A crypto wallet Theft lawsuit filed by a man claiming to be Bitcoin creator Satoshi Nakamoto could jeopardize the future of open source software development.
That’s according to the Jack Dorsey-backed Bitcoin Legal Defense Fund, which is filing a case to defend 11 Bitcoin developers named in a lawsuit brought by Craig Wright, an Australian computer scientist who came to the limelight in 2016 with a fierce controversial claim to be the founder of Bitcoin.
The crux of the matter in question dates back to 2021 when Wright, through a Seychelles-based company called Tulip Trading, launched a so-called “letter before action” against 16 Bitcoin software developers, seeking to regain access to £4 billion ($5 billion) worth of Bitcoin he claims to own. Wright said he lost access to private keys for 111,000 Bitcoins after his home network was hacked last year, and that it was the responsibility of the main developers of Bitcoin Core (the main version of the Bitcoin protocol software) to fix illegitimate crypto transactions.
While the case was initially dismissed before going to trial last year, a UK appeals court reversed that decision in March, allowing the case to move forward with a trial expected sometime in 2024. In his findings, Lord Justice Birss pointed to academic literature that questions whether public blockchains are truly decentralized.
“If Bitcoin decentralized governance is really a myth, then in my opinion there is much to be said for the claim that Bitcoin developers, while acting as developers, owe fiduciary duties to the real owners of that property,” he wrote. .
So on Wednesday this week, 11 Bitcoin developers filed their defenses backed by the Bitcoin Legal Defense Fund, a non-profit founded in 2021 by Twitter and Block (formerly Square) co-founder Jack Dorsey, Block’s chief litigator Martin Alex Morcos, co-founder of White and Chaincode Labs. The fund now also includes chief legal officer Jess Jonas, who joined in January.
“Multiple Lawsuits”
The founders of the fund initially wrote an open letter to Bitcoin developers last year to explain to them raison d’être. They pointed to the “multi-front litigation” facing the Bitcoin community, including the efforts of Craig Wright, which they confirmed at the time would lead the defense. Noting that the main purpose of the fund was to defend developers “of lawsuits related to their activities in the Bitcoin ecosystem,” they also noted that the ramifications extended much deeper into the wider open source realm.
“Proceedings and persistent threats are having their intended effect — individual defendants have chosen to capitulate in the absence of legal support,” the trio wrote. “Open source developers, who are often independent, are particularly susceptible to legal pressure. In response, we are proposing a coordinated and formalized response to help defend developers.”
A well-known story
In reality, the issue of the legal system interfering with open source software development has become a hot topic lately. In a letter to EU authorities last week, more than a dozen open source industry bodies said the newly proposed Cyber Resilience Act, which aims to codify cybersecurity practices for digital products sold in Europe, would have a “chilling effect can have on software development, as open source developers can be held personally liable for security flaws that occur in a downstream product. In other words, if the law is passed in its current form, developers may be less inclined to contribute to open source projects for fear of legal wrangles.
Elsewhere, some argue that the EU’s upcoming AI law, which aims to regulate AI applications based on perceived risk, could create heavy legal liability for open source developers working on general purpose AI systems (GPAI), and more would give power to well-funded big tech companies.
While the latest installment surrounding Bitcoin is somewhat different, it raises similar issues. The overarching narrative may well be about who gets control of Bitcoin or not, and whether the project’s core developer base should be forced to create some kind of “back door” to allow third parties to access private keys. But bubbling under the surface is something fundamental to the future of software and whether open source developers should have a fiduciary duty to their users.
“We believe these lawsuits are frivolous, but we still need to vigorously oppose them,” Jonas said in a statement.
Legal responsibility
Central to the defendants’ case is the simple fact that Bitcoin was released under an open source MIT license, implying little legal responsibility for those who maintain the software. The MIT license explicitly states:
In no event shall the authors or copyright holders be liable for any claim, damages or other liability, whether in an action of contract, tort or otherwise, arising out of, arising out of or in connection with the software or its use or other transactions in the software.
But if, for whatever reason, a court used to be to rule on Tulip Trading’s side, this could actually destroy one of the core principles of the MIT license that underpins countless open source projects today, setting a dangerous precedent that forces open source developers – from who many in their own time on their own dime – to serve the end user of that software, whatever their requirements.
“The Bitcoin Legal Defense Fund fights not only for Bitcoin, but for the right of open-source developers to create and freely share their code with the world for the public good,” Morcos said in a separate statement. “The Tulip Trading case not only threatens the MIT license, but also the very idea of freedom of speech. Our shared mission is to protect innovation by protecting developers from legal harassment.”
While there are 16 defendants in total, the Bitcoin Legal Defense Fund only represents 11 developers who worked on Bitcoin Core. There is a 12th Bitcoin Core Defendant who has not sought help from the Bitcoin Legal Defense Fund, plus another four Defendants who have worked on various Bitcoin forks arranging their own counsel.
Separately, Wright has filed a secondary case against other Bitcoin developer entities, with Wright claiming ownership of Bitcoin copyright and database rights on the basis that he is Satoshi Nakamoto. This case was dismissed in February, but the lawsuit quickly resurfaced in a revised form, with the defendants filing their defenses last month. The Bitcoin Legal Defense Fund also supports two Bitcoin Core developers named in that lawsuit.
“The outcomes of these cases are important to everyone, even those who may not be interested in Bitcoin, because these lawsuits could have serious adverse effects on open source development, which will negatively impact our lives in ways we we may not even realize. until it’s too late,” Dorsey added in a statement.