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Crypto Law/Level IX · Death, divorce and disputes/9.2 Family and money disputes/Lesson 6

Business partners and shared wallets

How informal crypto ventures become partnerships by default, who owns coins in a wallet only one partner controls, what partners owe each other, and what Kleiman v. Wright shows about proving a partnership years later.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Write the deal down before pooling money: a short partnership agreement or LLC operating agreement stating contributions, key holders, signing thresholds and exit terms avoids the costly years-later contest seen in Kleiman v. Wright.
  2. Demand books and records free under California Corporations Code §16403 before suing; a partner holding the only key must account for partnership property under §16404.
  3. A partnership must file Form 1065 under 26 U.S.C. §6031 even with no tax due; Rev. Proc. 84-35 may waive the late-filing penalty for 10 or fewer partners if each reported their share on time.
  4. Spouses who are the only members of a jointly run business and both materially participate can elect qualified joint venture status under §761(f), skipping a partnership return; they must file a joint return.
  5. Use a multisig wallet that mirrors the written agreement so no partner can move funds alone; the code does not decide ownership, so the signed document must.

MaterialsYour state’s version of the Revised Uniform Partnership Act (for California, Corporations Code §§16202, 16204, 16403 and 16404)Any written agreement, chat history or spreadsheet recording who contributed what and whenA list of shared wallets showing who holds each key or multisig signer and how transfers are approved

Wonder

  1. If a friend and I pooled money into one wallet, are we legally partners?
  2. Who owns the coins if only one of us holds the key?
  3. What can I do if my partner will not share access or information?

Explore

  1. Many crypto ventures start informally: two or three people pool money to trade, mine or run a node, and one of them holds the wallet. US partnership law can turn that into a general partnership without any filing. Under California Corporations Code §16202(a), which follows the Revised Uniform Partnership Act, an association of two or more persons to carry on as co-owners a business for profit forms a partnership whether or not they intend to form one, and partners are generally liable jointly and severally for its obligations. Lesson 5.3.4 applies these rules to DAOs; this lesson concerns small ventures and the people in them.
  2. Holding the key does not make someone the owner. Under §16204, property acquired in the partnership’s name, or by a partner in that capacity, is partnership property, and under §16204(c) property bought with partnership assets is presumed to be partnership property even if it is not held in the partnership’s name. A wallet funded from pooled money and controlled by one partner can therefore hold coins belonging to the partnership. The presumption cuts both ways: coins one partner regards as private may be claimed for the partnership if pooled funds paid for them. Records of who paid for what decide most of these arguments.
  3. Partners owe each other duties. Under §16404, the duty of loyalty includes accounting to the partnership for, and holding as trustee for it, any property, profit or benefit derived from use of partnership property; the duty of care is limited to refraining from grossly negligent or reckless conduct, intentional misconduct or a knowing violation of law; and rights must be exercised consistently with good faith and fair dealing. Under §16403, the partnership must give partners access to its books and records and furnish information reasonably required to exercise their rights. A partner who keeps the only key and refuses to disclose addresses or balances risks claims under both sections.
  4. Proving that a partnership existed is often the hardest part, as Kleiman v. Wright shows. The estate of David Kleiman sued Craig Wright in the Southern District of Florida, claiming that the two friends had formed a partnership to develop the original bitcoin protocol, to mine bitcoin and to develop related technology, and that the estate was entitled to half of the coins mined. After a trial that began on 1 November 2021, the jury found that no partnership existed. It did return a $100 million verdict for W&K Info Defense Research LLC on that company’s conversion claim. The Eleventh Circuit affirmed the verdict against the estate on 26 October 2023 (No. 22-11150).
  5. The appeal turned on the elements of a partnership. The Eleventh Circuit quoted Florida’s long-standing test: a common purpose, a joint proprietary interest in the subject matter, the right to share profits and the duty to share losses, and joint control or right of control, with the absence of even one being fatal; the estate argued without success that the jury instructions did not reflect Florida’s Revised Uniform Partnership Act. For a small venture the lesson is about evidence: a partnership asserted years later, without documents, depends on witnesses and inference. A written agreement, or a company such as an LLC with an operating agreement (lesson 5.3.7), avoids that contest.
  6. Wallet design can reflect the agreement but cannot replace it. A multisignature wallet, which needs several keys to approve a transfer (lesson 9.1.6), stops one partner from moving funds alone, but it does not decide who owns the coins or what happens if a signer leaves, dies or refuses to sign. A partnership also has tax duties: under 26 U.S.C. §6031, every partnership must file a return for each taxable year showing each partner’s distributive share. A practical check for any shared holding: record who contributed what and when, who holds which key, how many signatures a transfer needs, and how the holding is divided if the venture ends.

Key facts

  • California Corporations Code §16202(a) provides that two or more persons carrying on as co-owners a business for profit form a partnership whether or not they intend to.
  • Under California Corporations Code §16204(c), property bought with partnership assets is presumed to be partnership property even if not acquired in the partnership’s name.
  • California Corporations Code §16404(b)(1) requires a partner to account to the partnership and hold as trustee any benefit derived from use of partnership property.
  • In Kleiman v. Wright, a federal jury in the Southern District of Florida found that no partnership existed between David Kleiman and Craig Wright.
  • The Kleiman v. Wright jury returned a $100 million verdict for W&K Info Defense Research LLC on its conversion claim.
  • The Eleventh Circuit affirmed the verdict against the Kleiman estate on 26 October 2023 in No. 22-11150.

Exercise nine, six, three, one

9CollectList up to 9 crypto arrangements shared with other people that you have been part of or know of, such as pooled trading funds, mining rigs, shared wallets or joint token purchases.
6ClusterSort them into 6 groups: written agreement, company or LLC, informal with records, informal without records, single key-holder, and multisig.
3DistillReduce the 6 to 3 by keeping the groups most likely to produce a dispute over ownership or access.
1CrystallizeWrite 1 sentence describing the document that would most clearly settle who owns what in each of those 3 groups.

Fact check

Dates, figures and claims checked against the published sources listed below.

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