Bitcoin scheme leads to financial ruin, legal battle for B.C. men

An intricate cryptocurrency scheme trading on the name of the purported founder of bitcoin has resulted in a bitter B.C. legal battle between two men who both claim financial ruin.

A B.C. Supreme Court judge weighed into the dispute this week, ordering Daniel Tambosso to cough up $1.2 million — the cash equivalent of the 22 bitcoins Hung Nguyen loaned him in September 2021 for what was supposed to be just 48 hours.

In court documents, Nguyen — a Kelowna real estate agent — said the money "represented the entirety of my personal savings," claiming Tambosso's failure to reimburse him "has had a devastating impact on my personal finances and on my mental health."

Meanwhile, Tambosso — who told the CBC he plans to appeal — claims he has also been left penniless, the victim of an "elaborate scam" that saw him borrow funds from Nguyen as he threw good money after bad in the hopes of unlocking a blockchain wallet worth billions.

"My intentions were genuine, with no desire to misappropriate his bitcoins," Tambosso wrote in an affidavit.

"I had sought assistance from investors to recover my own bitcoins, only to uncover that it was a Ponzi scheme involving compromised and manipulated wallets, with bitcoins demanded within strict time frames, constantly requiring more."

The case may be mired in the complexities of cryptocurrency, but Justice Shelley Fitzpatrick said the underlying legal concept was a matter of simple contract law — calling the situation a "modern twist" on "old-fashioned cause of action and remedy."

In his affidavit. Nguyen detailed the growth of his portfolio starting with small investments in bitcoin and ethereum in April 2017. He took out a line of credit and drew from personal savings to grow a $264,000 investment into $1.18 million worth of cryptocurrency by 2021.

Nguyen said friends introduced him to Tambosso, who explained that "he had significant cryptocurrency holdings and that, in the past, he had encountered bad actors in the cryptocurrency market that scammed or attempted to scam him."

In his version of events, Tambosso claimed he went looking for a "solution to track and recover the misappropriated bitcoin" and came across security recovery software purportedly designed by Satoshi Nakamoto, "the creator of bitcoin."

According to the court documents, the security software could only be accessed in stages, with each stage requiring a fresh payment of bitcoin. Tambosso needed Nguyen's money to make the payments.

"Mr. Tambosso told Mr. Nguyen that the payoff could be huge: if the ... procedure was successful, Mr. Nguyen would receive 1,750 bitcoins as compensation for the loan," Fitzpatrick said.

In her judgment, Fitzpatrick said Satoshi Nakamoto "denies" being the inventor of bitcoin — but she drew no conclusions about the mysterious software developer, whose name is believed to be a pseudonym.

Still, the judge said the mere mention of a man with "cult-like status" in crypto circles "gave Mr. Tambosso's proposition additional credibility."