Market Watch

‘Craig is Satoshi’: a former online gambling mogul’s contentious campaign to change Bitcoin’s future

Orignally published on 2022-01-11 13:02:00 by www.marketwatch.com

Sitting in a small ballroom of midtown Manhattan’s Sheraton Hotel, Calvin Ayre is trying to remember his last visit to New York City. He can recall throwing a party at the Rainbow Room atop Rockefeller Center and hanging out with bigshot actors, like Bruce Willis and Luke Wilson, but the event was a long time ago. Busta Rhymes performed, and Victoria’s Secret models mingled among the crowd.

“That was a fun party,” says Ayre of the 2006 bash. “That was the last time I have been to New York.”

Ayre didn’t set foot in New York for the next 16 years, and it was unclear he would ever return. For a long time, Ayre avoided entering the United States out of fear he might be arrested. But Ayre says he never doubted he would be back. 

“I was no criminal,” says Ayre of his battle with the U.S. government. “I was caught up in an international trade dispute.”

In 2012,  federal prosecutors unsealed an indictment filed against Ayre claiming he was operating an illegal online gambling business that was taking large volumes of sports bets from Americans. He fought the case from his native Canada and his home on the Caribbean island of Antigua. Five years later, the U.S. government dropped the felony charges filed against Ayre, who pleaded guilty to a minor offense, a single misdemeanor charge. 

At the age of 60, Ayre returned to New York this past fall, not as an online gambling promotor, but as an evangelist for Bitcoin SV, which Ayre claims is the true and authentic Bitcoin because it is the only digital currency that follows the set of rules, or protocol, laid out by the white paper that launched Bitcoin in 2008. He organized a three-day conference at the Sheraton as part of his overall crusade, an effort that includes funding several companies and a media outfit dedicated to Bitcoin SV. 

Ayre says Bitcoin SV is powered by a revolutionary technology that has many useful applications, while the digital currency most people know as Bitcoin is useless and a fraud. He says the group of developers maintaining and updating the Bitcoin protocol violated the way it was set up in the first place, pushing Bitcoin
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in a direction that was not originally intended by limiting its usefulness. 

“For sure it’s a Ponzi scheme because it can’t do anything,” says Ayre of Bitcoin trading.  

A crucial part of Ayre’s quest hinges on his support of Craig Wright and Wright’s claim that he is Satoshi Nakamoto, a pseudonym used by the elusive inventor of Bitcoin. A fun-loving Australian entrepreneur, Wright has declared since 2016 that he is the person who launched Bitcoin against a firestorm of skepticism and doubt from digital currency players. Ayre and Wright have championed Bitcoin SV, which stands for “Bitcoin Satoshi Vision,” trading accusations of trickery and deceit with those who view Wright’s Satoshi claim as bogus. 

“I will be producing evidence about my creation of Bitcoin,” Wright said in an email. “It matters because what is being called Bitcoin (BTC) is not, BSV is.”  

Either way, investors are not convinced. Bitcoin recently changed hands for $41,000 apiece and carries a market capitalization of $777 billion, according to CoinMarketCap, while Bitcoin SV has a market capitalization of $2 billion. The market value of Bitcoin SV recently ranked below those of such obscure cryptocurrencies as Pancakeswap and Helium. Ayre, who has been involved in Bitcoin since its early days, points a finger at major cryptocurrency exchanges, like Coinbase
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and Binance, that refuse to list Bitcoin SV, and Silicon Valley venture capitalists who are fueling a cryptocurrency mania. Coinbase and Binance did not respond to requests for comment. 

“Craig is Satoshi,” says Ayre. “I think all of what you call crypto will die, a lot of it will be deemed illegal, as regulators start to understand more — a lot of people are going to lose a lot of money.”

***

Craig Wright arrives at Miami’s federal courthouse, Nov. 16, 2021. (AP Photo/Marta Lavandier)

On a summer Friday in 2017, an arraignment took place in room 7D of the federal courthouse in downtown Baltimore. A judge presided over the proceeding that included a U.S. prosecutor and a defense lawyer. But this was no ordinary court session. The defendant was not in the courtroom. He was 2,900 miles away. 

“Good morning, your honor,” said a voice that could be heard through the speaker of a telephone, according to the court transcript. “This is Mr. Calvin Ayre.”  

As part of a complex plea deal that Ayre negotiated with the U.S. government, federal prosecutors agreed that Ayre would not have to show up to his own arraignment. The unorthodox arrangement gave Ayre a layer of protection from the judge who would be sentencing him and was not bound by Ayre’s deal with federal prosecutors. Ayre joined the proceedings from the safety of his lawyer’s office in Vancouver, Canada. 

“I think all of what you call crypto will die, a lot of it will be deemed illegal, as regulators start to understand more — a lot of people are going to lose a lot of money.”


— Calvin Ayre

Ayre is one of the world’s most prominent online gambling pioneers. The son of pig farmers in Saskatchewan, he started in the 1990s to build what would become Bodog, one of the first big online gambling brands. Operating early on from Costa Rica, Ayre promoted Bodog by throwing lavish parties, Las Vegas conferences and music competitions. There were scantily clad “Bodog girls” who attended Bodog events and often huddled for photos with Ayre. In 2006, Forbes magazine put Ayre on the cover of its billionaires issue and ran an article about him under the headline “Catch Me If You Can.”

In the U.S., the world’s biggest online gambling market, prosecutors took the position at the time that all online gambling violated decades-old federal law, while federal lawmakers passed new legislation in 2006 that focused on the payments associated with online gambling. This led to a U.S. government crackdown in 2011 on the booming online poker industry, which shut down the biggest offshore websites catering to U.S. players and the indictment of 11 men. They eventually all pleaded guilty to felony charges. The individual jail terms were as long as three years, and the associated forfeitures exceeded $700 million.  

A year later, in 2012, it was Ayre’s turn. Rod Rosenstein, then the U.S. attorney in Baltimore, brought charges against Ayre, claiming that between 2005 and 2012 he had conducted an illegal gambling business involving online sports betting in the U.S. Federal prosecutors seized Bodog’s domain name and said Ayre participated in an effort that directed payment processors to send at least $100 million by wire and check to gamblers located in Maryland and elsewhere. Ayre denied he violated U.S. law, saying Bodog operated under a license from Antigua and that the U.S. was in violation of international trade obligations under a World Trade Organization ruling for not granting Bodog access to the U.S. market. “I was running a legit sports book,” says Ayre today. “All the winners got paid.”

When Ayre finally reached a settlement with the U.S. government, in 2017, Rosenstein had joined the Trump administration as deputy attorney general. Ayre pleaded guilty to a single misdemeanor offense of accessory after the fact to the transmission of gambling information, and was sentenced to one year of unsupervised probation and a $500,000 fine. Ayre also agreed not to make a claim on $67 million of funds that government lawyers had seized from companies that processed payments for Bodog. That meant Ayre was out $67 million, since he had separately made $67 million in payments to make Bodog’s U.S gambling customers whole, court filings show. The legal battle was over. On his website, Ayre posted a picture of himself as bare-chested actor Tim Robbins in the prison escape scene from the movie “The Shawshank Redemption,” his arms stretched up in the rain.

By this time, Ayre had already been involved in Bitcoin for years. Many online gambling entrepreneurs had taken an early interest in Bitcoin. The need to find payment processors willing to facilitate transactions for an industry that often operated outside the mainstream banking system made digital currencies intriguing for people involved in online gambling. Ayre says he invested in his first Bitcoin company that experimented with the technology in 2010 and, a while afterwards, started buying Bitcoin. “When it was really cheap, I bought lots of it,” Ayre says. 

Craig Wright did some consulting work for Ayre in 2011, but the two first met in person in June 2015 at Ayre’s Vancouver penthouse apartment, nearly one year before Wright publicly declared himself to be Satoshi Nakamoto. Over glasses of red wine, Ayre says Wright told him that he had written the famous nine-page white paper in 2008 that launched Bitcoin but that opportunists were twisting his vision for Bitcoin into something he had not intended, a speculative trading asset.

In 2017, Ayre and others pushed for the distributed software network, or blockchain, that supports Bitcoin to allow for more transactions to be processed per second so it could be moved cheaply and quickly to compete with established payment systems. But the idea was met with opposition from different core development groups that, among other things, saw Bitcoin more as a store of value.  

The developers who thought Bitcoin was being limited by its ability to only process seven transactions per second created a new branch of the network called Bitcoin Cash, with each holder receiving one Bitcoin Cash token for each Bitcoin they owned. A year later, in 2018, Bitcoin Cash split again, creating the digital currency Bitcoin SV, which was publicly championed by Ayre and Wright, and could process thousands of transactions per second. With Ayre backing companies and “mining” operations that worked to confirm transactions on its network, the two set out to create an ecosystem to support Bitcoin SV. 

Ayre claimed keeping transactions fast and cheap meant the Bitcoin SV platform could be used to solve data-management problems across industries. He says it’s the only digital currency that follows the original set of rules, or protocol, laid out by the white paper that launched Bitcoin. After both splits, Ayre says he sold the Bitcoin and Bitcoin Cash he owned, and held on to his Bitcoin SV. He used the proceeds from the sales to invest in businesses related to Bitcoin SV, he says.  

“What I am investing in is the utilitarian value of this technology,” says Ayre. “I’m working on creating an ecosystem around a transformational technology that will transform all industries that touch big data globally.” 

***


TERRENCE HORAN/MARKETWATCH

The hundreds of chairs carefully lined up in one of the larger ballrooms at Manhattan’s downtown Sheraton Hotel were mostly empty during Ayre’s recent Bitcoin SV conference. CEOs and software developers got up on stage and spoke about how they were utilizing Bitcoin SV to a largely empty room. At one point during the conference, Wright showed up brandishing a long sword, but the summit lacked the buzz of the last event Ayre hosted in New York 16 years ago. There were no young models, and the most notable actor to arrive was Adrian Grenier, best known for his role in the series “Entourage.”

Ayre likened the ballroom to a telecasing stage, saying pandemic-related travel restrictions had limited attendance, but the online viewership, he said, was large. He said the young models who hung on his arm at old Bodog events were just part of a marketing gimmick to promote the gambling brand. “We’re live streaming online,” said Ayre. “This is actually a TV studio.” 

The event was dutifully covered by CoinGeek, Ayre’s news site dedicated to writing about Bitcoin SV. It is part of the Ayre Group, the largest investor in companies utilizing the Bitcoin SV platform. Ayre says the ability of the software network supporting Bitcoin SV to scale means it can be applied to different kinds of projects attempting to process large amounts of data in a way that is superior to traditional database software. According to the Ayre Group web site, Ayre owns stakes in private companies like Centi, a Bitcoin SV payments company; FYX Gaming, an online gaming company that operates on the Bitcoin SV network; and Unisot, a provider of Bitcoin SV–related technology for supply chain enterprises.

Ayre has also moved back into the public markets. He was banned by British Columbia regulators in 1996 from owning securities of companies listed on the Vancouver Stock Exchange for 20 years but has built his first large-percentage equity holding in a publicly traded company in a long time, a 44% stake in Taal Distributed Information Technologies
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The company is the largest Bitcoin SV “miner,” recently making up a third of the computational power used to verify transactions on its network, according to CoinDance. Traded on the Canadian Securities Exchange, Taal lost about $4 million on $16 million in revenue in the first nine months of 2021 through its mining and transaction-processing operations, a securities filing shows. 

But none of Ayre’s activities has attracted as much attention as his support of Wright. “In reality, we are just friends, but, importantly, he gets that Bitcoin was designed to be a digital currency,” says Wright in an email. “The friendship has extended into him investing in companies that have built on the BSV Blockchain” software network.

Ayre has also backed Wright directly, a court-filed document shows. Wright has sued people who have publicly scoffed at the idea that he is Satoshi Nakamoto. Some have demanded Wright prove it by using the private key that controls the account where Nakamoto stored 1 million bitcoins. A gesture like moving a bitcoin or two out of the account could potentially settle the matter for good, they say. 

Wright’s lawyers sent a letter to Vitalik Buterin, the co-founder of the Ethereum
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network, alleging Buterin defamed Wright by calling him a “fraud.” Buterin said in a video posted online that Wright is using the Satoshi Nakamoto claim as a “marketing strategy” to appeal to those who are aggrieved that the effort to allow Bitcoin to process more transactions per second and become a more robust “peer-to-peer electronic cash system” was blocked. Buterin could not be reached for comment. 

Wright filed a libel lawsuit in the U.K. against podcaster Peter McCormack, who has also been critical of Wright’s claim to be the inventor of bitcoin. According to a court document he filed in the case, Wright said that his legal costs were “being funded by a third party in these proceedings, namely Calvin Ayre.” McCormack declined to comment, citing the litigation. 

In an interview, Ayre says, “Craig pays his own way.” 

Wright is also the chief science officer at nChain, a blockchain technology company in which Ayre is a large investor. The company has filed thousands of patent applications on Bitcoin-related technology. 

At his New York conference, Ayre was particularly focused on a civil trial taking place in Miami, in which Wright was being sued by the family of a late business associate, Dave Kleiman. The fight centered on ownership of certain Bitcoin-related assets, but Ayre insisted Wright would produce evidence in the case proving he invented Bitcoin. After the trial, Ayre acknowledged Wright hadn’t produced overwhelming evidence during the trial, but said he remains convinced that Wright is Satoshi.

In December, a federal jury mostly ruled in Wright’s favor, saying Wright did not have a business partnership with Kleiman. But the jury also found Wright liable for $100 million in compensatory damages for taking unauthorized control of intellectual property from a company Kleiman founded. The lawyers representing the Kleiman family said in a statement they were “immensely gratified” by the award. 

For his part, Wright declared total victory. “I feel completely vindicated,” he said. “Next there are still more fights; we are going to make everything change from cryptocurrency to digital cash the way it is meant to be. My original invention is coming back.“ 

The trial and the jury’s ruling drew international headlines and reignited interest in Wright’s campaign to show he invented Bitcoin. Critics of Wright seized on the lack of evidence produced at the trial that proved he invented Bitcoin. “There is zero chance Wright is Satoshi,” tweeted author and Bitcoin supporter Vijay Boyapati while the case was ongoing.

A spokesman for both Ayre and Wright said that as the trial unfolded, Wright was not required to prove he invented Bitcoin because both sides agreed he was Satoshi Nakamoto. 

Ayre says what’s most important to him is that Bitcoin SV is a technology that can work and scale in a way that Bitcoin and many other cryptocurrencies cannot, and that many of Wright’s critics are promoting digital tokens that have no underlying utility or value and will burn retail investors. He suggests there are financial opportunists and venture capitalists who are manipulating the price of various cryptocurrency tokens on unregulated exchanges. Ayre alleges that many tokens trading on exchanges are also facilitating crimes, like money laundering, or evading capital account controls in places like China. 

“Eventually those tokens are going to trap everybody, and a bunch of people are going to get financially wiped out,” says Ayre. 

One thing is clear: Ayre would have been much better off financially today had he kept his Bitcoin and not chosen to sell his holdings years ago, deciding to instead invest heavily in Bitcoin SV and its platform. But Ayre says he has no regrets. 

“I am going to feel a lot better for myself from investing in companies and creating companies that solve real-world problems than from making money off the back of someone else,” says Ayre. “We don’t care if our price stays right where it is. Because if we’re using the platform to solve real data-management and valuation problems, that is independent of where the tokens trade.” 

Orignally published on 2022-01-11 13:02:00 by www.marketwatch.com

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