The Verge in-depth investigation: The inside story of Sun Yuchen evading regulation

Original Author: Christopher Harland-Dunaway

Original Title: 《THE MANY ESCAPES OF JUSTIN SUN》

Compiled by: Hu Tao, Chain Catcher

(This article has been partially edited)

• Justin Sun, the founder of Tron, is a reckless and outspoken figure who has always been controversial in the crypto space.
• Sun is bolder than his reputation suggests, taking more reckless approaches to financial regulation in the U.S. and China—and often trying to evade that regulation.
• Will his rule-breaking and dangerous behavior ultimately lead to punishment? Or will he escape once again?

Justin Sun, a rising Chinese cryptocurrency tycoon, walked through the bright atrium of the departure terminal at Incheon International Airport in South Korea. It was September 2017, during the early peak of the crypto craze, and Sun had every reason to feel nervous after his first ICO. An ICO, or Initial Coin Offering, is similar to an IPO for new stocks. But Sun wasn’t worried about what he might lose if the tokens failed or what he would do with the money he would receive. In fact, his company Tron launched a token called TRX—which achieved tremendous success, selling out quickly for $70 million. The problem Sun faced was that just days earlier, the Chinese government had completely banned ICOs.
The country claimed that ICOs were tools for financial fraud, pyramid schemes, and other illegal and criminal activities—which was a credible assertion given that hundreds of new and highly dubious cryptocurrency tokens were introduced in 2017. People bought initial coin offerings for various reasons: sometimes because the underlying blockchain technology of the token seemed promising, or sometimes because they speculated that the value of the cryptocurrency might skyrocket over time, like Bitcoin.
But in many cases, token founders immediately sold off all the tokens they held for huge sums of money, thereby undermining the value of the tokens and the investments of all other buyers in the process. These are "exit scams" or "pump and dump" schemes, in short, they defrauded cryptocurrency buyers out of billions of dollars. People were scammed so frequently that the U.S. Securities and Exchange Commission could hardly keep up with filing criminal charges quickly enough. A week later, the Chinese government’s ICO ban was the reason Sun was waiting for his flight at Incheon International Airport. Sources who heard him tell the story said that Sun believed he was a fugitive, ready to take off at any moment.
Previously, Chris Harland-Dunaway reported on Sun’s acquisition of BitTorrent and how the cryptocurrency tycoon turned it into his self-promotion machine; see this article.
The exact escape route Sun took from Beijing to Seoul remains shrouded in rumor. But the reason he fled is simple: he likely knew the ICO ban was coming and stuck around anyway. Sun pushed for TRX to complete its token sale the day before the ban was announced. Zhao Changpeng, the founder and CEO of Binance, one of the world’s busiest cryptocurrency exchanges, tipped Sun off.
"They were in it together," a former employee told me.
Zhao was reportedly informed of the impending government ban through his own connections. But at some point after the ICO ban, Zhao made it clear that his relationship with Sun was not personal, saying: "We only talk business; we don’t really 'hang out' in any way." Yet in 2019, Zhao and Sun vacationed together on the shores of Lake Geneva. On social media, they presented the impression of a business trip.
(Zhao did not respond to requests for comment.)
At 4 PM in Seoul, Sun boarded his flight, the captain waving as the Korean Air plane taxied across the tarmac. It turned the sky-blue fuselage onto the runway, the jet engines roaring, and Sun was airborne. He was headed to San Francisco, marking the first of many escapes. Sun learned early on that in the world of cryptocurrency, as long as you are prepared to exit before it catches up with you, you can make a lot of money easily.
In this story, 15 sources spoke with me on the condition of anonymity for fear of retaliation from Sun. They are current and former employees of Sun in his cryptocurrency empire, as well as various businesses in China and the U.S. For other reasons, one source had firsthand knowledge of Sun’s operations. This story also relies on hundreds of pages of internal Tron documents that were leaked to me. They reveal financial dealings involving Sun and his company. During the reporting of this story, more than one person believed that talking to me could put their lives in danger.
Despite repeated requests, Sun never agreed to answer any questions. The law firm Harder LLP, which serves as legal counsel for Sun’s company, responded: "This story is Mr. Harland-Dunaway’s latest attempt to damage Justin Sun’s reputation. Poloniex and BitTorrent will not respond to these allegations."
I also interviewed 18 current and former employees of BitTorrent and Tron, who had spoken with me earlier when I reported on Sun for The Verge. These descriptions collectively paint a picture of a person who is extremely eager for success, seemingly possessing boundless energy, with little sympathy for his employees as they pursue hype strategies and technologies that contradict the U.S.-China trade war. But that story did not delve into the cryptocurrency that underpins Sun’s empire.
So I began to focus on his money.
He fled because of the ICO ban. Months later, the value of Tron’s token TRX skyrocketed. Sun began to use his newfound wealth. He transferred millions of dollars into his U.S. bank account through a Hong Kong company called Davidyo Limited, some of which he used to purchase a GMC Denali, which he apparently liked after seeing it on "House of Cards." Months later, Sun appeared at BitTorrent’s downtown San Francisco headquarters, dressed in his Gucci sneakers, discussing business. He proposed to acquire the struggling company, which focused on decentralized file sharing software, for $140 million.
The story of Sun’s flight is well-known in Tron’s San Francisco office. In his telling, it is a sob story about a businessman fleeing China to fulfill his God-given capitalist ambitions. A former employee said that when Sun emotionally recounted this story at Tron, they often received a message: "Justin Sun is crying again."
But suddenly, Sun seemed intent on stamping the company with a Chinese identity. He decided to refine the marriage between BitTorrent and Tron through a summit held at Tron’s Beijing headquarters. This was his first return to China, and the employees had all heard about it. After months of evading Chinese authorities, Sun apparently felt safe there now.
BitTorrent’s C-suite executives had just flown in from San Francisco, transported from the Shangri-La Hotel in Beijing to a shared office space, and brought into a glass-walled conference room. Sun stood at the table, reading a prepared speech, telling the executives they were "his generals," and they would slaughter their competitors together.
The executives split up to meet with different departments at Tron’s Beijing office. BitTorrent’s CFO Dipak Joshi looked shocked when he returned from his meeting. "Dipak seemed very concerned about what he had learned," a former employee said. When Joshi returned to San Francisco, he confided to another employee that he thought Sun’s office in China was doing something. "He told me they were running an insider trading team in Beijing."
The "market-making team" was led by a bureaucrat named Baolong Xu. One day, Xu and a former employee had lunch at a nearby restaurant serving traditional Chinese seafood. As Xu began to explain that his job was "to ensure the TRX price reaches a certain level that Justin Sun wants," they were eating a type of stewed freshwater fish called crucian carp. During the explanation, Xu stated that when his team knew Tron was planning to announce good news to the public, Sun instructed them to buy TRX. After Tron announced the news, the value of the token skyrocketed and was sold for huge profits. "I was a bit scared," the former employee told me. "He was doing what’s called market-making, insider trading."
When another former employee asked Sun’s top deputy in Beijing what "market-making" meant, he laughed and said, "You know how Chinese people do it, right?" He apparently explained that the market-making team’s job was to work with wealthy cryptocurrency consumers "whales" outside of Tron. "We have ways to drive up the price of TRX," he said. "You know those people who have a lot of money but not a lot of brains? You can influence them to do anything you want them to do." The team’s business had ventured into what is essentially wholesale market manipulation.
(Tron and BitTorrent did not respond to requests for comment.)
When BitTorrent’s CFO Dipak Joshi returned to San Francisco from the Beijing summit, he discussed the possibility of illegal activities in Beijing with another employee. The former employee confided to me, "I’m not a legal expert, but I definitely know this is not good." Joshi and another employee believed that if they could distance themselves as much as possible from their work on TRX and actively ignore discussions about cryptocurrency, they would be safest. "Don’t know. Don’t get involved," the former employee said. I asked them if this was because cryptocurrency fell into a legal gray area, "Yes. I would say black area."
(Dipak Joshi declined to comment.)
I spoke with three lawyers who are experts in the intersection of financial law and cryptocurrency, as well as former regulators from the Financial Industry Regulatory Authority, regarding insider trading laws and cryptocurrency. Their view on whether insider trading laws apply to cryptocurrency: "It can be actionable." They also clearly stated that Tron’s market-making team in Beijing appeared to be trading on "material nonpublic information." U.S. securities laws explicitly prohibit trading on "material nonpublic information" as an unfair advantage, with a maximum penalty of 20 years in prison.
In the U.S., Sun faces serious financial violations. But unlike the Chinese authorities, who have a clear record of arbitrarily detaining businessmen, the slow-moving judicial rule of law in the U.S. provides Sun with another escape route: legal arguments.
Insider trading prohibitions apply to financial products known as securities. "Securities" is an old-fashioned investment term from the 1930s—like stocks or bonds. The government regulates securities because they can easily be exploited by well-connected networks to amass huge wealth while keeping the public away from fair market conditions. The billion-dollar question is whether most cryptocurrencies qualify as securities. It depends on the specifics. But if a crypto token meets the criteria for being a security, insider trading laws apply.
Sun faces a second major danger. If cryptocurrencies qualify as securities: they must be registered with the SEC. Registration means that cryptocurrency companies open their accounting books for inspection and publicly disclose their performance. Selling "unregistered" securities is a criminal offense, punishable by up to five years in prison in the U.S. Nevertheless, a large number of blockchain companies flooded the ICO market without registering with the SEC. So far, the SEC has quietly engaged in multiple settlement negotiations with cryptocurrency companies and even charged company executives with selling unregistered securities.
Regardless of the outcome of this legal debate over cryptocurrency, Sun began to take steps to ensure Tron’s legal legitimacy. He started reaching out to lawyers to seek legal advice that could protect his cryptocurrency business. He knew the path to wealth in the U.S. was littered with legal traps to avoid.
Since the SEC is a regulatory agency that might closely follow Sun, it made sense when a former employee heard him ponder during a meeting, "You know what’s amazing? If we had someone from the SEC join the company." Sun set his sights on David Labhart, a senior official who had worked in the SEC’s compliance division for eight years. He could be Tron’s chief compliance officer.

When questioned by Sun, Labhart proposed a complete overhaul of Tron’s compliance processes, working directly with BitTorrent’s legal counsel to ensure everything at Tron was legal and compliant. Unsurprisingly, the former regulator’s mindset was that of a regulator. "Sun was very skeptical about this," a former employee said, adding that Sun countered Labhart: "Sun was trying to convince him that he wanted (Labhart) to specifically prove that TRX is not a security token, but a utility token." (A securities law expert told me there is no reason to believe the claim of "utility token" is valid, nor is there any judicial opinion that would describe a token that way.)
The former employee described Labhart’s confused expression as: "Are you kidding me? I come from the SEC." The conversation reached an impasse. Then, "Sun asserted his dominance, saying, 'I’m the boss, you’re going to work for me, these are my demands.'" Despite his apparent concerns, Labhart signed the contract.
After hiring Labhart, Sun seemed emboldened. Within days, he conducted another ICO. ICOs were not banned in the U.S. as they were in China. The new token was the BitTorrent token, or BTT. A former employee, enthusiastic about Sun, explained that when he acquired BitTorrent, it had over 100 million active users. Issuing the token would be very profitable, "a no-brainer." A former employee told me that Labhart’s understanding was far less. At the time, the SEC had provided little legal guidance on how to conduct an ICO without selling securities. According to Labhart, it was vague and very risky.
A former employee explained that Sun allegedly wanted Labhart to write a legal opinion to protect him in case he was later charged with selling unregistered securities and "avoid liability." Apparently, Labhart refused. Sun then announced that the company would give away BTT for free to the public, a so-called "airdrop." These crypto giveaways are a marketing strategy, which is also risky because it looks like marketing for an investment opportunity (a security). "I think this was the last straw that broke Labhart," he resigned.
"Sun will get into trouble, but he doesn’t care," a former employee believes. Sun ordered the China office to continue with the airdrop.
Labhart declined to comment.
Sun still faced risks. After trying to get BitTorrent’s general counsel to write a memo to protect his token TRX from being regulated under securities law, he was apparently furious. "In the end, they found someone—a lawyer from Hong Kong—to write a memo proving that TRX is a utility," the former employee recalled, feeling confused by the idea. "Can we do that? Hong Kong? Are you sure? It makes no sense," they remembered saying. This former employee never learned the identity of the Hong Kong lawyer and was unclear whether they had a license to practice anywhere in the U.S.
A cryptocurrency finance lawyer I spoke with warned, "Corporate executives should never go to lawyers looking for a 'yes.' You’re not looking for advice—you’re looking for someone to agree with you." Sun often managed to find such people in his company, and as his business decisions became riskier, few resisted Labhart’s approach. It seemed Sun viewed lawyers as disposable, as if he had the ability to cast them aside, tainted by actions they inadvertently facilitated while he kept his eyes on the exit.
When Sun purchased a cryptocurrency exchange called Poloniex, it marked a fundamental shift in his crypto empire. Cryptocurrency exchanges function similarly to stock exchanges but list tokens.
Poloniex was a very popular and highly risky cryptocurrency trading venue. "Poloniex used to be a shitcoin casino," a former employee said. "It would list all kinds of coins." That is to say, the exchange listed tokens with incredibly fragile legitimacy ("shitcoins"). The trading environment was ruthless. "People would constantly pump and dump it, like it was the Wild West," a former employee said.
Previously, in 2018, Poloniex was acquired by a cryptocurrency financial company called Circle, which attempted to clean up illegal activities from the exchange and transform it into something closer to the Nasdaq stock exchange, but for crypto. They implemented new "Know Your Customer" (KYC) rules, which are typically mandated by governments but also written by companies to proactively prevent fraud on their platforms. This usually means requiring users to provide government-issued identification. KYC information is often cross-referenced with databases of known criminals banned from the international financial system, but it turned out that Poloniex’s previous lack of customer scrutiny was what made it so appealing initially. Once KYC was enforced, trading volume plummeted.
Sun’s new control was revealed at a company-wide event when he slid out from a side door. "It was really a mob," one employee said. Sun planned to bring Poloniex back to its earlier gray area, and some employees were eager to get back on the "Poloniex pirate ship."
Sun moved Poloniex to the Seychelles. The islands have virtually no regulations on cryptocurrency trading. The fact that about 50 to 70 Poloniex employees were based in a high-rise in downtown Boston was irrelevant. Bostonians were now employed by a company called Augustech, LLC, which was designed to provide "technical and IT services" for Poloniex Seychelles. "The corporate structure is like a Russian nesting doll, confusing," a former employee said. This was not only confusing—employees said it was also a painful thing for any customer hoping to sue Poloniex. They might have to go to court in the Seychelles.
The corporate restructuring was conducted by Sun’s new favorite law firm, Fenwick & West, a blue-chip firm that also represents Silicon Valley giants like Amazon, Google, and HP. Employees said Fenwick & West is now part of his private legal entourage. But according to a former employee, after Sun acquired his own new law firm, he took even greater risks. For this former employee, the combination made Fenwick & West "the scariest lawyers I’ve ever seen."
(Fenwick & West did not respond to requests for comment.)
Elsewhere at Poloniex, the approval requirements for token listings were relaxed. Sun also began to impatiently push down Poloniex’s KYC rules, which were slowing user adoption in China. A former employee said the stalemate infuriated Sun. "Fake KYC!" he screamed at a meeting. "Fake!"
To expedite the approval of new customers, Poloniex established an automated KYC system, but according to a former employee, it was permissible. They explained that it essentially stamped any type of government ID with a rubber stamp—"It didn’t matter if they submitted a picture of Daffy Duck."
Sun also seemed to find a completely different way to use Poloniex. As one former employee put it: "I think over time he began to see all the possibilities of using Poloniex more or less as his personal bank." But there was only one problem: all the money on the exchange belonged to the users.
It began with a project formally called "Operation Couch Cushions." Poloniex’s digital architecture was outdated and programmed oddly, so it became common for small amounts of money to get stuck in the digital cracks of the old exchange, like coins buried deep in a couch. Employees referred to the lost cryptocurrency traces as "dust," and eventually, engineers discovered a gold mine. Over the years, customers had accidentally deposited Bitcoin into wallets meant only for receiving a popular cryptocurrency called Tether. The Bitcoin was effectively blocked outside the wallet in a state of limbo, undelivered. Users could not recover it, seemingly forgotten for years.
By 2021, these Bitcoin fragments added up to a significant amount. When Sun learned about them, he ordered engineers to collect them. Almost daily, engineers would find a new pocket of change. A former employee said, "You could flip a stone and find a million dollars." After the rest of the company learned about the operation in a full company meeting, many expressed opposition. They argued that the money did not belong to the company.
When the engineers finished their search, they roughly estimated the dust they found to be about 300 Bitcoin, worth around $20 million.
Gradually, employees involved in the operation realized that Bitcoin would never become "alternative income" for Poloniex. According to current and former employees, they knew Sun would personally use the Bitcoin. A former employee claimed that Sun constantly asked those involved in the project, "Where are my 300 Bitcoin?"
Over the course of four hours, in hundreds of transactions, almost all the Bitcoin dust was siphoned from thousands of old Tether wallets. In total, it was 230 Bitcoin, worth just over $10 million today.
All the dust fell into an anonymous wallet. Within half an hour, this nameless wallet transferred almost all of it to a public wallet at Poloniex. Here, amidst the massive withdrawals and deposits of Bitcoin by Poloniex users, the traces of the dust disappeared.
Looking back at the blockchain transactions, former employees noted that synchronously unfreezing and transferring large amounts of Bitcoin dust could only be executed through Poloniex’s code scripts.
One former employee pointed out that Poloniex’s terms allowed them to deduct "dormancy fees." For them, the terms and conditions seemed malleable, at least providing a policy safeguard to eliminate the Bitcoin dust.
Although Sun demanded the Bitcoin, there was no apparent blockchain evidence that he personally received it. Former employees explained that Poloniex’s public wallet had so many user funds flowing through it 24/7 that they inadvertently obscured any tracking of funds. But ultimately, the legal distinction between Sun personally receiving money or Poloniex receiving it might not matter in practice. Andrew Verstein, a professor at UCLA and a lawyer specializing in cryptocurrency and financial crime, told me that since Sun is the sole owner of Poloniex, he would be responsible for it regardless. "Using customer funds for personal use is absolutely a crime," Verstein said.
In interviews, not a single former employee believed Sun would take personal responsibility for his misconduct. Most seemed to think his presence transcended the reach of U.S. law.
The legal ambiguity surrounding the initial explosion of cryptocurrency is one reason Sun appears to be legally untouchable. It seems that long-standing securities regulations should apply to cryptocurrency in obvious ways, but some have yet to be tested, such as insider trading laws. Some might even argue that this is not a new scenario, and in some cases, cryptocurrency is merely repeating some of the same mistakes and scandals that shaped financial law in the U.S. and many other countries.
A former Poloniex employee believed Sun found a way to live in the shadows of the law: "Sun’s tolerance for risk is absurdly high. And I don’t know if it’s because he knows more than I do, like he just completely believes that he’s legally set up to protect himself."
It was in a meeting about a business decision with legal risks that Sun hinted at how he would truly protect himself. A former employee was present. "What’s the worst that could happen?" Sun asked. "The worst might be that I never come back to the U.S."
All along, Sun seemed to be charting a different course.
A former employee told me that Sun focused on an island nation. In 2018, Sun sent a Tron employee to a blockchain conference in Malta, where they attended a VIP party inside the presidential palace. Caviar and champagne were served by a huge swimming pool, with string lights twinkling overhead. There, surrounded by waiters, mixed crypto celebrities, and business journalists, Tron’s representatives met with Malta’s then-president, Marie-Louise Coleiro Preca. The meeting was perfunctory, but she told Tron’s emissaries, "We welcome Tron’s investment in the Maltese economy."
The next day, Tron employees went to the office of Malta’s Minister of Economy and Industry, Silvio Schembri. They sat together in a conference room. The emissaries’ goal was to arrange a one-on-one meeting between Sun and the country’s former prime minister, Joseph Muscat, who was accused of corruption. In the preliminary meeting with Schembri, the finance minister stated that Sun "needed to invest first."
Sun invested secretly. At the time, Malta was notorious for essentially selling citizenship to the wealthy around the world for about $1 million, as long as they settled on the island. The passport sale process was formally called the "Individual Investor Program."
The program was widely criticized for being susceptible to corruption, including by the legendary Maltese journalist Daphne Caruana Galizia, who was later assassinated for her reporting.
(The Maltese government did not respond to requests for comment. Silvio Schembri also did not respond to requests for comment.)
Sun began renting a light purple apartment on a narrow street in the resort town of Sliema, with white decorative security bars on the windows. Malta’s business registry also shows that Sun set up a company called Tron Limited using his Chinese name. However, sources involved in the company’s formation could not clarify whether it conducted any meaningful business. According to them, Sun made business investments that might have stimulated the Maltese economy.
Meanwhile, Sun wired thousands of dollars to the lawyer assisting him with his citizenship application. According to a prominent Maltese immigration lawyer, "individual investors" must contribute at least €650,000 to Malta to obtain citizenship. It remains unclear how Sun made that contribution. Sun received his residency card in Malta and dissolved his Maltese company, Tron Limited, in 2020.
In some ways, Sun’s Maltese citizenship was not exceptional, as he had other destinations to escape to. He claimed in court documents that he was also a citizen of St. Kitts and Nevis in the Caribbean. Another former employee told me that Sun casually boasted about intending to buy a passport from the small West African nation of Guinea-Bissau. But Sun’s relationship with Malta held another, more significant secret. According to multiple Tron employees, Sun made two additional "investments" of €50,000 each for his father and mother to apply for citizenship.
Sun hoped to bring his parents along, suggesting that if he found himself at a crossroads with U.S. or Chinese regulators, Malta might be his ultimate destination. He claimed that other countries to which he pledged allegiance on paper seemed to serve more transient interests. After all, if you don’t live in a place, you owe it nothing.
Sun is, in some ways, a master of bank accounts. When Sun said he would seek citizenship in Guinea-Bissau, he urged an employee to start opening bank accounts there if feasible. He controlled at least 13 accounts in the U.S. alone. When he opened a checking account at First Republic Bank, he was vague about his profession, calling himself a technology service provider, and told a former employee never to disclose his cryptocurrency work to bankers. He also told them that banks often froze his money, and he needed to spread his wealth across multiple accounts. The employee believed Sun’s banking strategy was aimed at avoiding the pitfalls of anti-money laundering laws. For a cryptocurrency tycoon like Sun, cashing out large amounts of cryptocurrency can be a tricky issue.
Many of Sun’s bank accounts might simply serve as waypoints for transferring funds. As one former employee familiar with Sun’s banking operations speculated, "If he had to cash out all his cryptocurrency, he would have to do it somewhere outside the U.S. and China, where they would be under strict scrutiny or completely banned."

According to another former employee, Malta was not only a physical escape route but also a monetary one. Maltese citizens can bank across much of Europe. Allegedly, Sun urged an employee to submit applications to open eight bank accounts there. One potential explanation for Sun’s excessive number of bank accounts comes from a former close associate of Sun, who told me he was looking for ways to pay as little tax as possible. As one former employee succinctly put it, "He thinks taxes are stupid." As Sun’s close associate explained, "Every billionaire, what they think about is: tax evasion, tax optimization."
Multiple former employees told me that Sun could never return to China. Sun evaded the ICO ban, and during the trade war, he ignored attempts by Chinese authorities to contact him and demanded he forfeit a widely publicized lunch with Warren Buffett (whom he also invited to President Trump). Subsequently, Chinese authorities detained six senior Tron employees.
His exact relationship with Chinese authorities has been difficult to gauge, but he was recently appointed to an academic position at the Central Party School of the Communist Party of China to promote blockchain development. On the surface, Sun seemed to have shifted his strategic focus back to China, possibly for self-preservation.
Just before Christmas, a former employee received a call from their apartment building’s front desk. "The FBI is coming," they said. The former employee was startled: "Wait, you mean the FBI, FBI?"
The former employee was not home, but about 10 minutes later, the FBI called. An agent on the other end arranged to meet them at a dessert restaurant in Koreatown, New York. The former employee brought a friend along to the meeting, just in case it was a prank by dangerous individuals. The former employee walked into the restaurant, bought a pastry, and sat down.
A man in a dark jacket and jeans walked in, held up his wallet to the front staff to show his ID, and was waved through. He sat down next to the former employee at their table. He identified himself as an IRS agent. He said FBI agents were also coming, but they were still looking for parking.
While they waited, the IRS agent told the former employee that they were investigating Sun but didn’t really know what to look for. The FBI agents finally arrived, asking about various employees in the U.S. and Beijing, rumors of beautiful models flying Sun around the world, and whether he was doing business privately. The former employee got the impression that the agents were interested in potential tax evasion. The former employee said they even referred to Sun as "the IRS’s criminal." The agents handed over a letter requesting that the former employee forward any information related to the investigation and listed court dates, saying, "It sounds like you really want to help us." The former employee replied, "Oh, yes, because I want to screw him over." The agents found that amusing, saying they had heard that before.
Other employees working for Sun had received grand jury subpoenas. The Southern District of New York U.S. Attorney’s Office, which typically handles Wall Street financial crimes, was seeking criminal evidence against Sun.
The investigation was led by the FBI. Sun had hired a top white-collar defense attorney named Telemachus Kasulis, who had previously prosecuted fraud for the U.S. Attorney’s Office. (Kasulis did not respond to requests for comment.)
Meanwhile, a former lawyer for the SEC was tasked with guiding employees through the grand jury subpoena process. A source close to the investigation predicted they would try to resist the subpoenas. But that might be futile. As sources pointed out, any number of Sun’s employees might have already been cooperating with the government. They said, "They’ve been tight-lipped about it for a long time."
As the investigation into Sun neared its conclusion, the grand jury was exploring a long list of potential charges. According to a subpoena (one of which was shown to me), they are: wire fraud, conspiracy or intent to commit wire fraud, fraud, money laundering, spending the spoils of a criminal enterprise, unregistered securities and lying, aiding and abetting crimes, and conspiracy to defraud the United States.
(The SEC, which prosecutes securities fraud, declined to comment. The IRS could neither confirm nor deny the existence of an investigation but welcomes tips about financial crimes. The FBI and the Southern District of New York U.S. Attorney’s Office did not respond to requests for comment.)
Sun left the U.S. before the pandemic broke out and has not returned.
The cryptocurrency space is filled with colorful personalities and idealistic individuals who want to push the possibilities of finance. "I think there are a lot of people who genuinely believe in the power and promise of crypto. In many ways, it really is a generous, dedicated community," a former employee who worked closely with Sun explained. "I think that makes you too gullible. I think con artists anywhere can easily spot targets. Unfortunately, the crypto community is rife with easy targets."
These "easy targets" are not just everyday investors—many are people working in cryptocurrency. As one former employee described, "delusional optimism" combined with a lack of regulatory legal guidance led to an atmosphere of invincibility. Some employees at Poloniex were unsure whether Sun’s Bitcoin dust heist was illegal. When those around Sun could not distinguish right from wrong, he could easily slip away without any consequences.
Sun’s fate remains unclear. Over the past two years, he has spent millions on art and NFT auctions, including a $500,000 digital image of a rock and a $78.4 million sculpture by Alberto Giacometti. He also revealed that he won a $28 million bid for a seat on one of Blue Origin’s spacecraft for space travel.
Sun also announced that he is now the ambassador of Grenada to the World Trade Organization, claiming he would advocate for favorable cryptocurrency policies there. With his new title, one of his senior employees sent out proper guidance on Slack, instructing staff on how to correctly refer to Sun as "Your Excellency." A former employee speculated that the ambassadorship was aimed at securing diplomatic immunity. But so far, he has most notably used his public office to promote Tron. After the Russian military invaded Ukraine, Sun met with the Russian representative to the WTO and tweeted, "We discussed how to implement humanitarian use cases of Bitcoin / TRON for Russian civilians who cannot use financial payment systems." The tweet was later deleted.
(A spokesperson for the WTO stated they were unaware of the incident and thus had no comment. They also stated that the WTO has no authority to bar any representative from attending meetings and had no further comment.)
If the U.S. does indeed prosecute Sun, it has valid extradition treaties with every country where I learned he holds citizenship, except for China and Guinea-Bissau—if his claim to a former employee that he purchased citizenship there is true.
Over the past year, the international community has indicated they are tired of various small countries acting as legitimate backdoors for tax evasion and financial crime. It is hard to imagine that Sun could stay one step ahead forever, though it may still be possible.
When I spoke with an employee who told me about the operation of couch cushions, I questioned them and asked why Sun might risk such brazen actions. The staff member did not hesitate to speculate.
"If he breaks so many laws so quickly, then no one can catch up with him."
So far, no one has. So far, it has worked.
Note: After this report was published, Sun tweeted that the article was blatant defamation and that he would take legal action.
Related Reading:
《In-Depth Investigation | How Tron Became a Marketing-Oriented Public Chain?》
《Tracking | Justin Sun Transferred Over 12.1 Billion TRX to Exchange Addresses in 2020》
《Exclusive Interview with Justin Sun: I Hope to Play the Role of a Preacher》