Cryptocurrency Expert Gets 5 Years In Nkorea Sanctions Case

An ICO, or initial coin offering, is like an initial public offering for a new stock. It’s the first time cryptocurrency traders have the opportunity to buy a brand-new token. But Sun wasn’t anxious about the money he stood to gain if it took off or what he’d lose if the token flopped.

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Maltese business registry records also show Sun set up a company called Tron Limited using his Chinese name, Yuchen Sun. But a source involved in the company’s founding couldn’t say whether it conducted any meaningful business. According to them, Sun made zero commercial investments that might have stimulated the Maltese economy. When engineers finished searching, their ballpark estimate for the dust they found was roughly 300 bitcoin, or about $20 million. WikiScanner essentially could determine the business, institutions or government agencies that owned the computers from which some edits were made. It quickly identified businesses that had sabotaged competitors’ entries and government agencies that had rewritten history, among other findings.

By 2021, these slivers of Bitcoin, added together, were worth serious money. When Sun learned about the dust, he ordered engineers to gather it. Nearly every day, an engineer would find a new pocket of lost change. “You’d turn a rock over and find a million dollars,” a former employee said. After the rest of the company learned about the operation at an all-hands meeting, many people objected.

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Poloniex — or “Polo,” as enthusiasts called it — was an incredibly popular and incredibly risky place to trade crypto, held together by what some employees called “duct tape” code. “Polo used to be shitcoin casino numero uno,” a former employee said. “It would list everything.” That is, the exchange listed tokens of unbelievably tenuous legitimacy (“shitcoins”). It was just, like, completely Wild West,” a former employee said. For this story, 15 sources spoke to me on the condition their names be withheld because they fear retaliation from Justin Sun.

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He transferred millions of dollars to his United States bank account through a company in Hong Kong called Davidyo Limited, some of which he used to buy a GMC Denali he apparently fancied after seeing it on House of Cards. Months later, Sun showed up at the downtown headquarters of BitTorrent in San Francisco to talk business in his Gucci sneakers. He proposed buying the ailing company, whose software focuses on decentralized file sharing. For $140 million, he emerged with one of the most recognizable worldwide brands in peer-to-peer sharing technology. Over the past year, the international community has signaled they’re fed up with various small nations serving as legal trapdoors for tax avoidance and financial crime.

They are current and former employees of Sun’s various ventures across his cryptocurrency empire, in China and the US. One source has firsthand knowledge of Sun’s businesses for other reasons. This story also relies on hundreds of pages of internal Tron documents that were leaked to me. Over the course of reporting this story, more than one person believed that talking to me might put their lives at risk.

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He began approaching lawyer after lawyer after lawyer to find legal opinions that could protect his cryptocurrency businesses. He knew his path to riches in the United States was littered with legal pitfalls to dodge. When another former employee asked Sun’s top lieutenant in Beijing what “market making” meant, he chuckled and said, “You know how the Chinese folks do it, right? ” He apparently explained that the market-making team’s job was to work with “whales” who were wealthy cryptocurrency spenders outside of Tron. “You know those folks that have a lot of money and don’t have a lot of brains?

The former employee stepped into the restaurant, bought a puff pastry, and sat down. Part of Luo Dan’s WeChat presence is defined by incessantly posting about the Panchen Lama’s political appearances. While Luo Dan may be an access point to influence for Sun, it’s unclear what Luo Dan has gained from the relationship, other than possibly two Google Fi phones he can read the news with. Sometimes, second- and third-generation descendants of some of the highest-ranking Chinese Communist Party officials live there, some of whom were Chinese Communist Party founders alongside Chairman Mao. Sun started renting a lavender-blue flat in Malta, with white ornamental burglar bars over the windows on a narrow street in the resort town of Sliema.

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According to multiple Tron employees, Sun made two additional €50,000 “investments” in Malta. Meanwhile, Sun wired thousands of dollars to lawyers assisting him with his citizenship application. According to a prominent Maltese immigration lawyer, an “individual investor” is “required to contribute at least €650,000 to Malta” in order to qualify for citizenship. Sun received his residency card for Malta, and in 2020, his Maltese company, Tron Limited, dissolved. Sun made a radical change in his crypto empire when he bought a cryptocurrency exchange called Poloniex. Crypto exchanges function like stock exchanges, but instead list tokens.

The phone number also matches Luo Dan’s WeChat account, where he frequently posts articles about Buddhism and Chinese government visits to various provinces. In an interview with the party-aligned outlet China Tibet, Luo said he began his academic career as an adjunct professor and PhD in Tibetan Studies. Now, he is a government official, working as vice-chancellor of The Tibet Institute of Socialism. He has occasionally served as a diplomatic delegate for China on Tibet issues at the United Nations. The sudden turn in Sun’s relationship with China seemed inexplicable. But there’s evidence he may have reconnected with the Chinese authorities in secret.

As the source pointed out, any number of Sun’s employees may already be cooperating with the government. “They’ve kept this close to the vest for a long time,” they said. Within half an hour, the no-name wallet transferred almost its entire haul into one of Poloniex’s communal wallets.

Cryptocurrency Expert Gets 5 Years In Nkorea Sanctions Case

All along, it seems Sun had been paving another escape route. Hype man of the century Previously, Chris Harland-Dunaway reported on Justin Sun’s acquisition of BitTorrent — and how the crypto mogul turned it into a self-promotion machine for himself. Security Council have imposed increasingly tight sanctions on North Korea in recent years to try to rein in its nuclear and ballistic missile programs.

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NEW YORK — A cryptocurrency expert was sentenced Tuesday to more than five years in federal prison for helping North Korea evade U.S. sanctions. When I spoke to one employee who told me about Operation Couch Cushions, I challenged them and asked why Sun would possibly risk something so brazen. If Sun truly curried favor with someone powerful inside the Chinese government who could protect him, he might have been wise to do so. I spent a week calling his number at the same time every day. The same number appears in a dark web database of hacked Chinese phone numbers and personal information and identifies the owner as Luo Dan.

His exact relationship with the Chinese authorities has been difficult to surmise, but he was recently appointed to an academic position at the Central Party School for the CCP to promote blockchain development. On the surface, it looks like Sun has made a strategic pivot Ethereum vs Bitcoin: the two cryptocurrencies compared back to China, possibly out of self-preservation. Sun hid in a high-rise apartment in San Francisco, afraid of returning to face Chinese authorities, especially if he fled because of the ICO ban. After a few months, the value of Tron’s token, TRX, had skyrocketed.

Despite Sun’s demands for the Bitcoin, there was no obvious blockchain evidence he received it personally. Former employees explained that the Poloniex communal wallets have so much user money pumping through them 24/7 they incidentally obscure any money trail. But ultimately, the legal distinction between Sun himself or Poloniex taking the money may be moot. Andrew Verstein, a UCLA professor and lawyer specializing in cryptocurrency and financial crime, told me that because Sun is the sole owner of Poloniex, he would be responsible anyway.

The Many Escapes Of Justin Sun

The former employee never learned the identity of the Hong Kong lawyer, and it’s unclear if they even had a license to practice law anywhere in the United States. But in many cases, the coin founders immediately sold all the tokens they held for a vast sum of money, crashing its value in the process and every other buyer’s investment. These were “exit scams” or “pump-and-dumps,” and all told, they bilked crypto buyers for billions of dollars. People were swindled so frequently the United States Securities and Exchange Commission could barely file charges fast enough.

The legal murk in which cryptocurrency originally exploded is one reason Sun looks to be legally unassailable. Seemingly, long-standing securities statutes ought to apply to crypto in obvious ways, but some haven’t been tested, like insider trading law. Some might even argue these are not new scenarios, and in some cases, cryptocurrency at large is just rehashing some of the same mistakes and scandals that begged for the financial laws the United States and many other countries have on the books.

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It seemed as though Sun believed that counsel were disposable, like he could afford to leave them behind, tarred by the acts they unwittingly facilitated, while he kept his eye on the pathway out. Meanwhile, a former attorney for the SEC has been tasked with shepherding employees through the grand jury subpoena process. A source close to the investigation predicted they will try to fend off the subpoenas.

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It’s hard to imagine Sun will be able to stay one step ahead forever, though it’s perhaps still possible. Other employees who worked for Sun have received grand jury subpoenas. The prosecutor’s office from the Southern District of New York, which normally handles financial crime on Wall Street, is searching for criminal evidence against Justin Sun. Many of Sun’s bank accounts could just be waypoints for moving money. As a former employee who knew about Sun’s banking speculated, “If he has to cash out all his cryptocurrencies, he has to do it outside both the US and China,” where they’re closely scrutinized or banned outright. Whatever the conclusion of this lawyerly debate over crypto, Sun embarked on an obsessive quest to secure Tron’s lawful legitimacy.

When people surrounding Sun lost track of right and wrong, it made it easy for him to blithely escape without consequence. Standing back and looking at the blockchain transactions, former employees said that unfreezing and transferring massive amounts of Bitcoin dust in synchrony could only be executed with a script of code by Poloniex. By all indications, the day before the dust was grabbed from thousands of wallets, those wallets had been disabled. In the unlikely event that thousands of users somehow organized themselves to selflessly give away their dust, the fact that the wallets were seemingly inaccessible would make it outright impossible.

  • I also revisited 18 current and former employees from BitTorrent and Tron who spoke to me during my earlier reporting on Justin Sun for The Verge.
  • In the unlikely event that thousands of users somehow organized themselves to selflessly give away their dust, the fact that the wallets were seemingly inaccessible would make it outright impossible.
  • The prosecutor’s office from the Southern District of New York, which normally handles financial crime on Wall Street, is searching for criminal evidence against Justin Sun.
  • This allows us to offer the event at no charge for attendees and helps further position the region as a knowledge center for blockchain and cryptocurrency topics,” Dr. Eric Darr, Harrisburg University president, said in a press release.
  • Here, the dust’s trail is lost amidst flurries of Bitcoin being withdrawn and deposited by Poloniex users.
  • The phone number also matches Luo Dan’s WeChat account, where he frequently posts articles about Buddhism and Chinese government visits to various provinces.
  • As the source pointed out, any number of Sun’s employees may already be cooperating with the government.

Here, the dust’s trail is lost amidst flurries of Bitcoin being withdrawn and deposited by Poloniex users. Over the course of four hours, in hundreds of transactions, nearly all the Bitcoin dust was siphoned out of thousands of old Tether wallets. All told, it was 230 Bitcoin, or a little over $10 million in today’s value. “Justin would be in trouble, but he didn’t care,” a former employee believed. Sun ordered the office in China to carry out the airdrop instead.

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While they waited, the IRS agent told the former employee they were investigating Justin Sun but didn’t really know what to look for. When the FBI agent finally arrived, they asked about all sorts of employees in the US and Beijing, about rumors of beautiful models who flew around the world with Sun and whether he did business transactions under the table. The former employee got the impression that agents were interested in potential tax evasion.

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Sun dodged the ICO ban, and in the midst of the trade war, he ignored the Chinese authorities’ attempts to contact him and demand he abandon a highly publicized lunch with Warren Buffet . In retaliation, the Chinese authorities detained six senior Tron employees and tried to sully Sun’s name in the press with corruption allegations. In some ways, Sun’s Maltese citizenship isn’t exceptional because he has other destinations he could escape to. He claimed in a court declaration that he is also a citizen of the Caribbean islands, Saint Kitts and Nevis. Another former employee told me Sun bragged offhand about intending to buy a passport from the small West African nation of Guinea-Bissau. But there was another more important secret about Sun’s relationship with Malta.

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