The many escapes of Justin Sun

The departure terminal at South Korea's Incheon International Airport has a shiny lofted atrium. Sun had every reason to be nervous after his first coin sale. An initial coin offering is like an initial public offering for a new stock. It is the first time that traders can buy a new token. Sun wasn't worried about the money he would get if the token flopped or what he would lose if it took off. His company, tron, introduced a coin that sold out quickly for $70 million. The Chinese government had just banned all Initial coin offerings.

The state claimed that the introduction of hundreds of new and highly dubious cryptocurrencies in the last year made them a credible vehicle for financial fraud, pyramid schemes, and other illegal and criminal activities. Sometimes people buy into initial coin offerings because the coin's underlying technology is promising, or other times they are speculating that a coin's value will go up over time.

In many cases, the coin founders sold all of the token they held for a huge sum of money, crashing the value of the project and every other buyer's investment. These werepump-and-dumps, exit scam, and all of them bilked people for billions of dollars. The United States Securities and Exchange Commission couldn't file criminal charges fast enough. Sun was waiting for a flight in Incheon International Airport because of the Chinese government's ICO ban. Sources who heard him tell the story said he was ready to leave at a moment's notice.

Sun's true escape route from Beijing to Seoul is shrouded in rumor. He probably knew the ban was coming and went through with it. Sun wanted to finish the token sale before the ban was announced. Sun was tipped off by Changpeng, the founder and CEO of Binance, one of the world's busiestcryptocurrencies exchanges.

A former employee told me that they were in it together.

The government was going to ban from his own connections. At some point after the ban, Zhao made it clear that his relationship with Justin Sun was not personal. They used social media to say it was a business trip.

Changpeng didn't respond to the request for comment.

The Korean Air plane was waved across the tarmac by aircraft marshals after Sun boarded his flight. Sun was airborne after it pivoted its blue fuselage onto the runway. The first of his many escapes was completed when he was bound for San Francisco. Sun learned early that in the world of cryptocurrencies, lots of money can be made with ease if you are ready to leave before it catches up to you.

15 sources spoke to me on the condition that their names be kept out of the story because of their fear of being retaliated against. Current and former employees of Sun's various ventures in China and the US. One source has firsthand knowledge of Sun's businesses. Hundreds of pages of internal documents were leaked to me. They shed light on Sun and his company. More than one person believed that talking to me might endanger their lives.

Sun never agreed to answer any questions. The law firm that is litigation counsel for Sun's companies responded with a statement. Poloniex will not respond to these allegations.

I spoke to 18 current and former employees of BitTorrent and tron who were part of my earlier reporting on Justin Sun. The accounts depicted a man desperately thirsty for success, with seemingly unlimited energy, and little to no sympathy for his employees, who pursued hype tactics and technology that ran afoul of the US-China trade war. The story didn't touch on the cryptocurrencies that underpin Sun's empire.

I started following his money.

Sun hid in a high-rise apartment in San Francisco because he was afraid of being deported to China if he fled. The value of the token skyrocketed after a few months. Sun was putting his money to use. He transferred millions of dollars to his United States bank account through a company in Hong Kong called DavidyoLimited, some of which he used to buy a car. Sun showed up at the downtown headquarters of BitTorrent in San Francisco to talk about business in his Gucci sneakers. He wanted to buy the company that focused on file sharing. One of the most well-known brands in peer-to-peer sharing technology was acquired for $140 million.

The tale of Sun's escape became well-known in San Francisco. It was an anti-communist sob story about a businessman escaping China to fulfill his God-given capitalist ambitions. A former employee said they get a message when Sun emotionally retells the story at Tron.

Sun seemed to be trying to put a Chinese stamp on the company. He decided to have a summit meeting at the Beijing headquarters of TRON. It was his first time back in China. Sun had been avoiding Chinese authorities for months, but now feels safe there.

The C-suite executives from San Francisco were ferried from Hotel Shangri-La in Beijing to a workspace and then into a conference room. Sun took the head of the table and read a typed speech, telling the C-suite executives they were his generals and that they would massacre them. The CEO of BitTorrent made a key observation when Sun finished: "Weren't all of Mao's generals killed?"

The executives of the C-suite met with different departments at the Beijing office. A former employee said that Dipak seemed very concerned about what he was learning. When he returned to San Francisco, he talked to another employee about what he thought Sun was doing.

The market-making team was led by a technocratic man with glasses. One day, he went to lunch with a former employee at a restaurant that serves traditional Chinese seafood. They were eating a freshwater fish called crucian and Xu explained that he was supposed to make sure the price of TRX was at a level that Justin wanted. The token's value went up and they sold at a profit.

The top lieutenant in Beijing chuckled and said that the Chinese people do it. The team's operations had ventured into the realm of wholesale market manipulation.

Tron and Bittorrent did not reply to the request for comment.

The chief financial officer of BitTorrent spoke to another worker about the possibility of illegal activities in Beijing when he returned to San Francisco. The former employee admitted to me, "I'm not a law expert, but I definitely know that this isn't good." The former employee said to not engage. I asked if that was because of the gray area of the law. I would say black. There is a black area.

Dipak didn't comment.

I spoke to three lawyers who are experts on the intersection of financial law and cryptocurrencies, and a former regulator for the Financial Industry Regulatory Authority who was interested in the intersection of financial law and cryptocurrencies. They all agreed that the Beijing market-making team appeared to be using non-material material. The maximum penalty for using material nonpublic information as an unfair advantage is 20 years in prison.

Sun was in the United States. The United States has a slow-churning judicial rule of law, which offered Sun a different kind of escape hatch: legal arguments.

Financial products called securities have Insider trading prohibitions. An old-fashioned 1930s term for an investment is security. The government regulates securities because they can easily be exploited by well- connected whisper networks to make enormous riches while conning the public out of fair market conditions. The question is whether most cryptocurrencies are securities or not. It is dependent on a case-by-case basis. Insider trading law applies if a token is a security.

There was a second major danger facing Sun. The Security and Exchange Commission (SEC) must be registered with if a coin qualifies as a security. Firms that register open their accounting books for inspection and make public disclosures about their performance. It is a crime to sell securities in the US and can result in up to five years in prison. A large number of companies rushed cryptocurrencies to an initial coin offering without being registered with the SEC. The SEC has charged company executives with selling unregistered securities and negotiated numerous settlements with cryptocurrencies businesses.

Sun embarked on an obsessive quest to secure the legitimacy of the coin. He was looking for legal opinions that could protect his businesses. He knew his path to wealth in the United States was full of legal pitfalls.

Since the SEC was the watchdog that might bite at Sun's heels, it made sense when a former employee heard him muse in a meeting. Sun zeroed in on David Labhart, a lawyer and eight-year veteran of the SEC's compliance division. He could be the chief compliance officer.

During his interview with Sun, Labhart proposed to completely change the compliance process at Tron, working directly with BitTorrent's legal counsel to make sure everything was legal. The former regulator was thinking like one. A former employee said that Labhart was trying to pitch to Sun that he wanted to prove that TRX was true.

The former employee described Labhart's expression as puzzled. I'm from the SEC. He asserted his dominance and said that he would be working under him.

Sun seemed to be more confident after hiring Labhart. He made another coin offering within a few days. In the United States, they are not banned like they are in China. The new one was called BTT. A former employee who was effusive about Sun said that when he acquired BitTorrent, it had 100 million active users. Issuing a coin would be a lot of money, and Labhart was not very understanding. The SEC didn't provide legal guidance on how to do an initial coin offering that wasn't selling a security. Labhart said it was incredibly risky.

A former employee said that Sun wanted Labhart to write a legal opinion to protect him if he were charged for selling securities. Labhart refused. Sun announced that it would give out BTT to the public for free, which is dangerous because it looks like a marketing ploy.

He didn't care that he would be in trouble. The office in China was ordered by Sun to carry out the airdrop.

David Labhart didn't say anything.

The sun was still out. They got a lawyer from Hong Kong after he tried and failed to get the general counsel to write a finding to protect his token. Hong Kong? Are you sure? They said that it doesn't really make sense. They were reassured that it would be fine. It's unclear if the former employee had a license to practice law in the United States because they didn't know the identity of the Hong Kong lawyer.

Business executives should never go to a lawyer until they get a lawyer, warned one of the lawyers I talked to. Sun believed that counsel were disposable, like he could afford to leave them behind, tarred by the acts they were unaware of, while he kept an eye on the pathway out.

Sun bought a new exchange called Poloniex. Like stock exchanges, cryptocurrencies function like token exchanges. They are white-knuckled marketplaces.

Poloniex was an incredibly popular and incredibly risky place to tradeCryptocurrencies, held together byduct tape. People would do pump-and-dumps on it. A former employee said that it was just like the Wild West.

Poloniex was purchased by Circle, a firm that wanted to transform the exchange into something similar to the stock exchange. KYC rules are often set by governments but also written by companies to prevent fraud on their platforms. Asking users for government-issued ID cards is what this usually means. Poloniex's prior lack of customer scrutiny was what made it so appealing in the first place, as KYC information is often checked against databases of known criminals who are banned from the international financial system. Trading volume plummeted once KYC was enforced.

One employee said that it was pretty gangster when Sun slipped out of a sliding side door. Some employees were eager to get back on the Polo pirate ship, as Sun planned to take Poloniex back to its earlier gray area infamy.

Poloniex was moved to the islands. There are no regulations for cryptocurrencies exchanges in the archipelago. Roughly 50 to 70 Poloniex employees were based on High Street in Boston. The Bostonians were employed by a company called Augustech, which was set up to provide technology and IT services. Employees said it would be a pain in the ass for any customer who wanted to file a lawsuit. They would have to go to court in the island nation. Sun's new favorite lawyers, Fenwick & West, a blue chip firm that also represents Silicon Valley giants, carried out the company reorganization. Employees said that Fenwick & West were part of his retinue of personal lawyers. According to a former employee, Sun took even more risks when he started his new law firm. The combination made Fenwick & West the scariest lawyers I have ever met.

West did not reply to the request for comment.

One employee described it as a return to "YOLO Polo" where token listing requirement approvals slackened. Sun began bulldozing Poloniex's KYC rules, which were slowing Poloniex's user adoption in China. He screamed at one meeting.

Poloniex built an automated KYC system to approve new customers as quickly as possible, but according to a former employee, it was permissive. They didn't matter if they submitted a picture of Daffy Duck or not.

Sun found a completely different way to use Poloniex. As one former employee put it: "He started to see all the possibilities of using Polo as more or less his personal bank." But just one problem: all the money on the exchange belonged to the users.

Poloniex's digital architecture was archaic and strangely programmed, so it became common for bits of money to get trapped in digital crevices of the old exchange. Engineers discovered a gold mine after traces of lost coin were called in by employees. Over the years, customers accidentally deposited their money into wallets that only accepted a popular digital currency called tether. In a kind of suspended animation, the Bitcoins were blocked out of the wallet. It was forgotten for a long time by users.

By the year 2021, these pieces of Bitcoin were worth a lot of money. Sun ordered engineers to gather the dust. A former employee said that an engineer would find a new pocket of lost change nearly every day. Many people objected after the rest of the company learned about the operation. They argued the money was not theirs.

The estimate for the dust that engineers found was about 200 million dollars.

The employees involved in the operation realized that the Bitcoins would never be used for Poloniex. According to current and former employees, they knew that Justin Sun would take the Bitcoins personally. Sun asked people involved with the project one question: Where is my 300 Bitcoins?

Over the course of four hours, in hundreds of transactions, nearly all the dust from theCryptocurrencies was taken out of the Tether wallet. It was over $10 million in today's value.

The dust landed in a wallet. Within half an hour, the no-name wallet transferred almost its entire haul into one of Poloniex's communal wallets. There is a trail of dust that is lost when there is a lot ofBitcoin being withdrawn and deposited by Poloniex users.

The former employees said that unfreezing and transferring massive amounts of Bitcoin dust in sync could only be done with a script of code. The day before the dust was taken from thousands of wallets, the wallets had been disabled. The fact that the wallet was seemingly impossible would make it impossible for thousands of users to give away their dust.

A clause in Poloniex's terms and conditions that allows them to deduct adormancy fee was pointed out to them by a former employee.

There was no evidence that Sun received the coin personally. According to former employees, the Poloniex communal wallet has so much user money that it obscures any money trail. The legal distinction between Sun and Poloniex may be irrelevant. Andrew Verstein, a UCLA professor and lawyer specializing in financial crime, told me that Sun would be responsible for converting customer funds for personal use.

Not a single former employee believed that Sun would be held accountable for his actions. A majority of people think he is beyond the reach of American law.

Sun looks to be legally unassailable because of the legal murk in the original explosion of cryptocurrencies. Seemingly, long-standing securities statutes ought to apply tocryptocurrencies in obvious ways, but some haven't been tested. Some might argue that these are not new scenarios, and that the same mistakes and scandals that led to the financial laws of the United States and many other countries are still being repeated.

One former Poloniex employee thought that Sun had found a way to live in the shadow of the law. It was absurdly high. I don't know if it's because he knows more than I do, like he just believes in his bones that he's set up legally to protect himself.

During a meeting about a legally risky business decision, Sun mentioned how he would protect himself. Sun asked what the big deal was.

Sun was paving another escape route.

Sun was fixated on one island nation. Sun sent a worker to a conference in Malta where they joined a party inside the palace. There was a swimming pool with string lights overhead. There was a meeting between the Maltese president, Marie-Louise Coleiro Preca, and the representative of tron. The meeting was perfunctory, but she told the emissary that she was looking forward to his investment in the Maltese economy.

The next day, the employee went to the office of the minister. They sat in a room. The goal was to arrange a one-on-one meeting between Sun and the country's former prime minister, who has been accused of corruption. The finance minister told Sun that he needed to invest first.

In secret, Sun invested. At the time, Malta was known for selling citizenship to wealthy individuals around the world for $1 million if they established residence on the island. The individual investor programme is what the passport sale process is called.

The program was criticized for being susceptible to corruption, including by the Maltese journalist who was assassinated for her reporting.

The Maltese government did not respond to the request for comment. The person did not respond to the request for comment.

Sun rented a lavender-blue flat in Malta with white ornamental burglar bars over the windows on a narrow street in the resort town of Sliema. Sun used his Chinese name, Yuchen Sun, to set up a company called TRON LIMITED. A source involved in the company's founding couldn't say if it did any business. Sun made no commercial investments that might have stimulated the Maltese economy.

Sun wired money to his lawyers to help with his citizenship application. An individual investor is required to contribute at least 650,000 to Malta in order to qualify for citizenship, according to a prominent Maltese immigration lawyer. It is not clear how Sun made his contribution. Sun's Maltese company dissolved in 2020 after he received his residency card for Malta.

Sun has other destinations he could escape to, so his Maltese citizenship isn't exceptional. He claimed in a court declaration that he is a citizen of the Caribbean islands. A former employee told me that Sun bragged about wanting to buy a passport from the small West African nation of Guinea-Bissau. There was more to Sun's relationship with Malta. Sun made two more investments in Malta. He applied for citizenship for his parents.

If Sun gets caught in the crosshairs of regulators in the US or China, he might want to take his parents to Malta. The other nations seem to have more fleeting interests. You don't owe anything if you don't live in a place.

Sun has a lot of bank accounts. Sun urged a worker to open a bank account if he was granted citizenship for Guinea-Bissau. He has at least 13 in the United States. When he opened a checking account at First Republic Bank, he said he was a technology services provider, but never told a former employee that he worked in cryptocurrencies. He told them that banks froze his money so frequently that he needed to spread his wealth across many accounts. Sun's bank account strategy was designed to avoid being caught up in anti-money-laundering laws, according to an employee. Sun has a problem cashing out large sums of money. The traditional financial system has not been fond of cryptocurrencies.

Sun's bank accounts could be used to move money. If he has to cash out all his cryptocurrencies, he has to do it outside of the US and China, according to a former employee.

According to a former employee, Malta was more than just a physical escape route. Most of Europe has access to banking for Maltese citizens. Sun is said to have told an employee to apply to open eight bank accounts. A former associate of Sun's told me that he looks for ways to pay less in taxes. One former employee said that he thought taxes were stupid.

Sun cannot return to China, according to multiple former employees. In the midst of the trade war, Sun ignored attempts by the Chinese authorities to contact him and invited President Trump to lunch with him. The Chinese authorities tried to sully Sun's name in the press with corruption allegations, after detaining six senior Tron employees.

It seems Sun began to apologize to Chinese officials. In China, many citizens are required to read communist writings inside a smartphone app called "Study Xi, Strong Nation." Recently, the app published a piece about the technology written by Justin Sun, who is a member of the communist party. He was recently appointed to an academic position at the Central Party School for the Chinese Communist Party to promote the development of the internet of things. It looks like Sun has made a strategic pivot back to China, possibly out of self-preservation.

The sudden change in Sun's relationship with China was inexplicable. The authorities had accused him of being corrupt. There is evidence that he may have reconnected with the Chinese authorities. The story begins with a phone call.

After Sun arrived in San Francisco, he vanished for months. He told the employee that he was in the forest with the lama. The term lama is often reserved for Buddhist spiritual leaders.

Silicon Valley tech moguls attended a spiritual retreat, but it didn't seem to be wavy. The employee pushed Sun for more information and he began to crack, his voice filled with desperation. I am a slave. He kept repeating that he needed to please the leaders.

When Sun returned to San Francisco, he ordered an employee to send two phones to someone in Beijing. The recipient was called Brother Rainbow.

The former employee insisted that Sun has a powerful Chinese contact who can protect him, after learning that Brother Rainbow wanted the phone to read news that was normally blocked in China.

Satellite images show that Brother Rainbow is located in Zone 1 of Beijing, which is known to be reserved for government officials and celebrities. Some of the highest-ranking Chinese Communist Party officials, as well as some of the Chinese Communist Party's founding fathers, live there.

I obtained Brother Rainbow's phone number. A dark web database of hacked Chinese phone numbers and personal information has the same number in it as the owner. The phone number is similar to the one used by Luo Dan, who frequently posts articles about Buddhism and Chinese government visits to various provinces. In an interview with China Tibet, Luo said that he began his academic career as a professor in Tibetan Studies. He is the vice-chancellor of The Tibet Institute of Socialism. He served as a delegate for China at the United Nations.

The Panchen Lama is the second holiest figure in Buddhism behind the Dalai Lama, and an official from China's National Committee Consultative Congress said that a special assistant to the Lama is named Luo Dan. The Panchen Lama is influential in Beijing and was installed by the Chinese Communist Party.

The Panchen Lama's political appearances are posted about in part of Luo Dan's WeChat presence. It is not clear what Luo Dan has gained from his relationship with Sun, other than two phones he can use to read the news.

I called his number every day for a week. No one answered when it rang.

Sun might have been wise to give favor to someone inside the Chinese government who could protect him.

A former employee got a call from their building's front desk just before Christmas. The former employee asked if he said the FBI.

The FBI called the former employee about 10 minutes later. The agent arranged for them to meet at a dessert restaurant in New York. A friend of the former employee shadowed them to the meeting in case it was a hoax. The former employee went into the restaurant and sat down.

A man in a dark jacket and jeans walked into the restaurant and held his wallet to the employee at the front of the restaurant as the billfold fell open. He sat at the former employee's table after they waved him through. He said he was an agent from the IRS. He said an FBI agent was also coming, but they were still looking for parking.

The former employee was told by the IRS agent that they didn't know what to look for. When the FBI agent 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 or not he did business transactions under the table. The former employee thought agents were interested in tax evasion. The former employee said that they called Sun an IRS criminal. The agents handed over a letter asking the former employee to forward them information relevant to their investigation and listed a court date, to which the former employee said, "It sounds like you really want to help us."

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 looking for evidence against Sun.

The FBI is leading the investigation. Telemachus Kasulis is a top-flight white collar defense lawyer who used to prosecute fraud for the US Attorney's office. Kasulis didn't reply to the request for comment.

A former SEC attorney has been tasked with shepherding employees through the grand jury subpoena process. A source close to the investigation said they would try to fight the subpoenas. That could be pointless. The source said that Sun employees may already be cooperating with the government.

The grand jury is looking at a long list of possible charges as the dragnet closes in. They are wire fraud, conspiracy or intent to commit wire fraud, swindling, money laundered, spending the spoils of a criminal enterprise, failure to register a security and lying about it.

The SEC declined to comment. The IRS welcomed tips on financial crimes, even though they couldn't confirm or deny the existence of an investigation. The FBI and US Attorney's Office for the Southern District of New York did not respond to questions.

Sun left the US before the Pandemic struck.

There are a lot of people who believe in the power and promise of the coin. A former employee who worked closely with Sun said that it is a generous community. I believe con artists can spot an easy mark. The community of crypts is awash in easy marks.

Many of the people who work incryptocurrencies are also investors. A lack of legal guidance from regulators has allowed an atmosphere of anything-goes to flourish, as one former employee described it. There were employees at Poloniex who were unsure if Sun's theft was legal or not. It was easy for Sun to escape when people around him lost track of right and wrong.

Sun's end game is not clear. He has spent millions on art and NFT auctions over the past two years, bagging a $500,000 digital image of a rock on the one hand and a $78.4 million sculpture on the other. He won the Blue Origin auction for a seat on one of its craft for a cool $28 million.

Sun is the ambassador to the World Trade Organization in Grenada, where he will advocate for cryptocurrencies. One of his senior employees gave proper guidance to his workers on how to refer to Sun as his excellency because of the new title. He used his public office to promote tron. Sun met with Russia's representative to the WTO after their military invaded Ukraine and they discussed humanitarian use case of how TRON can be implemented for Russian civilians who lack access to financial payment system.

A spokesman for the WTO said they were not aware of the event and had no comment. The WTO has no right to bar any representative from meetings, they said.

If the United States indicts Sun, it has treaties with every country he has citizenship for, with the exception of China and Guinea-Bissau, if the claim he made to a former employee that he bought citizenship is true.

The international community is fed up with small nations that serve as legal traps for tax avoidance and financial crime. It is hard to imagine Sun will be able to stay one step ahead forever.

When I spoke to an employee who told me about the operation, I asked why Sun would risk something so bold. The employee speculated.

It would be impossible for anyone to catch up to him if he broke so many laws at such a rapid pace.

No one has yet. It has worked so far.