As if the drama surrounding the recent Bitcoin Cash split needed a sequel, the vaudevillian sideshow has reached a new stage: the legal arena.
A suit spearheaded by United American Corporation (UnitedCorp), a telecom company with a little-known blockchain subsidiary, BlockNum, is taking legal aim at Bitmain and its cofounder Jihan Wu; Bitcoin.com and its CEO, Roger Ver; Kraken and its CEO, Jesse Powell; and others. The suit “is seeking injunctive relief,” alleging that the defendants engaged in “collusion for the purpose of control of the [Bitcoin Cash] network.”
The suit indicates that it was filed on behalf of the plaintiff, UnitedCorp, and was launched on December 6, 2018, in the U.S. District Court for the Southern District of Florida.
“We are bringing this suit on behalf of UnitedCorp because we believe strongly in the value and integrity of democratic, distributed and decentralized blockchain networks which will become more important with time. In order to maintain confidence in cryptocurrencies such as Bitcoin Cash, no person or entity can be allowed to control them,” Benoit Laliberte, president of UnitedCorp, stated in a press release.
An Attempt to Control
The lawsuit claims that during the recent November 15 Bitcoin Cash split, the defendants acted in unison to hijack the network and force an undemocratic protocol change.
“This action involves a scheme by a tight knit network of individuals and organizations to manipulate the cryptocurrency market for Bitcoin Cash, effectively hijacking the Bitcoin Cash network, centralizing the market, and violating all accepted standards, protocols and the course of conduct associated with Bitcoin since its inception,” the lawsuit reads.
An accusatory presentation entitled “Anatomy of a Fraud on the Bitcoin (Bitcoin Cash) Network” delves into the specific injunctions of each defendant. Notably, it claims that the defendants colluded with China, “operating with the support of the Chinese government to centralize the Bitcoin Cash network resulting in Chinese entities now having established dominance over this important segment of the cryptocurrency market with proprietary software checkpoints and instituting other means of control over the system.”
Defending its bold allegation, the document suggests that given its ongoing trade war and economic disputes with the U.S., China has a vested interest in “[controlling] the economy of the future through increasing control of the [Bitcoin Cash] digital currency network.” It goes on to say that the China International Capital Corporation (CICC) — what amounts to China’s central bank — holds the exclusive mandate to Bitmain’s forthcoming IPO, using this as ostensible evidence for Bitmain and the Chinese government’s ties.
The document continues to outline Jihan Wu and Bitmain’s alleged culpability in this conspiracy, indicating outright the weight that Bitmain’s mining pools carry in both the Bitcoin and Bitcoin Cash networks. Specifically, it accuses Wu and his mining firm of “renting” hashpower from Bitmain mining pool contributors without their consent and redirecting some 90,000 ASICs to the Bitcoin ABC network in an effort to strongarm competitor Bitcoin SV’s hashing power.
Moving on to Bitcoin.com, CEO Roger Ver and communications ambassador Sterlin Lujan, the document highlights some seemingly extraneous yet potentially prejudicial facts about Ver’s life and cryptocurrency career, specifically his political affiliation as a libertarian/anarchist and his alleged involvement in the Silk Road. The document doesn’t make any overt accusations against Ver, only implicating him via his connection to Bitmain and Wu and Bitcoin.com’s mining support for Bitcoin ABC.
The presentation also targets Bitcoin ABC and its main developers, Amaury Sechet, Jason Cox and Shammah Chancellor, alleging that the Bitcoin ABC hard fork was “more than a benign network upgrade.” According to the document’s rationale, the upgrade’s primary components, namely the addition of an OP code for smart contract oracles and modification of checkpoints (a.k.a. deep reorg prevention) — which the plaintiff has called a “poison pill” elsewhere — were added after the fork and could set the stage for network centralization and manipulation.
“Combining this change with the hashing power of Bitcoin ABC backers amounts to centralization. They will be able to override any consensus reached by the rest of the network, forcing others to conform or create an unwanted hard fork,” it states.
On its final page, the presentation targets Kraken and its CEO, Jesse Powell, for supporting Bitcoin ABC’s implementation over Bitcoin SV’s and issuing caveats against the latter’s legitimacy.
Turning Back the Clock
The nucleus of the plaintiff’s argument centers on the allegation that the Bitcoin ABC camp and its supporters manipulated the Bitcoin Cash network during the November hard fork to artificially create a longer chain than Bitcoin SV.
Hashpower that was previously employed to mine on the Bitcoin network was one of the camp’s primary tools during the split, and the temporary boost in hashing power let Bitcoin ABC supporters hijack the Bitcoin Cash network, the plaintiff claims.
With these claims in mind, the filing charges the defendants with violating the Sherman Act (a federal act that bans monopolistic business dealings), equitable estoppel (a defensive doctrine that one party can invoke when they’ve been coerced into acting a specific way) and negligence, among others.
In response to the following charges, the plaintiff is seeking restitution and disgorgement of the defendants’ assets, and it’s also asking that the Bitcoin ABC team be barred from implementing checkpoints on the protocol and for the court to dial back the recent upgrade.
“Plaintiff seeks an injunction: (a) precluding Amaury Sechet, Shammah Chancellor, and Jason Cox via Bitcoin ABC from continuing to implement checkpoints on the Bitcoin Cash network and any other implementation of the software that would prevent the resulting chains from being able to be re-merged; and (b) requiring them to return the blockchain to its previously decentralized form with the previous consensus rules,” the filing reads.
While “[returning] the blockchain to its previously decentralized form” is ambiguous, “with the previous consensus rules” seems to imply that the plaintiff is requesting that the court dial back the network to its previous state before the November 15 hard fork. This would require a complete network rollback, so the request is tinged with irony given the plaintiff’s complaints of Bitcoin ABC’s alleged manipulation and centralized practices.
A (Messier) Mess in the Making
At any rate, the lawsuit will only augment the furor that has surrounded the November split.
On the eve of the split, Craig S. Wright, Bitcoin SV’s front man, seemed to forecast the coming legal troubles. He tweeted that his side would help any miner in Bitcoin.com or Bitmain’s mining pools “start a long messy class action” if either organization redirected Bitcoin hash power to Bitcoin cash during the split.
Some Bitcoin Cash supporters have taken Wright’s words as an admission of guilt. Vin Armani, CTO at CoinText, for example, insinuated that the Bitcoin SV camp (and its primary proponents, Craig S. Wright and Calvin Ayre) is behind the lawsuit, calling UnitedCorps a “shell company.”
I’m not sure if there has been a more petty and lame move in the history of Bitcoin. The fact that this lawsuit was filed via a random OTC shell company is… wow!
There’s being a loser… and then there’s this.
I guess “miners choose” is actually “US federal judges choose.” https://t.co/dvO8n78WuB
— Ⓥin Ⓐrmani (@vinarmani) December 6, 2018
Chris Pacia, an OpenBazaar developer, has echoed Amrani’s sentiments. In a separate tweet, he claims that the lawsuit proves that Ayrehat Calvin Ayre, who owns Bitcoin Cash mining pool and news site CoinGeek, used his mining pool to mine a hidden chain on the Bitcoin ABC network, something that ABC’s checkpoint implementations quashed.
“After this lawsuit I’m now certain Calvin was mining a hidden chain to reorg BCH that he had to abandon when the checkpoint was announced,” the tweet reads.
Pacia continues to reprimand the action as “malicious,” saying it also “shows [the Bitcoin SV group lacks] even basic knowledge about the codebase of the chain they were trying to take over.”
This article originally appeared on Bitcoin Magazine.