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Dorian Nakamoto Wants to Sue Newsweek, But He Probably Has No Case

The Supreme Court has given journalists the "breathing room" to get things wrong on important stories.

by Jason Koebler
Oct 14 2014, 7:20pm

Did Dorian Nakamoto create Bitcoin? We still don't know—but the California engineer and  subject of a bombshell Newsweek cover story on the subject earlier this year says he's suing the publication for the pain he's endured thanks to unwanted attention and harassment gleaned from the March report. He probably doesn't have any chance of winning a defamation or libel suit, however.

First things first:  If Dorian Nakamoto really is Satoshi, the pseudonymous Bitcoin creator, he's got no chance whatsoever. Truth is an absolute defense against libel, so-called "false light" claims, and defamation. There are many reasons to suspect that Nakamoto is actually, as he claims, a random unemployed 65-year-old engineer. But even if Nakamoto didn't create Bitcoin, he faces something of an uphill battle to prove his case. If this case does ultimately go to court, we might know once and for all who Dorian Nakamoto is (and if he actually is Satoshi).

A media frenzy isn't harm

Journalists have many defenses against suits like Nakamoto's (which hasn't actually been filed yet—a website set up by his lawyer is raising money to officially file the suit), and the  Supreme Court has ruled time and time again that journalists don't necessarily have to get the story right in order to successfully defend themselves.

Nakamoto is going to have to prove that the Newsweek report harmed him and his family. He's going to have a hard time proving this, according to several legal experts I spoke to.

"I have difficulty understanding why it's defamatory of Newsweek to say (even inaccurately) that he did the apparently hard work of inventing a perfectly legal digital currency that appears to work and to be useful in entirely lawful transactions," Stuart Karle, a New York University law professor who advised Reuters on legal situations in the past as its chief operations officer, told me in an email.

Dorian Nakamoto. Image: Newsweeklied.com

To be fair, the ensuing media frenzy and spotlight shone on Nakamoto after the Newsweek story broke probably wasn't particularly enjoyable, but that doesn't mean it was necessarily deleterious. "A media frenzy isn't harm," Deborah Nelson, a University of Maryland journalism law professor (and Pulitzer Prize-winning investigative reporter) told me.

Beyond that, Nakamoto's  own legal defense website notes that, in the immediate aftermath of the story, more than $23,000 worth of Bitcoin was donated to Nakamoto "for his personal use. He is extremely grateful for this gesture."

On the other hand, assuming he had nothing to do with Bitcoin, Nakamoto was thrust into the public spotlight without doing anything himself.

"Emotional distress is a large ticket item often in libel cases," Sandy Davidson, a law professor at the Missouri School of Journalism, told me. "If he's saying he was distressed by the cover story that misidentified him, well, it'd be up to a jury to decide if that's distressing or not."

Defenders of Nakamoto also note that the real Satoshi, whoever he is,  has roughly 1 million Bitcoin. Outing Satoshi could, theoretically, put him and his family in danger. But that's also something that would have to be proven.

Assuming Nakamoto could prove that he did indeed suffer from Newsweek's story, Nakamoto would then have to prove that Newsweek was negligent in publishing its story.

erroneous statement is inevitable in free debate

The rules and case law in each state are slightly different, but this case will most likely be filed in California, where Nakamoto lives, a state that has relatively favorable laws for plaintiffs who are suing news publications. 

In California, for instance, Nakamoto is likely to be considered a private figure, so the standard of "negligence" would likely apply, not a standard of "actual malice," which would require him to prove that Newsweek was actively trying to do harm with its story.

"In any situation, if a person is misidentified who has done nothing to inject himself into a public issue and doesn't have pervasive fame or notoriety, then libel laws give him more protection," Davidson said.

Journalist Leah McGrath Goodman's investigation has been called into question by several different people, but Nakamoto would have to prove that she and her editors departed from established journalistic standards in running the story. There's no real public evidence that she did.

Image: Newsweeklied.com

In her story, for instance,  Goodman spoke with Nakamoto, who she says didn't deny working on Bitcoin—"I am no longer involved in that and I cannot discuss it," Nakamoto is quoted as saying in the story. She also spoke with members of his family, including a brother who noted that Nakamoto would "deny everything."

It's not clear that that's definitely enough to prove Goodman and Newsweek were operating in good faith, but it'll certainly help the argument.

1964 Supreme Court case, New York Times v. Sullivan, is well known because it established what's known as the "actual malice" doctrine that applies to public figures. 

But, importantly, in his opinion, Justice William Brennan noted that "erroneous statement is inevitable in free debate, and that it must be protected if the freedoms of expression are to have the 'breathing space' that they need to survive."

That's important here. Even if Nakamoto isn't a public figure, the story of Bitcoin is certainly of public interest. If Newsweek got it wrong, and perhaps it did, well, unfortunately that's the court-decided price of doing journalism.