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How a self-proclaimed Satoshi sold investors and SEC officials on his coin scheme

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An SEC official ‘tried to speak with me in Japanese,’ the alleged Satoshi says

Illustration by Alex Castro / The Verge

Last week, The Verge reported on a self-proclaimed Satoshi who had appeared to drum up interest in a new blockchain — and the mysterious figure’s scheme now seems to have attracted interest from some of the cryptocurrency world’s most influential players. Emails shared by the mysterious developer reveal weeks of planning alongside a major investor and several SEC officials, many details of which have been independently verified by The Verge. Throughout August, the supposed Satoshi and prominent Bitcoin investor Tim Draper were in discussions for an initial coin offering based on the new coin blockchain — talks that seem to have abruptly dropped off when Draper lost faith in the scheme late last week.

Best known for championing the Six Californias ballot initiative in 2014, venture capitalist Tim Draper has become a major source of funding and political for cryptocurrency entrepreneurs, making a string of high-profile Bitcoin buys when the price of the currency dipped in 2015.

Draper appears to have been a central figure in the supposed Satoshi’s plans, although the relationship between the two has since soured. When reached for comment for Friday’s article, Draper said simply, “he is a fake.” Draper later elaborated that he had cut ties with the supposed Satoshi when he came to believe the figure was not the real Satoshi Nakamoto. “He had me going for a bit, but his ‘proof’ didn’t check out,” Draper explained. “Satoshi” confirmed that they had parted ways, but says it was he who fired Draper from the project.

Following last week’s piece, the mysterious “Satoshi” insisted to The Verge over multiple emails that he is indeed the originator of Bitcoin. He offered access to an email account as proof of his identity, and claimed his new project would offer significant improvements on existing blockchains.

Among the emails in the account shared by “Satoshi” is a seemingly authentic correspondence between Draper, Satoshi, and SEC employees that spans from August 4th to 28th. While none contain convincing proof of his claimed identity, they offer surprising insight into the early planning for the project. “Satoshi” spent weeks planning the blockchain project with Draper, envisioning it as an initial coin offering in the mold of recent successes like FileCoin and Bancor. In the first email in the archive, Draper lays out a general plan for the partnership: he and Satoshi would take equal five-percent shares of a $50 million initial coin offering, a figure Draper saw as low enough to attract early investment.

“Make sure you can sell/spend your piece of the coin,” Draper wrote in the email. “I would hate to see you stuck with another billion dollars you can't get to.” (In previous correspondences, the supposed Satoshi claimed to have lost his keys to the initial coins, placing what would now be more than $4 billion in bitcoin outside of his reach.)

There were also significant efforts to keep “Satoshi’s” true identity secret throughout the process. Draper was envisioned as the public face of the project, registering domains and handling other regulatory tasks that might otherwise threaten “Satoshi’s” anonymity. Even simple communications were a potential risk. “Still thinking about how to position this with press and public,” Draper wrote in an August 4 email. “I think just that I only hear from you by phone when you call, and that the phones are disposable.”

Some details from the emails were independently confirmed by The Verge, suggesting the conversations are authentic. In an August 10th email, the pair discussed possible domain names for the new blockchain. Draper wrote that he had purchased the rights to CoinB.org — and records confirm that Draper registered CoinB.org on that day. The duo also inquired about purchasing a more expensive domain — coin.org — although the deal fell apart before any transaction could be made.

The emails also show extensive conversations with the SEC over approximately a week-long period as the two men tested the legal waters for their upcoming venture. In an email on August 15th, “Satoshi” told Draper that he had just gotten off the phone with one of the commissioners of the SEC. “He answered the phone and tried to speak with me in Japanese. We spoke briefly. He mentioned that the Chairman of the SEC is well aware of ICOs.”

Those conversations culminated in a meeting on August 23rd with at least three SEC officials. Draper flew to Washington, D.C. for the meeting, while “Satoshi” appears to have called into a conference line. According to the email, other teleconference attendees included Draper’s lawyer and even his sons, whom he described to ”Satoshi” as “very active in the ICO market.”

The SEC declined to comment on the situation, although “Satoshi” claims discussions with the agency are ongoing. In July, the agency released a report on initial coin offerings, signaling its intent to regulate ICOs as investment vehicles in the absence of any consumptive good or service. On Monday, the agency issued a bulletin warning of scammers offering ICO opportunities, which have grown more common as the arrangement has gained wider acceptance.

Writing to Draper after the SEC meetings, “Satoshi” proposed an unusual tiered rollout for the upcoming coin, opening first to vetted US investors, then to everyone in the US, then to buyers outside the US. While some ICOs have separated public and private investors (and drawn criticism for doing so), tiering investors by nationality or level of vetting is highly unconventional, and would serve no apparent regulatory purpose.

“This definitely sounds like a cargo cult,” said Coin Center director Peter van Valkenburgh when The Verge described the scheme. “He’s taken a bunch of complicated words from the technology and from the regulatory landscape and mashed them together and hoped the money would show up.”

Unusual ideas have become common as initial coin offerings have hit their stride, with jokey proposals like the Useless Ethereum Token raising tens of thousands of dollars in a matter of days. Under the right circumstances, having an ICO backed by Satoshi himself could have been highly appealing to investors — but the success of the project would have hinged on convincing investors the newly discovered Satoshi was genuine.

It’s not clear whether the SEC actually believed that they were speaking to the inventor of Bitcoin. Although an SEC official cordially addressed the supposed Satoshi as “Mr. Nakamoto” in the emails, there was nothing in the emails that indicated that anyone at the SEC was convinced of his identity (or, for that matter, that they were not convinced of his identity).

His emails to Draper suggest that “Satoshi” was going to lean hard on his established line of communication with the SEC to legitimize his claim. “The most important file you have to be aware of is the original design paper. Which no one has,” he wrote to Draper on the 22nd. “It is not drastically different from the final whitepaper but some clear differences. Media may ask but I don't think they will question it after our meeting with the SEC.”

The forms of proof offered to the media last week — older versions of Bitcoin and early emails from Satoshi Nakamoto to Wei Dai (the creator of a cryptocurrency precursor) — were already publicly available on the internet. In addition to those, “Satoshi” also sent Draper the “original” Bitcoin white paper, which he claimed “no one has.” In emails to Draper, “Satoshi” claimed that no one knew that before he called his creation “bitcoin,” he had called it “ecash.” (In truth, this was already publicly known.)

“Satoshi” provided the PDF of the “original paper” to The Verge on Monday, alongside a now-deleted Medium post announcing his identity to the public. A cursory Google search showed that at least part of the original white paper has been available to the public for quite some time. The abstract of the “original paper” matched what has been publicly available, but the rest of the changes were quite minor — a tense tweaked here and there, and a paragraph moved from one section to another. The densest changes occurred in the abstract, which again, was already publicly available. No previously unknown sentences existed in this “original paper” provided to us.

But most odd of all, the “original paper” given to us was in PDF version 1.6, whereas the Bitcoin white paper—the supposed final draft—is in PDF version 1.4, a slightly older version.

Whatever it was that set off Draper’s suspicions, the fallout was quick. On the evening of August 23rd, Draper sent out an email thanking various SEC officials, writing, “I look forward to working with you to see the best path forward for both this project with Satoshi, and with future ICOs.”

The next morning, emails indicate that he and “Satoshi” had been on the phone hammering out more details around their coin project. But by the afternoon, “Satoshi” had began blasting out mysterious messages to various members of the press about how he was “ready” to share his story. On August 25th, at 9AM PT, “Satoshi” emailed the SEC saying, “I am writing to inform you that Tim Draper (and his lawyer by extension) is no longer involved in the project and I have terminated our partnership. Due to unforeseen circumstances, I had to take these necessary steps.”

Reached for comment for this piece, Draper said simply, “I don't think I want to perpetuate this farce.”