DOJ arrests Ethereum Foundation coder for teaching North Korea how to launder money, evade sanctions

Virgil MediumWhen you openly defy the U.S. government and travel to North Korea — one of the U.S.’s foremost enemies — to teach crypto and blockchain tech at a conference, you can’t really expect things to go well. I mean, can you?

It’s hard to know then, if Virgil Griffith, head of special projects for the Ethereum Foundation, knew what was about to happen or if he was completely caught off guard on Thanksgiving Day — a day when everyone else in the U.S. was stuffing themselves with turkey, mashed potatoes and gravy — when the DOJ arrested him at LAX.

According to a statement by the U.S. Attorney’s Office for the Southern District of New York, he is charged with violating the International Emergency Economic Powers Act, which prohibits U.S. citizens from exporting goods, services or technology to North Korea without approval from the Treasury Department. The maximum sentence is 20 years.

In April, Griffith traveled to North Korea — or more formally, the Democratic People’s Republic of Korea — to allegedly deliver a presentation and technical advice on using crypto and blockchain tech to evade sanctions at the Pyongyang Blockchain and Cryptocurrency Conference.

That’s a big no-no. In September 2017, the U.S. issued a travel ban to North Korea. U.S. citizens are not allowed to go there without a special validation.

According to the unsealed complaint, Griffith knew full well that it was illegal to travel to the DPRK. He sought permission from the Department of State and his request was denied. Still — and this is the mind boggling bit — he went anyway.

In his presentation at the conference titled “Blockchain and Peace,” Griffith allegedly discussed how a blockchain and a smart contract could be used to benefit the DPRK.

The complaint states:

“At the DPRK Cryptocurrency Conference, GRIFFITH and other attendees discussed how blockchain and cryptocurrency technology could be used by the DPRK to launder money and evade sanctions, and how the DPRK could use these technologies to achieve independence from the global banking system.”

In an interview that took place with the FBI in November, Griffith said the presentation amounted to a “non-zero transfer of technical knowledge” and that the information included “basic concepts accessible on the Internet,” the complaint said. So did he actually “export” any new information to the DPRK? I’m not so sure.

Griffith’s flouting of U.S. laws did not stop there, however. He also allegedly communicated about violating sanctions with a financial transaction.

“After the DPRK Cryptocurrency Conference, GRIFFITH began formulating plans to facilitate the exchange of cryptocurrency between the DPRK and South Korea, despite knowing that assisting with such an exchange would violate sanctions against the DPRK.”

Griffith is presumed innocent until proven guilty. Still, he is in deep water and will need a really good lawyer to dig him out of this mess.

Who is Virgil Griffith?

Labeled an “internet man of mystery” by The New York Times in November 2008, Griffith, 36, has a doctorate from the California Institute of Technology in computations and neural systems and a B.A. in computer and cognitive science from the University of Alabama. He is a U.S. citizen who lives in Singapore.

He is also the founder of a data-mining tool called WikiScanner, which makes it possible to figure out which organization made which edits to a Wikipedia entry by cross-referencing IP addresses with a database of IP address owners.

The NY Times article described him as a “troublemaker” and a “twerp” and said Griffith’s problems with authority emerged early on. He spent several school days in detention. Also, according to the article:

“In his public school, he worried about gangs; his mother pulled him out and briefly homeschooled him. Eventually, he graduated from the Alabama School of Math and Science, even though he once threatened to sue the school — for a proposed policy of mandatory drug testing — and skipped his final exams to travel in Greece.”

Griffith joined the Ethereum Foundation in 2015. In an interview, he told developer Makoto Inoue that met Ethereum Founder Vitalik Buterin pre-Ethereum, which would likely have been sometime in 2014, after Buterin dropped out of the University of Waterloo and started traveling the world to learn more about crypto.

“While I was a graduate student Vitalik slept in my closet for about two months,” Griffith told the interviewer. 

‘But danger is my fetish’

What could Griffith have possibly been thinking to do something so incredibly stupid? He once tweeted, “But danger is my fetish,” so maybe that was the thrill.

For many, Griffith’s actions are a flashback to Ross Ulbricht, the creator of the Silk Road, now serving a life sentence for drug trafficking and money laundering. On Thanksgivings, Ross’ mother puts a plate piled high with food in front of an empty chair at the table. One can’t help wonder if Griffith’s family faces a similar future.

Like Ulbricht, Griffith’s actions appear that of a narcissist thinking he was too special, too clever to get caught. So confident was he that he openly flaunted his trip to North Korea. For instance, on Aug. 13, he literally tweeted a picture of his visa to go there. In another tweet, he referred to the journey as a “Trip of a lifetime.”

I recommend reading Ben Munster’s September story in Decrypt on the upcoming 2020 “Pyongyang Blockchain and Cryptocurrency Conference.” In it, Munster describes the government-sponsored event as offering an “exclusive environment of confidentiality and contacts with the highest government officials and engineers.”

Munster spoke with an attendee of the 2019 conference, who told him that “the main things (the North Koreans) were interested in were using Bitcoin to get around sanctions, and using Ethereum for U.N.-less courts.”  The source went on to describe how North Korea has trouble enforcing agreements outside of its own borders:

“‘Generally they load up Chinese people with millions of dollars in cash [and send them across the border], but half the time, these people just disappear with the money. There’s not much they can do about it.’ As such, North Koreans ‘desperately want a way to have agreements that work outside their own borders,’ he explained. ‘I told them about smart contracts. They were very excited about that.’”

The cryptosphere reacts

A few of the folks in cryptoland appear to be downplaying the seriousness of Griffith’s behavior — some calling the government’s case “misdirected” and portraying Griffith as a sweet guy with the best of intentions.

“Hoping that this concludes quickly, and teaches a valuable lesson to all, but with a minimum of wasted time and effort for Virgil, who is a valuable technical contributor,” tweeted Emin Gün Sirer, a Cornell professor working on his own blockchain protocol.

Crypto lawyer Stephen Palley retorted: “I mean, it’s the Southern District of New York — they are not really in the teaching lessons business.”

One Ethereum developer wondered aloud on twitter if Griffith was trying to teach North Korean citizens with the hope he was “setting them free” from the regime — a humanitarian mission, if you will.

As for the Ethereum Foundation, it issued a formal statement to Vice, saying it was not represented in any capacity at the events outlined in the Justice Department’s filing, and it “neither approved nor supported any such travel, which was a personal matter.”

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