The Pomp Podcast - #1210 Jess Jonas On Bitcoin Under Attack In UK Court

Episode Date: June 14, 2023

Jess Jonas is the chief legal officer at the Bitcoin Legal Defense Fund. She is also the point person organizing the defense of 13 bitcoin developers across two court cases in the United Kingdom. In this conversation, she breaks down what is going on in those court cases, why this is so important for bitcoin development & open source software, and then she describes how you can get involved to support their work. BLDF Website: https://bitcoindefense.org ======================= Pomp writes a daily letter to over 235,000+ investors about business, technology, and finance. He breaks down complex topics into easy-to-understand language while sharing opinions on various aspects of each industry. You can subscribe at https://pomp.substack.com/

What's up, everyone? This is Anthony Pompliano. Many of you know me as Pomp. You're listening to the Pomp Podcast, which is my effort to find the most interesting people in the world and sit with them for hours while I ask questions in an effort to learn. So it would mean the world to me if you would subscribe to the show on your favorite audio platform, watch episodes on YouTube, and tell your friends and family about the podcast. My goal is to help millions learn from the world's most interesting people. So let's get into today's episode. Jess Jonas is the chief legal officer at the Bitcoin Legal Defense Fund. She's also the point person organizing the defense of 13 Bitcoin developers across two court cases in the United

Kingdom. In this conversation, she breaks down what's going on in those court cases, why this is so important, not only for Bitcoin development, but also open source software. And then she describes exactly how you can get involved to help support their work. I really enjoyed this conversation with Jess. There's all kinds of crazy stuff happening inside of these court cases. And So the better informed you are, I think the more that you will pay attention and stay on top of what is going on when it comes to Bitcoin developers and open source software. Here is my conversation with Jess Jonas. Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments.

You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy. but only as an expression of his personal opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. I've got Jess here with me. Jess, I thought that a great place for us to start this conversation would just be around the idea of using the courts against open source software.

What is the history of people trying to do this? And what are some of the implications maybe of the current environment of open source software that's actually been driven by past court decisions? Yeah, that's a great question. So, you know, I think part of the thing that we're dealing with at the Bitcoin Legal Defense Fund is understanding that at any point, anybody can bring a lawsuit for anything. Right. But if a lawsuit is frivolous, typically those lawsuits don't survive. The issue becomes when somebody brings a lawsuit that is arguably frivolous and they have the financial means to run with it. the court systems are abused by people who have the means to abuse them.

And in this case, we're dealing with somebody who has brought a series of lawsuits against a group of Bitcoin core developers that have really created an existential threat to open source software development. So I'd love to take a little bit of time and walk you through what these cases are about and what the potential implications are for open source software. Let's do it. Go ahead. Let's do it. Go ahead. Yeah. So the fund that I work for, the Bitcoin Legal Defense Fund, it was established in 2021 by Jack Dorsey, Martin White, and Alex Morkos to support Bitcoin developers who are facing legal battles for the work that they do on Bitcoin Core.

But the fund is fighting for more than just Bitcoin. It's fighting for the right for developers to create open source software without fear of legal retaliation. Right now, we're supporting 13 Bitcoin core developers across two cases in the UK that have been brought against them by Craig Wright or companies that he controls. Wright is infamous for litigating against members of the Bitcoin community. And I think there's a tendency for people to kind of just dismiss these attacks as unserious because of who's behind them. But we need to take these cases in the UK extremely seriously. because if the courts rule against the Bitcoin developers in these cases, it would have a chilling effect on all open source software development. So turning to the first case, which is the case that's known as Tulip Trading,

the origins of this case are that Craig Wright claims to have lost 111,000 Bitcoin in this Ocean's Eleven style hack. The first thing to make clear is that there's no evidence that any of this actually happened. There's no evidence that he owned any of this Bitcoin, and there's no evidence that he was hacked. Nevertheless, that did not stop him from issuing a demand letter to several Bitcoin Core developers claiming that they have a duty to stop illegitimate transactions from occurring on the network. Tool of Trading filed this lawsuit in 2021 in the UK against 12 Bitcoin Core developers, asking the court to legally compel these devs to introduce a backdoor to the Bitcoin Core client that would allow Wright to recover the Bitcoin he claims to have owned and claims to have lost.

It's an absurd claim, and the UK courts initially agreed. The lower court in the UK initially dismissed this lawsuit, finding that tool of trading had not established a serious issue of fact to be tried. Wright appealed that decision, and a three-judge appellate panel at the second highest court in the UK found, in fact, that it was a serious issue that the court needed to evaluate at a full trial. So the question that the courts are now grappling with in the UK is whether decentralization of Bitcoin is really a myth. And more importantly, the question of whether open source developers, not just Bitcoin developers, should owe a fiduciary duty to people who use software that they create. Let's take those two things right there, right? decentralization, why is that an important thing that they're grappling with? Because if it is fully decentralized, then no one person could be held responsible for introducing backdoors or

anything like that? Or like, what is the exact kind of debate around why decentralization is so important here? I think, ultimately, it's just a myth, a misunderstanding that the courts have as to how Bitcoin functions. And I think that's something that we'll be able to clarify throughout the course of this trial, I do think that question is potentially a bigger issue for some other protocols or, you know, cryptocurrencies, et cetera, because what the court is considering when they are considering decentralization is whether there is an element of control. And I think that is what the courts are interested in, whether there is one person or a group of people who control whatever the protocol is. That's not the case in Bitcoin. The devs,

the maintainers, they don't control Bitcoin. Nobody controls Bitcoin. If you were to say there's a person who controls Bitcoin, it is each and every single person who selects what type of Bitcoin client they're going to run. So I think fundamentally, that question is just a misunderstanding of how Bitcoin works, that question that the court is asking. But I do think it should raise the hackles of maybe people who work in other types of protocols or software that maybe there is some level of centralization. There is an opportunity for somebody to come in and save a person or write a backdoor in. That's not the case with Bitcoin, but it is a question that the court is curious about. And I think for those reasons that I articulated, the question of

whether there is an opportunity to control. Got it. And then talk about the open source developers having a fiduciary duty to people who use the open source software. That seems on its face to be kind of ridiculous, but the courts aren't in the business of narratives. They're much more in the business of facts and kind of precedent and things like that. And so what are some of the things people should be aware of in terms of that specific argument? Yeah, so I think it's important to first describe to your listeners what fiduciary duty is, because although I'm a lawyer and I sort of have spent quite a lot of time living and breathing this, not everybody is conversant with all the different duties that exist under

the law. Fiduciary duty is a well-established legal duty that arises in certain contractual or legal relationships. It is the strongest duty of care that exists under the law. The UK courts have defined fiduciary duty as a duty of single-minded loyalty. What this means in practice is that the fiduciary is obligated, either by law or by contract, to put their principal's best interests above all others, including their own. This is an exceptional obligation, and it goes far beyond any ordinary duty of care to deal honestly or without negligence. Some examples of real fiduciary relationships that exist under the law are a lawyer has a

fiduciary duty to their client, a doctor to their patient, a corporate board to their shareholders. So fiduciary duty is a real duty that exists under the law. It is an important one, But it doesn't apply in this situation. It doesn't make any practical sense. And the reason for that is because it is absurd to consider that any one or group of open source developers could ever owe this duty of single-minded loyalty to potentially millions of strangers all over the world who use their code. There is no nexus between the software developer and some unknown end user. There is no connection. How could a software developer writing code in Texas have any idea what would be in the best interest of some unknown end user who uses their code way down the line? So that's the question that the court is grappling with.

And the court said in the appellate decision it rendered earlier this year, it acknowledges that this is not a real application or an apparent application of fiduciary duty. It acknowledges that this would be a departure from the hundreds of years of existing law. But it is considering whether this is a step the court would need to take. And I think for those of us who are paying close attention to this, and I hope now all of us are paying close attention to this, I think that is the most concerning piece. This is a very intelligent group of judges who spent quite a lot of time thinking about this. This was not just an overall miss. What they said was that this is a departure. This is not where fiduciary duty lies or has historically ever lied. But they need to consider whether in this changing ecosystem

it makes sense. And part of our job as the representatives of these devs is to show the court, no, it doesn't make any sense. It's illogical, it's impractical, and it's inapplicable. I have no idea how this could actually be effectuated in practice. So, Jess, before we move on to the other cases, explain a little bit about the Bitcoin Legal Defense Fund and kind of like your role's role, because I think people will hear what you're talking about and say, OK, cool, there's this case going on. It's very important. There's a lot of nuance here. She sounds like she knows what she's talking about. Right. And is making a compelling case. Who are they? Why are they the ones who are going in and fighting this?

Who kind of put them up to do this? So describe a little bit about the Legal Defense Fund. I'm so glad you asked. So the Legal Defense Fund is a nonprofit that was established a couple of years ago in response to this case that we've been discussing, this tool of trading case. It was founded by Jack Dorsey, Alex Morcos and Martin White to fight back, because essentially what's going on is Craig Wright sued a group of Bitcoin core devs. And he's banking that these devs might not be able to adequately defend themselves. Litigation is incredibly expensive, and he's being bankrolled by a billionaire. So that's why the fund is here. The fund is here to fight back. We provide funding, litigation strategy, and serve, if you will, sort of as in-house, de

facto in-house counsel for these 13 developers who are subject to, excuse me, this lawsuit. So that's what we're here to do. But it's not just that we provide funding. Of course, that's a very important component of this. You know, in order to defend yourself in a lawsuit, you need to be able to pay your lawyers. You need to be able to pay good lawyers. And lawyers in the UK are expensive. And the way the UK legal system is set up, you necessarily have two of them.

You have your solicitor and you have your barrister. So it's doubly expensive as compared to the way we do it in the US. But you also need to think strategically about what you're going to do. And part of what we're doing at the fund is we are making sure that we are speaking loudly and telling the community about how serious these cases are, because these cases are arguably the most serious legal threat that the Bitcoin community has ever faced. And even though each of these cases is nominally about Bitcoin, they are more fundamentally an attack on open source software and basic rights that are as fundamental as freedom of speech. These cases are important for Bitcoin and the broader community, but they are also important to all of us who depend on open source software in our day-to-day lives. So that's why the Bitcoin Legal Defense Fund was founded. And that's what we're doing. We're fighting to defend these developers. We're supporting them in these lawsuits. And we are standing up on high and telling the community, pick your head up and pay attention. This impacts you, whether you love Bitcoin, hate Bitcoin, or completely agnostic to it. But how much of what you all are doing is Bitcoin's the battleground, but actually this is about open source development versus, no, it's just all about Bitcoin. And like, yeah, sure, maybe there's like some, you know, very dotted lines you could draw to open source, but that's not really the focus.

Great question. It is exactly that. these cases are, you know, the battleground is Bitcoin. But I think when you read the decisions and you think about what we are fighting about, the court did not narrowly tailor in the tool trading case, the court did not narrowly tailor its decision in a way that had any of us walking out of there saying, this has no implications for anybody except Bitcoin debts. The decision in tool trading, this appellate decision, which has now opened this case up for trial, was about the potential that open source developers, which encompass Bitcoin developers, but also include

Linux developers, for example, could owe fiduciary duties to people that use their code. So that's what the tool trading case is about. The other thing that's going on is that the MIT license is on trial. And I think that's a piece that has not been getting enough focus. But the MIT license is the most popularly used open source license that exists. And when Bitcoin was first developed, it was released under the MIT license. And I think it's helpful to read the language of the MIT license. So I'm going to do that now. The MIT license says that the software is provided as is without warranty of any kind, express or implied, including but not limited to the warranties of merchantability, fitness for a particular purpose, and non-infrigment. In no

event shall the authors or copyright holders be liable for any claim, damages, or other liability, whether in action of contract, tort, or otherwise arising from, out of, or in connection with the software or the use or other dealings in the software. The language of the MIT license is incredibly clear. And it is this license and other similar open source licenses that protect open source software developers who release their code freely into the world. That's what's on trial here. That's what we're fighting for. And yes, it is nominally about Bitcoin, but it is clearly about the rights and the freedoms of open source developers to continue to work on free open source software and offer it to the public for the purposes of innovating

and creating our future. Talk about the other cases that you all are focused on and kind of working to make sure that you keep kind of pushing forward here. So there's one other case that we're dealing with, and this case is at an earlier stage. This case is more specifically, it relies on Craig Wright's fallback claim that he's Satoshi Nakamoto, I don't think it's worthwhile to spend any time on that allegation, which has been proven in other places to be false. But very similar to the tool trading case, this again is an attack on open source software more broadly. Essentially, what the allegations are in this place are that Bitcoin developers and other industry participants, So there are some big crypto companies that are defendants in this case as well, owe a intellectual property rights to the developer of Bitcoin.

And they are infringing on these intellectual property rights by developing Bitcoin, using Bitcoin, etc. It is a nonsensical claim, but the fact that this claim can even be initiated in light of the language of the MIT license is really scary. So when you start thinking about these licenses, and let me caveat this entire piece with, like, I'm outside of my circle of competence the second we start talking about the licenses. But what I find interesting is these are court cases that are happening in the UK, but we are talking about licenses that are from US-based institutions. How does geography play into this, right? And would you actually prefer for these court cases to be playing out in the UK or the US or does it not matter? well i actually don't think these court cases would have really gotten off the ground in the u.s if you want my perspective as an american litigator has been doing this for you know more than a decade um i think there are several things that made the uk jurisdiction palatable for craig wright uh he is suing a lot of people who are not uk residents and the courts

were able to extend jurisdiction over people who are residents of the U.S. and several other countries, in large part because of how the U.K. legal system is set up. So I guess at the outset, I don't think this would have gotten anywhere in the U.S. There are a lot of problems with it, not least of which one of the remedies that Wright is seeking in tool of trading is he is asking the courts to order the Bitcoin developers to write a backdoor into this software. And in the U.S., that's prohibited compelled speech. Software development is protected speech in the U.S., and asking a court to compel someone to speak is contrary to our constitutional rights. So that was, sorry, I'll get off my soapbox and answer the question that you actually asked.

But the interesting thing about this is that, yes, although this case is proceeding in the U.K., It is against many people who are not situated in the UK. So at the outset, if anybody's sitting here thinking, well, so long as I'm not developing software in the UK, I'm safe, that's false, because the people who are subject to this lawsuit are situated all over the globe. The second thing that I think is really interesting about this is, by its nature, software is available everywhere, right? So these open source software developers, no matter where they are, they're writing code that may at one point be accessed by somebody, for example, in London, and that that somebody in London may then make an allegation that, oh, no, I was injured as a result of the code that you wrote.

you now have to come to court in the UK to answer to me. So I would say that if anybody is considering this as a UK issue or within the confines of some sort of jurisdictional world, that's false because the people that are being impacted live all over the world and the people that could be impacted by such a decision live all over the world. So it's a bit of a fallacy to think that this is, you know, this is a UK problem, this is a global problem. And I think it speaks to a larger global trend that we are looking at, which is sort of this expansion of potential liability against software developers. So other things that are going on that, you know, the fund isn't fighting, but I think it's worth mentioning so that everyone's aware that this

isn't just happening because Craig Wright has brought these frivolous lawsuits against these devs. There are, there's legislation that's popping up all over the world that seems to include potential liability for software developers for certain types of harm. So for example, there's a Cyber Resilience Act in the EU. There's the AI Act in the EU. There was the, gosh, I'm forgetting what it's called, but it was a Biden strategy report here in the U.S. that was released a few months ago. All of these things are sort of painting a picture of a trend. We are moving in this direction of trying to create some sort of ad hoc class of individuals who should be liable when a bad actor does something bad. And that's not really, that seems like a

ignorant and short sighted solution to a problem. So we've talked a lot about open source developers here. If this was not open source, would these attack vectors be available? Or would they have to basically go and make claims against a company or, you know, some sort of legal entity and the individuals themselves will be shielded. But that would take away, you know, the trade-off being the benefits of open source? Yeah, it's exactly right. If this were, for example, proprietary software, the avenue would be to sue the company that releases the proprietary software, and that company would shield the employees that may have developed that proprietary software. So it would be, you know, the argument would be that the company would be on the hook,

not the individual employees who may have participated in writing the code that was then misused down the line. But in that example, that analogy, I think what's interesting is if you were to, if you were to propose that, you know, Joe Schmo sues Microsoft claiming that Microsoft owes people a fiduciary duty, people would be like, well, how? What? In what world is there a link there? In the same way that there's no link between, you know, these individual software devs who volunteer to write open source software. And I think that's an important point, is that this is volunteer work. And in particular, for people who work on Bitcoin Core, they don't receive any sort of direct remuneration out of the work that they do. They work on Bitcoin Core

because they believe in it, because it's an interesting project. And many of these software developers also work on other open source projects. For example, one of our devs has been is a very prominent software developer. And he's one of the people who has helped develop the audio codec that these video chats use. So like what we're using to talk to each other, at least partially runs on open source software. 97% of all the world's software has some open source components. Facebook's data infrastructure runs on Linux. The first humans launched into space on SpaceX were sitting on top of a rocket that ran on open source. The most popular smartphone operating system in the world, Android, is open source. The NASA's technology that figures out

if meteors are going to hit the earth runs on open source. So anybody who thinks that this is sort of like a narrow problem, a Bitcoin problem, a problem that doesn't impact them or affect their lives is not paying attention to how threaded open source is with our day-to-day lives. When you go into a courtroom and you're talking about highly technical topics such as we're talking about here, how do you get the judges or the jury to understand what you're talking about, right? If they don't sit all day long and think about technical topics, I mean, do you really have to start kind of from 101 and build up and explain, you know, here's how databases work and here's how open source software works and kind of walk them through the entire journey? or is there some sort of maybe filtering system within the legal kind of scheduling that will put you with juries and judges

who have the technical kind of basics down to be able to make these arguments? Well, it's different from jurisdiction to jurisdiction. I guess one thing to note is that in the UK, they don't have juries. So the decision will be made by a judge who evaluates the facts and evidence and applies the law. I love the UK, but that's weird.

That's one of our constitutional criminology. Yeah, that's weird. Yeah. I mean, a lot of things over there are weird, for example. Their use of S's instead of Z's. It's weird. But, you know, our UK brethren. But there's also a difference in the UK than from the US, or at least I'm a New York lawyer,

so I'm very familiar with the court systems here where, you know, cases are typically assigned randomly here. It's just sort of like the next judge up gets the case. And I think there's some benefit to that randomness. In the UK, my understanding is that the judges are a little bit more subject matter oriented. So cases that are about IP, for example, go to a judge who practiced IP law when they were a practitioner. But at bottom, the role of a good lawyer is to teach the court or teach the jury. They should not be applying any of the information that they know coming into the case to the case.

They should be learning from the advocates what the facts are and how they apply. So being able to provide the technical primer in a comprehensible way is a really important skill. and it's one of the most important things in this case. It takes us back to one of your earlier questions, the question of decentralization. I think, frankly, that's just a bit of a misunderstanding

that we will not have a problem clearing up for the judge that Bitcoin is in fact really decentralized and nobody controls it. I think that's something that we'll be able to explain and the judges will be able to understand, but that's part of our job, to make an assumption that the finder of fact knows or should know how any of this works is improper. It's our job to teach them, to tell

them, to make sure that they have all the information they need to make the right decision. Are we going to have the developers take the stand? Are we going to have them have to kind of articulate, answer questions, cross-examination? I'm envisioning this, and again, stupid American who just entire court kind of thought process is all around what you see on television. And I can imagine a Bitcoin core developer sitting up on the stand and you're asking a bunch of great questions. And then all of a sudden here comes somebody who's, you know, teeing off on them and being combative. Like, is that what we should expect? Or is this more of kind of a procedural type thing? And it's more the lawyers are in there and the developers aren't

actually showing up in person. So this is another difference from our sort of Perry Mason, like American legal system. One thing that happens in the U.S. legal system is part of discovery. People sit for depositions. That's not typical in the U.K. So even the pretrial work is less of what you are used to here. It's more document discovery, letters written back and forth between the lawyers, submissions made to court, lots of arguments on the papers. But this case is going to go to trial, and the trial will involve people taking the stand and testifying as to the facts. A defendant is not obligated to take the stand in their own defense. That's really the same thing here in the U.S. as it is in the U.K. So the question of whether any devs will actually get

up to take the stand. It's not required. And frankly, I don't think it's necessary. I don't think there's any information that wholly lives within the knowledge base of the devs that would require them to sit up there and be subject to cross-examination. I'll also say that the legal system and the lawyers in the UK are much more polite and decorous than they are here. So our, Or what we're used to, these sort of hard-hitting, aggressive lawyers make people cry on the stand. That's just not how it's done there. Yeah, it's very interesting to think about, again, from the Western American viewpoint, how different just the proceeding itself is. And I do wonder, it sounds like maybe that is a disadvantage for the Bitcoin Legal Defense Fund.

Would you agree with that? Or is it actually something maybe that you think is helpful? I think it's helpful to have this cross-jurisdictional view. We have our attorneys in the UK who represent our clients and who are there to make sure that we are appropriately managing the case in a way that takes into account the norms of the legal system over there. But we have a lot of defendants who are Americans. And I think it's important that we can sort of support their perspective as well.

And I think because this really is a cross-jurisdictional issue, even though it's only taking place in the UK right now, I think it's important to have that sort of global oversight over what's going on. Let's look across the world and see where the trends are and see where these encroachments are happening. And let's try and shut them down because they're problematic and they're bad for all of us. Yeah. Talk a little bit about kind of your future plans with Bitcoin Legal Defense Fund. So we have these two cases here. You all are very focused on them. And I think one, getting the word out that they're happening, two, why they're important, three, what the details are. But what's kind of the future vision for you all in terms of what you want to be doing? the fund was started to fight for these devs and it exists to fight for these devs it has grown to fight beyond um these devs and fight for the future of open source but in an ideal world we won't have to exist in a few work few years we will have done our job we will have beaten craig

right, won these cases, created, you know, important precedent in the UK that shuts down any future potential allegation that there should be a fiduciary duty, something that would be, you know, dismissed immediately by the court. If we do our job, and if all of you help us by talking about it, by speaking to your friends, by donating to our cause, hopefully we won't have to exist. We will have won, and we can, you know, all of us can go back to our day jobs, if you will. So that's my ideal future state for the Bitcoin Legal Defense Fund. It's hard to say now where we will be, though, in a few years. Before I let you go, talk a little bit about what people can do who are listening or watching this.

Are there things that they can do around these specific cases? Are there things that they can do with the Bitcoin Legal Defense Fund? What's kind of your call to action or kind of direction of people who get excited and say, hey, I want to help here? What can they do? So the outcomes of these cases are not a foregone conclusion. If we, all of us, don't rally behind these developers and mount a strong defense, the UK court may decide that there should be a fiduciary duty owed by open source developers. And that would be devastating for every single person listening to this. We are here not just fighting for these 13 devs. We are fighting for all of you.

We are fighting for the future of Bitcoin and open source. We are fighting for your fundamental freedoms. Whether you know it or not, if you're listening to this, you have skin in the game and we need your support. What that means is donate. Go to our website, bitcoindefense.org. Spread the word. Talk about this.

Tweet about this. Post it on Reddit. Tell your friends about it. Tell your family about it. We need you to shout this from the rooftops. This is a community problem and it takes engagement from all of you to fight it. So that's my call to action. I think that that is a very worthy call to action. Jess, I really appreciate you taking the time to explain what's going on with these cases, bring attention to them, and then obviously continue with your work at the Bitcoin Legal Defense Fund to participate here and help defend

these developers. Where can people find you on the internet if they want to reach out, if they have more questions, or they'd like to engage in any way? You can visit our website and contact us through there. I surprisingly do not have much of a social media presence, but we do respond to email. We do have Noster. You can reach out to us there. You can zap us if you'd like to donate through that angle. That's how you reach us. That's how you can get engaged and you can learn more about our cases. We have documents up on our website. We have sort of a full explanation of what's going on. And if you really want to dig into the issues, you know, please do, uh, please do visit our website to learn more. Um, and we hope,

you know, we hope that you're all, you're all going to help us fight this worthy cause. Amazing. Well, listen, thank you so much for taking the time to do this. Uh, I learned a lot today and I think other people will have as well. And so we'll definitely do it again in the future. Thanks. Thank you.