Here’s a clue: if you’re going to teach North Korea how to use cryptocurrency to evade sanctions, don’t post your visa on Twitter. Particularly if the U.S. State Department has warned you not to go.
Virgil Griffith, the Ethereum Foundation’s Special Projects Lead, has been arrested for doing just that, the Department of Justice (DoJ) announced on Nov. 29. A Singapore resident and U.S. citizen, Griffith was arrested at Los Angeles International Airport on Nov. 28—Thanksgiving Day.
North Korea has hacked cryptocurrency exchanges of $2 billion over the past two years, according to a U.N. report. That includes the January 2018 theft of $534 million from the Japanese exchange Coincheck.
The Democratic People’s Republic of Korea was accused of using those funds to continue developing nuclear weapons.
Griffith’s March 20, 2019 paper, “Ethereum is game-changing technology, literally,” is one of four described as “excellent starting points” for people new to Ethereum on the Foundation’s Ethereum.org/learn webpage.
Vitalik Buterin’s “Decentralizing Everything” video is the first of those links.
The DoJ said Griffith has a Ph.D in computational and neural systems from the California Institute of Technology
An illegal destination
“Despite receiving warnings not to go, Griffith allegedly traveled to one of the United States’ foremost adversaries, North Korea, where he taught his audience how to use blockchain technology to evade sanctions,” said John Demers, the Assistant Attorney General for National Security, in a statement. “By this complaint, we begin the process of seeking justice for such conduct.”
Griffith faces up to 20 years in prison if convicted of conspiring to violate the International Emergency Economic Powers Act (IEEPA) and Executive Order 13466. Those prohibit the export of any goods, services, or technology to the DPRK without Treasury Department license.
The indictment alleges Griffith visited the DPRK in April to attend the Pyongyang Blockchain and Cryptocurrency Conference on April 26-27.
Intentions versus actions
FBI Special Agent Brandon Cavanaugh said in the indictment that Griffith and “other attendees discussed how the DPRK could use blockchain and cryptocurrency technology to launder money and evade sanctions.”
Regardless of U.S. Attorney Berman’s characterization of Griffith’s actions at the conference, his intentions get a little vaguer once you read the indictment.
For one thing, Griffith’s presentation was titled “Blockchain and Peace,” and the topics described by Cavanaugh are very basic.
In the actual presentation, Griffith discussed “how a blockchain technology, including a ‘smart contract,’ could be used to benefit the DPRK,” Cavanaugh said. “Griffith identified several DPRK Cryptocurrency Conference attendees who, during his presentation, asked more specific questions of Griffith, and prompted discussions on technical issues such as ‘proof of work’ versus ‘proof of stake.’”
None of which is, directly, about evading sanctions. But, both the IEEPA and the Executive Order—which has been in place since 2008—are very broadly worded.
And, Cavanaugh also said Griffith admitted in a Nov. 12 interview that his presentation “amounted to a ‘non-zero tech transfer,’ that is, a transfer of technical knowledge from Griffith to other attendees.”
Text messages are forever
Griffith “consented in writing to the search of his cellphone,” the agent added.
That search, said Cavanaugh, showed that Griffith knew the DPRK’s interest in cryptocurrency was sinister.
He said the search turned up a Nov. 26, 2018, text messages with an unnamed individual who asked Griffith “in sum and substance, what interest North Korea had in cryptocurrency. Griffith replied, in sum and substance, ‘probably avoiding sanctions…who knows.”
That followed an August 6 text message with a different person, in which Griffith said he needed to send an unnamed amount of a cryptocurrency between North and South Korea, Cavanaugh noted in the indictment. “In response, Individual-2 asked, in sum and substance, ‘Isn’t that violating sanctions?’ Griffith replied, ‘It is,’” Cavanaugh said.