Looking the Other Way

Not everything of my story is good and positive, but it is not the one my detractors make out either. In creating Bitcoin and all the derivative systems, I can be said to have 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, because of 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.

Things started falling apart for me in the middle of 2010. Under my pseudonym, Satoshi Nakamoto, I had started to lose faith in my own project. I had been pushing for commercial applications to be built on top of Bitcoin. I wanted systems involving micropayments. I wanted methods of utilising Bitcoin on websites and automated systems. And yet, the first thing people developed was a heroin store.

For some reason, it seems, I attracted every wacko and anarchist fool in the industry. I mean the information technology industry. After a certain point, I started losing control of my own project and was being pushed out. Most of the people you see running Core (BTC) are utterly depraved. Mr Antonopoulos has only just testified under oath about how he wants to see child pornography rings expand because of Bitcoin. What they fail to understand is that the entire creation of Bitcoin was designed to mitigate all of the previous problems. The one thing that I’ve needed to be able to achieve such an end has been scale. Not scaling with megabytes of data, scale and price. As the value of what is now a derivative of Bitcoin has gone up, it becomes captured in the same economic framework as the original idea of Bitcoin I created and published in the white paper is (as BSV).

You see, I have been working this whole time. It involved not just patents, but I’ve been working on scaling my creation. I spent a lot of time between 2011 and 2015 gaining enough knowledge to be able to scale Bitcoin without the help of certain other people — if you could call such people who promote crime, drugs, terrorism, and about every other despicable thing people.

The previous 9 1/2 years, I have been waiting. The value of Bitcoin (and all derivatives) needed to increase enough, and we needed a solution that could be quickly implemented and scale. There were a number of other aspects that I needed to complete, too. All of it is now complete. The year is going to be quite interesting as a result. Bitcoin is a system that utterly destroys anonymous criminal systems. I presented in China, in December 2010, talking about the economics of crime and how with the use of systems designed to trace money and allow privacy yet also ensure that records are immutable, we could make criminal activity more expensive. It remains my hypothesis that as we increase the cost of crime, we significantly decrease the amount of crime.

People such as Erik Voorhees and Greg Maxwell have understood that Bitcoin could be captured through regulatory control right from the early days. It is why they have fought to keep Bitcoin small. It is why they have started false narratives about using nodes as if it mattered. But none of the same people truly understand the interaction between the Bitcoin blockchain, the shadow-bank system (aka bucket shops or exchanges), and the mainstream monetary system. Importantly, they failed to understand the nature of Bitcoin mining. Nodes are designed to grow into large systems based on data centres. It was actually the most difficult part in developing Bitcoin. Creating a system that could not be bypassed — allowing the criminal capture of the system past a certain point… It was incredibly difficult.

We are approaching the time when government and regulators are beginning to understand Bitcoin and associated systems. It will be interesting when people such as Vitalik Buterin start to face perjury charges for their lies about the system. You see, when you falsely make claims to Congress and organisations such as the SEC in the US, your lies will eventually catch up to you. The same people all say that the blockchain can’t be captured and can’t be controlled because it’s decentralised. The reality is that pump-and-dump scammers have used the narrative to promote the illegal use of a system that leaves an evidence trial. In doing so, they have utterly lied and perjured themselves. Bitcoin is not controlled by the users. No blockchain is. A node is defined in section 5 of my white paper. Only point 3 references the solving of a hash puzzle. The majority of what a node has to do lies not in hashing. But then, dishonest companies like Bitmain promoted a lie to sell their second-rate equipment.

The unfortunate timing of Bitcoin led to a lot of myths. Right about the time I created Bitcoin, e-gold collapsed, and it seemed that every single piece of criminal scum associated with the system jumped ship — like the rats they are — in a false belief that Bitcoin was designed as a system that allowed anonymous criminal activity. They had their time, and now we move into the new era as the existing fools and idiots get flushed in the toilet of their ideas.

And as we do, I’m going to tear apart the narrative that has allowed people who would rarely rise above minimum wage to promote the false idea of an anonymous system designed to take down governments. You see, Bitcoin is a system designed to promote legitimate exchange. And as such, it is easily controlled by law. And we are coming to the period where they will understand it as such.

As the court case moves forward, they are going to start finding out the reality of things. Not what the crypto media wants you to hear, but the truth. And they’re going to learn that Bitcoin is really a system that is utterly opposed to the widespread use for criminal exchanges.

I’m definitely not going to tell everyone everything about all I own, 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, in the same way I don’t need you to like me.

The original family trust is something I set up a long time ago. It’s beyond anything you’ve seen reported. The earliest company is one I won’t even mention; if you want to find it, I’m not stopping you, but I’m not helping you. It was mentioned with bank accounts in an Australian court case of 2004, 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 the trust was 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 assets 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. And, bearer share companies may be illegal in the USA, but I am not in the USA, and so it remains legal.

I set the company up when I was first trying to bring things back to Australia. I had not been hiding them or moving them out of the country, but rather I actually wanted to bring things back to 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 and a charge of recklessness from the Australian Taxation Office (ATO). I fought it, and won. It turned out that I had underclaimed and the ATO owed me a larger return than I had claimed.

Both things worked out in my favour, you could say. In 2013, everything was finalised (as it turned out I had underclaimed). I had someone at the ATO 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 would even begin; 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 reason, I said I’d have another company, again in the Seychelles, to move everything back. The company is registered with the 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. I am not a trustee. 

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 companies — including ones in Panama and Costa Rica. Ira threw the paper work on them away.

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 was not like it is now, where gaming software is a dime a dozen. Back then, it was valuable.

Dave became involved 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 a few ignorant people stop what I was trying to build.

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 which 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 the same 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; 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 to related organisations. Zero-day exploits can be extremely valuable. I only deal with Western governments on this side of things.

Dave sold many of my exploits 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, any location 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 called 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.

I am not a US citizen. Gambling was legal in Australia.

Dave Kleiman was a US citizen. You see, there’s a federal statute in the USA, under 18 U.S.C. §§ 371, 1953. The statute incorporates 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, which included 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. I held accounts with Liberty Reserve prior to its seizure by the US government in 2013. The National Australia Bank and Westpac each used Liberty Reserve to move funds, and if four top Australian banks use it, it must be okay — well, it turns out, it wasn’t.

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 several Panama-based companies that I dealt with, Liberty Reserve, and Webmoney. So it is not as if I was hiding from the government. 

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 (nor my companies) did not receive anything from the contract. I actually didn’t care. I wanted my code, my data, and little more. I had that, I just needed to ensure clean title.

If you read the court case carefully, which 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 them 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 contracted people (using my money) to run.

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. 

In the few years that I was doing the various things, we (me and my companies) created several million lines of code. The code was valued a lot of money. We (Hotwire) had it independently validated by a variety of sources. Not all of the code was commercial, but it all related to the research I was conducting.

Here is why I used the Twitter handle @ProfFaustus. 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, at the time, 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 I was 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.

And, the real story begins…

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