1 SUPERIOR COURT OF THE STATE OF CALIFORNIA
2 FOR THE COUNTY OF SAN FRANCISCO
3 UNLIMITED JURISDICTION
4 DEPARTMENT 606
5 BEFORE JUDGE ROCHELLE C. EAST
6 DONALD NORMAN,
Plaintiff,
7
V. CASE NO. CGC-17-556483
8 PATRICK STRATEMAN, AMIR
TAAKI, AND JAMIE STRATEMAN,
9 Defendants.
And
10 INTERSANGO LIMITED LIABILITY
COMPANY AND INTERSANGO, LTD,
11 Nominal Defendants.
_____________________________/
12
PATRICK STRATEMAN,
13 Cross-complainant,
V.
14 DONALD NORMAN,
Cross-Defendant.
15 ____________________________/
All transcripts taken from the trial above.
The following testimony confirms Patrick Strateman has paid out only 12 people
11 Q. Mr. Strateman, when is the last time you
12 examined how many Bitcoin you were holding for
13 customers?
14 A. Probably the last time someone was paid.
15 Q. So, now, Mr. Strateman, you are in the
16 process of winding down Intersango; that's
17 correct, right?
18 A. Yes.
19 Q. And do you keep track of the price of
20 Bitcoin?
21 A. Yes.
22 Q. And so do you have an idea about how
23 much it's worth today?
24 A. Yes.
25 Q. Is it worth about roughly 20,000; is
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1 that right?
2 A. It was last week, yes. It was last
3 week. I don't know about today in particular.
4 Q. So you're holding on to many tens of
5 millions possibly of Bitcoin that belong to the
6 customers; isn't that right?
7 A. Yes. I'm keeping them safe.
8 Q. And between -- in this five-year from
9 2014 to 2019, you paid back 12 people?
10 A. I paid back people who appeared -- who
11 asked and who could verify their claim in a
12 reasonable way.
The following is testimony as to how many users are owed Bitcoin
22 And we turn to page 5. And do you see it
23 says "Defendant is informed and believed there are
24 5,681 users who have an account balance greater
25 than zero Bitcoin."? Do you see that answer?
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1 A. Yes.
The following testimony confirms that Patrick Strateman made no attempts to contact the users.
15 Q. Sure. From between the time that the
16 Intersango Website shut down and you had to be
17 involved in the process to April 2019, do you know
18 how many people, approximately, you paid back?
19 A. Maybe a dozen.
20 Q. So -- and we said that the Website went
21 down in 2014; is that right?
22 A. Yes.
23 Q. And so from 2014 to 2019 you paid back a
24 dozen people -- 12 people; is that correct?
25 A. Approximately, yes.
Later the testimony continues verifying approximitely the amount of user Bitcoin Patrick Strateman still holds.
4 Q. So you're holding on to many tens of
5 millions possibly of Bitcoin that belong to the
6 customers; isn't that right?
7 A. Yes. I'm keeping them safe.
8 Q. And between -- in this five-year from
9 2014 to 2019, you paid back 12 people?
10 A. I paid back people who appeared -- who
11 asked and who could verify their claim in a
12 reasonable way.
The following excerpt shows Patrick Strateman admit that he sold forked coins which split from user coins.
2 Q. And other customers of Intersango have
3 forked coins; is that right?
4 A. Well, there are forked coins, but
5 whether they're the customers, I don't believe
6 they are.
7 Q. You don't believe these forked coins
8 belong to the customers, is that what you are
9 saying?
10 A. Yes.
11 Q. Mr. Strateman, who did these forked
12 coins belong to?
13 A. I'm not sure that's clear.
the testimony later continues
17 Q. What did you do with those Bitcoin cash
18 coins?
19 A. I sold them as fast as I could because
20 the price was dropping precipitously.
21 Q. And do you remember how much money you
22 made in connection with Bitcoin cash coins?
23 A. I don't recall specifically.
24 Q. Do you recall if it was in the tens --
25 in the thousands, tens of thousands, hundred
690
1 thousand?
2 A. It was millions of dollars -- three or
3 four, something like that.
the testimony later continues...
4 Q. 3 or $4 million. And where are those 3
5 to $4 million now?
6 MS. HEATON: Objection, Your Honor.
7 This goes to beyond the transfer of those. Your
8 Honor's ruling regarding financial conditions
9 about where is Bitcoins and forked coins went, I
10 don't believe that we're permitted to invade
11 further about where those Bitcoins went after the
12 next step.
13 THE COURT: Overruled.
14 Go ahead, you can answer.
15 THE WITNESS: I bought things with them,
16 and I paid legal about bills.
Further testimony regarding the user bitcoins and forked coins
7 Q. And so your position is you're holding
8 on to these Bitcoins for the customers, we can
9 agree on that, right?
10 A. Yes.
11 Q. And they forked and then Bitcoin cash
12 coins came into your possession, we can agree to
13 that as well, right?
14 A. Yes.
15 Q. And your position is that those Bitcoin
16 cash coins belong to you; is that correct?
17 A. Yes.
Testimony also shows Patrick Strateman sold other forks of user coins
2 Q. Mr. Strateman, aside from the proceeds
3 that you generated from Bitcoin cash coins, did
4 you sell off any other forked coins that are
5 connected with the Intersango customers' Bitcoin?
6 A. I also sold Bitcoin SV coins.
7 Q. Anything else?
8 A. No.
9 Q. How much did you generate from the
10 Bitcoin SV coins?
11 A. I don't know.
12 Q. Do you know if it's in the thousands,
13 hundreds of thousands, millions?
14 A. You know, more than a hundred thousand,
15 but I don't remember the scale of what it was. SV
16 coins were worth less than the Bitcoin cash coins,
17 but they were sold at different times and I'm not
18 sure.
19 Q. Mr. Strateman, is it your view that the
20 proceeds from the sale of Bitcoin SV that we just
21 discussed belong to you?
22 A. Yes.
The testimony also goes on to show he did not inform other shareholders of the company.
18 Q. Did you ever -- you didn't inform Mr.
19 Norman about what you did with the forked coins,
20 did you?
21 A. No.
22 Q. Did you inform Mr. Taaki?
23 A. I don't think so, no.
In the following testimony Patrick Strateman confirms that these forked coins only came into his possession because he was holding customer bitcoin. We know from previous testimony that he had already for years failed to alert customers of their bitcoin. I am also able to provide evidence showing he took steps to cover up his embezzlement.
1 Earlier -- let me give you a
2 hypothetical. Let's say that you have one Bitcoin
3 from a client in your wallet, correct, before a
4 fork occurs. You with me on that, correct?
5 THE WITNESS: So far, yes.
6 BY MR. YEH:
7 Q. Okay. And let's say a fork occurs.
8 Then you will have one Bitcoin and whatever the
9 fork coin is; is that right?
10 A. Yes.
11 Q. And if you had not had the Bitcoin in
12 that wallet, you would have no forked coins,
13 correct?
14 A. Yes.
15 Q. Okay. And so we can agree that the
16 original Bitcoin for the customers belonged to the
17 customers, correct?
18 A. The original customer was owed one
19 Bitcoin, yes.
20 Q. And they're still being held by
21 Intersango, correct?
22 A. Yes.
23 Q. So for all intense purposes, the
24 customer Bitcoin in the Intersango wallet, that's
25 not being held by you, that's being held by
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1 Intersango, correct?
2 A. I mean, it's in a wallet that I control
3 and have keys for.
4 Q. But, they are held by Intersango, not by
5 you, correct, I understand you have the keys. I'm
6 asking whether you or Intersango are holding these
7 Bitcoin for the customers.
8 A. Intersango owes the customers, but I
9 have control of the wallet.
10 Q. But, these are still -- these are still
11 withdrawn.
12 Mr. Strateman, I understand you think that
13 this money proceeds from those Bitcoin belong to
14 you. Have you generated any other income from
15 Intersango or related to Intersango that you
16 haven't already disclosed in the course of this
17 examination?
18 MS. HEATON: Objection. Vague.
19 THE COURT: Sustained.
20 I think you need to narrow that down.
21 Go ahead.
22 MR. YEH: Sure. So, Mr. Strateman, we
23 talked about the salary you took in the form of
24 Bitcoin, correct?
25 THE WITNESS: Yes.
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1 BY MR. YEH:
2 Q. We talked about the salary you took in
3 U.S. dollars, correct?
4 A. Yes.
5 Q. And we talked about the forked Bitcoin
6 that you sold, correct?
7 A. Yes.
8 Q. And that arose -- can we agree that
9 arose from your involvement in Intersango?
10 MS. HEATON: Objection. It
11 mischaracterizes testimony. He did not testify
12 that all of the forked Bitcoin were derived any
13 funds related to Intersango.
14 THE COURT: Overruled.
15 You can answer.
16 THE WITNESS: I don't know. Sorry. Can
17 you ask the question again?
18 MR. YEH: Can you please reread the
19 question?
20 (Whereupon, the Court Reporter read back
21 the testimony as follows:
22 "Question. And that arose -- can we
23 agree that arose from your involvement in
24 Intersango?")
25 THE WITNESS: Not all of the coins that
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1 are in my wallet have anything to do with
2 Intersango. So, to that extent, no, and whether
3 -- yeah. Sorry. I really don't understand your
4 question completely, but that was funds that I got
5 which I wouldn't have been able to get if I didn't
6 have the keys for the Bitcoin to pay back
7 Intersango customers.
8 MR. YEH: So, Mr. Strateman, I'm just
9 trying to make sure that we have covered all the
10 bases. Aside from the compensation that we have
11 discussed in the course of this examination has
12 there been any other -- have there been any other
13 payments or revenue that you have been able to
14 obtain arising out of your relationship with
15 Intersango.
16 THE WITNESS: I don't think so, no.
17 MR. YEH: Thank you, Your Honor. I have
18 nothing further.
19 THE COURT: Okay. All right. Why don't
20 we take a 15-minute break, and we'll resume at
21 10:35.
22 MS. HEATON: Thank you, Your Honor.
23 (Whereupon, a break was taken from
24 10:33 a.m. to 10:40 a.m.)