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 creator of bitcoin'

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.

'Additional credibility'

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."

So did a "screenshot of a blockchain wallet (presumably that of Mr. Tambosso) showing a balance in excess of $5.2 billion in bitcoin."

Nguyen agreed to provide a short-term loan, and the two men signed a first contract for 18 bitcoins. A short time later — as the program demanded even more money — they drew up another deal for a further four bitcoins.

"By their clear terms, the contracts provided that Mr. Nguyen agreed to provide Mr. Tambosso with a total of 22 bitcoins (18 and 4) on the condition that Mr. Tambosso would repay these bitcoins within 48 hours," the judge wrote.

"In other words, regardless of whether or not the ... procedure succeeded, Mr. Tambosso was required by the terms of the contracts to return the original 22 bitcoins to Mr. Nguyen."

'It felt like being trapped in the movie SAW'

In his affidavit, Tambosso claimed mounting anxiety as the "Satoshi program" demanded more and more bitcoins — while any promised reward slipped further and further away.

He compared his plight to a popular horror film series in which victims are tested through torture: "It felt like being trapped in the movie SAW, where each step required more bitcoins to survive, leading us down the wrong path without knowing."

Tambosso claimed he sought cash from yet another investor, giving him a "rose gold IPhone" containing his bitcoin wallet as collateral for a $900,000 loan.

He claimed the other man refused to return the phone — trying to extort him instead for a portion of its contents.

"Deprived of my rose gold iPhone, I resorted to sending emails to Satoshi Nakamoto, detailing the situation and seeking clarification on why the program failed to complete," he claimed.

"Despite my efforts, I received minimal to no response."

But Fitzpatrick said none of that was Nguyen's concern.

"Although it appears to be, in hindsight, that Mr. Tambosso was either scammed or has otherwise become involved in some kind of broader nefarious scheme, neither absolve him of his obligations to repay Mr. Nguyen," she wrote.

'Why did they even sue me?'

Tambosso represented himself, crafting a host of arguments Fitzpatrick shot down one by one.

At one point, he sought to hide the proceedings from public view, applying to seal the case and close the courtroom for fear the facts "exposed me to high risk for both my personal safety and livelihood at present day and the future."

"Mr. Tambosso appears to conflate duress as a result of pressure from third parties with duress imposed by Mr. Nguyen. The simple truth is that it was Mr. Tambosso who sought loans from Mr. Nguyen," the judge wrote.

"Mr. Nguyen set out the conditions upon which he would advance the bitcoin. Mr. Tambosso had the choice of accepting those conditions or walking away from the deal. He chose the former."

Nguyen declined to comment on the ruling. According to his affidavit, he still owes "significant funds" on a line of credit used to build his cryptocurrency portfolio and has been forced to refinance property to pay.

"I regularly experience anxiety concerning the loss of my life savings," he wrote.

Tambosso — who said he now works in heating, ventilation and air conditioning — told CBC he lost "billions" on the venture.

"I lost everything in my entire life to this, and now I have to pay for it again? I don't have an asset to give them. Why did they even sue me? They can't get anything from me," he said.

"I have a vehicle to go to work — and that is it."