would be the ability to split traffic in stream. Effectively, steganographically embedded padded information in configurable streams. I wrote the software, and allowed other people to sell and run it. I did so to pay for my testing.
I know also that it was sold amongst a number of US groups who operated allowing US customers to gamble without being traced to the US. I turned a blind eye on how the software I was coding was being used. I did so to pay for USD5 million worth of computer hardware and even more in software.
So now you know why I call myself Faust.
The lure of gaming software
I created the software and built the back-end for a number of Costa Rica- and Panama-based online casinos. Some of them were funded by a number of people who were grumpier than me and who came from ex-Soviet countries. They were not the nicest of people, and my turning a blind eye was more problematic for Dave than me.
I am not a US citizen, and I have little to do with the country, but I do understand the law. Most importantly, I know that such groups used some of the covert-channel software to not only create a means of running casinos in Costa Rica but to allow US citizens to get money in and out of them. I can say that I’m not American and all I did was write software. I taught myself to say so for many years. I looked away as other people used things I created in oftentimes ways I did not like.
The biggest problem comes because the person who I dealt with directly, who managed the things was Dave Kleiman who was a US citizen. You see, there’s a federal statute in the USA, 18 U.S.C. §§ 371, 1953. The statute incorporates the mere consist, the receipt to transport, aiding and abetting, or general interstate transportation of waging paraphernalia.
You see, what I created wasn’t just a casino. It was an embedded website that encrypted all data without a forensic trail. I have been a digital-forensic expert for many years including teaching, and I know perfectly well what is used and found. I created a system that allowed people in Costa Rica associated with a number of Russian and Philippine groups to bypass about any security control you could think of. My system would run in China. The great firewall of China didn’t ever notice one of my casino software creations running.
In fact, I created a system that allowed for the embedding of gaming information as people listened to standard pop music or even researched and looked up scientific publications. Nobody checks the padded data. You can proxy to many sites pulling down what seems to be rather innocuous material and incorporate streamed information at the same time.
I didn’t deal with the monetary side; some of the casinos used bitcoin but most used Liberty Reserve. Dave and I both held accounts with Liberty Reserve prior to its seizure by the US government in 2013. I looked away saying that the National Australia Bank and Westpac each used Liberty Reserve to move funds and if four top Australian banks use it, I must be okay.
Unfortunately, with alterations to the laws of the United States in how systems must be maintained and the AML provisions that I knew very well, FinCEN decided to finally take action, and they closed Liberty Reserve.
Interestingly enough, I didn’t hide any of it from the authorities. My tax filing incorporates the details of a number of Panama-based companies that I dealt with, Liberty Reserve, and Webmoney. So it is not as if I was hiding from the government.
I knew about several addresses connected to Silk Road, too. All a part of the deal with the devil. No, I did not manage, run, configure, or have anything to do with the operations of Silk Road; having said so, Dave and I did pay for and hire people using SR. I didn’t manage any of it; I just said the code I needed and the results I needed, and just sat back, ignoring how it happened. I knew perfectly well that Dave had entered a partnership with a number of people that were nominally based out of Panama and who were involved with the sites anonymousspeech.com and Vistomail.
I knew the relationship between the Panama group and people who ran large-scale botnets involved with identity crime and email scams. I even used the relationship to obtain data in the creation of models of territorial cybercrime. Having created certain types of command-and-control software and also having coded covert channels, I was actually able to embed information that enabled me to monitor and record the complete operations of a number of criminal operations involved in cybercrime. I even modelled them and released papers.
So, coming clean as Satoshi is not a walk in the park as some people think. I am more than certain that many government agencies already know the involvement in such other industries, and my coming forth just confirms it.
ASICs and mining
The thing few people look at with the contract between Dave and myself in the court case after his death is that I did not receive anything from the contract. I actually didn’t care. I wanted my code, my data, and little more.
If you read the court case carefully, something few people seem to do, you will note that I agreed not to chase after equipment and other things that Dave had maintained. I wanted the software and data that I had collected, and I wanted to maintain the rights for it as we started new companies. I really did not care about the other computer systems, all the ASIC mining systems that had been set up and that Dave had run.
Good Craig is the part that worked to stop certain things I did not like, Bad Craig is the part that turned a blind eye saying, “All I am doing is creating software, I am not responsible for this.”
In the “leaked” transcriptions of my talks with the ATO you will note that I never hid the fact that I had been dealing with online “money” sources (such as Liberty Reserve). I should also note that the transcripts are differently encoded. The ATO copy and mine have different canaries. In other words, the particular document is encoded differently such that it allows you to know where it came from.
The version Ira leaked is from the ATO. They are not actually allowed to share it, but for Ira to drop it on public servers is a criminal offence.
So, what is not being said is how I’ve never taken control of the machines that have been mining. There was actually a reason for it; I turned a blind eye as to where the systems and support were obtained. In the few years that I was doing so, we created several million lines of code. The code was valued a lot of money. We had it independently validated by a variety of sources. Not all of the code was commercial but at all related to the research I was conducting.
Here is why I use the Twitter handle Prof. Faustus. It is the pact that all capitalists in Adam Smith’s system must make, and in mine it was the pact as I saw anonymous systems once again growing. To create and fulfil the vision that I had of Bitcoin, of an immutable evidence source and money, I had to look for alternative ways of funding what I was doing.
Some of them have been detailed above.
SGI and computers
They, of course, are also a part of the reason why SGI decided to disavow any knowledge when approached by the media, even though there is ample evidence of meetings, communications, and about everything you could ever think of. The reason is simple: SGI is a US company.
Why is it simple? Well, in the day gambling and sports books just happened to be illegal within the US. The consequence for a US computer company was that selling computer hardware to gaming companies in Panama and Costa Rica just happened to be illegal. Recently, only last year in fact, it has started to change. The article below details some of what has occurred:
Gambling and Tech Companies Charge Into American Sports Betting Market
So, the US has seen the light and discovered that there is a lot of money leaving their shores that they don’t get tax on. The consequence is the change in how the government plans to manage and maintain gaming and sports book sites. If Dave and I were selling software now, it would be fine, but that’s now. Now large companies are out there commercialising the industry and bringing tech back into it.