Justin Sun, a budding Chinese cryptocurrency mogul, walked through the shiny lofted atrium of the departure terminal at South Koreaโs Incheon International Airport. It was September 2017, an early height of the crypto craze, and Sun had every reason to be nervous after his first ICO. An ICO, or initial coin offering, is like an initial public offering for a new stock. Itโs the first time cryptocurrency traders have the opportunity to buy a brand-new token. But Sun wasnโt anxious about the money he stood to gain if it took off or what heโd lose if the token flopped. In fact, his company, Tron, introduced a coin called TRX โ a huge success, selling out quickly for $70 million. The problem for Sun was that the Chinese government, just days before, had just banned ICOs entirely.
The state claimed ICOs were vehicles for financial fraud, pyramid schemes, and other illegal and criminal activities โ a credible claim because, in 2017, hundreds of new and highly dubious cryptocurrency tokens were being introduced. People buy into initial coin offerings for all sorts of reasons: sometimes because the coinโs underlying blockchain technology is promising, or sometimes because theyโre speculating that a cryptocurrencyโs value might rise astronomically over time, like Bitcoin has.
But in many cases, the coin founders immediately sold all the tokens they held for a vast sum of money, crashing the its value in the process and every other buyerโs investment. These were โexit scamsโ or โpump-and-dumps,โ 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 criminal charges fast enough. The Chinese governmentโs ICO ban was why, a week later, Sun was waiting for a flight in Incheon International Airport. Sources who heard him tell this story say Justin believed he was a fugitive and was ready to take off at a momentโs notice.
Hype man of the century Previously, Chris Harland-Dunaway reported on Justin Sunโs acquisition of BitTorrent โ and how the crypto mogul turned it into a self-promotion machine for himself. Read the story.
Sunโs true escape route from Beijing to Seoul remains cloaked in rumor. But the reason for his getaway was simple: he likely knew the ICO ban was coming and went through with it anyway. Sun pushed TRX to finish its token sale the day before the ban was announced. Sun had been tipped off by Changpeng โCZโ Zhao, the founder and CEO of Binance, one of the worldโs busiest cryptocurrency exchanges.
โThey were in it together,โ a former employee told me.
Allegedly, Zhao learned of the impending government ban from his own connections. But at some point after the ICO ban, Zhao made clear his relationship with Justin Sun was not personal, saying, โWe have only talked business and havenโt really โhung outโ in any way.โ But as recently as 2019, Zhao and Sun vacationed together on the shores of Lake Geneva. Over social media, they gave the impression it was a business trip.
(Changpeng Zhao did not respond to a request for comment.)
At 4PM in Seoul, Sun boarded his flight, and aircraft marshals waved the Korean Air plane across the tarmac. It pivoted its sky blue fuselage onto the runway, the jet engines blasted, and Sun was airborne. He was bound for San Francisco, completing the first of his many escapes. Sun learned early that in the world of cryptocurrency, heaps of money can be made with ease, so long as youโre ready to exit before it catches up to you.
โI was kind of scared,โ the former employee told me. โHe was doing the so-called market making, insider trading all the time.โ
For this story, 15 sources spoke to me on the condition their names be withheld because they fear retaliation from Justin Sun. They are current and former employees of Sunโs various ventures across his cryptocurrency empire, in China and the US. One source has firsthand knowledge of Sunโs businesses for other reasons. This story also relies on hundreds of pages of internal Tron documents that were leaked to me. They shed light on Sun and his companyโs financial dealings. Over the course of reporting this story, more than one person believed that talking to me might put their lives at risk.
Despite repeated requests, Sun never agreed to answer any questions. The law firm that is litigation counsel for Sunโs companies, Harder LLP, responded with the statement: โThis story is yet another attempt by Mr. Harland-Dunaway to impair the reputation of Justin Sun. Poloniex and BitTorrent will not dignify these allegations with a response.โ
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. Together, those accounts depicted a man desperately thirsty for success, with seemingly limitless energy, little to no empathy for his employees, who pursued hype tactics and technology that ran afoul of the US-China trade war. But that story didnโt delve into the cryptocurrencies that underpin Sunโs empire.
So I began following his money.
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 Tronโs token, TRX, had skyrocketed. Sun began putting his newfound riches to use. 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.
The tale of Sunโs escape became well-known in San Franciscoโs Tron office. In his telling, it was an anti-communist sob story about a businessman escaping China to fulfill his God-given capitalist ambitions. A former employee said theyโd often get a message when Sun emotionally retold the story at Tron: โJustin cried again.โ
But suddenly, Sun seemed intent on putting a Chinese imprint on the company. He decided to consummate the marriage between BitTorrent and Tron with a summit meeting at Tronโs Beijing headquarters. It was his first return to China employees had heard of. After months of ducking Chinese authorities, Sun apparently now felt safe there.
BitTorrentโs C-suite executives, just in from San Francisco, were ferried from Hotel Shangri-La in Beijing to a coworking space and led into a glass-enclosed conference room. Sun took the head of the table and read a typed speech, calling himself โChairman Mao,โ telling the C-suite executives they were โhis generalsโ and that, together, they would massacre their competition. โPeople were feeling uncomfortable and incredulous at the euphemisms and metaphors,โ a person who was present said. When Sun finished, BitTorrentโs CEO made a key observation: โWerenโt all of Maoโs generals killed?โ To which Sun supposedly confirmed, โYes, yes.โ
โFake the KYC!โ he screamed at one meeting. โFake it!โ
The C-suite executives split up for meetings with different departments at Tronโs Beijing office. BitTorrentโs chief financial officer, Dipak Joshi, returned from his meeting looking shaken. โDipak seemed very concerned about what he was learning,โ a former employee said. When Joshi returned to San Francisco, he confided to another employee about what he thought Sunโs Chinese office was doing. โHe told me they were running an insider trading team in Beijing.โ
The โmarket-making teamโ was led by a technocratic, reserved man with thin-framed glasses named Baolong Xu. One day, Xu went to lunch at a nearby restaurant that serves traditional Chinese seafood with a former employee. They were eating a stewed freshwater fish called crucian when Xu began explaining his job was โto make sure the TRX price is at some level Justin wants.โ Over the course of his explanation, Xu explained that Sun directed them to buy TRX when his team knew that Tron was planning to announce good news to the public. After Tron made the announcement, the tokenโs value shot up, and they sold at a major profit. โI was kind of scared,โ the former employee told me. โHe was doing the so-called market making, insider trading all the time.โ
When another former employee asked Sunโs top lieutenant in Beijing what โmarket makingโ meant, he chuckled and said, โYou know how the Chinese folks do it, right?โ He apparently explained that the market-making teamโs job was to work with โwhalesโ who were wealthy cryptocurrency spenders outside of Tron. โWe have a way to pump the price [of TRX],โ he said. โYou know those folks that have a lot of money and donโt have a lot of brains? You can influence them to do whatever you want them to do.โ The teamโs operations had ventured into the realm of what was essentially wholesale market manipulation.
(Tron and Bittorrent did not respond to a request for comment.)
When Dipak Joshi, BitTorrentโs chief financial officer, returned to San Francisco from the Beijing summit, he spoke to another worker about the possibility of illegal activities in Beijing. The former employee admitted to me, โIโm not a law expert, but I definitely know that this isnโt good.โ Joshi and the other employee decided they would be safest if they removed themselves as much as possible from work on TRX and actively ignored discussions of cryptocurrency. โTo not know. To not engage,โ the former employee said. I asked them if thatโs because cryptocurrency fell into a gray area of the law. โYeah. I would say black. A black area.โ
(Dipak Joshi declined to comment.)
I spoke to three lawyers who are experts on the intersection of financial law and cryptocurrency and a former regulator for the Financial Industry Regulatory Authority about insider trading law and cryptocurrency. Their opinion on whether insider trading law applies to crypto: โa case can be made.โ They also all agreed, emphatically, that Tronโs Beijing market-making team appeared to be using โmaterial nonpublic informationโ to make trades. The US Securities and Exchange Act explicitly forbids trading using โmaterial nonpublic informationโ as an unfair advantage, and the maximum penalty is a 20-year prison sentence.
Sun was flirting with a grave financial transgression in the United States. But unlike China, where authorities have a clear record of arbitrarily detaining businessmen, the United States has a slow-churning judicial rule of law, which offered Sun a different kind of escape hatch: legal arguments.
Insider trading prohibitions apply to financial products called securities. A โsecurityโ is an old-fashioned 1930s term for an investment โ stocks or bonds, for example. 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 multi-billion-dollar question is whether most cryptocurrencies are securities or not. It depends on a case-by-case basis. But if a crypto token qualifies as a security, insider trading law applies.
Sun faced a second major danger. If a cryptocurrency qualifies as a security: it must be registered with the Security and Exchange Commission (SEC). Registering means crypto firms open their accounting books for inspection and make public disclosures about their performance. Selling โunregisteredโ securities is a crime, punishable by up to five years in prison in the US. Nevertheless, a huge number of blockchain companies have rushed cryptocurrencies to ICO without registering them with the SEC. So far, the SEC has quietly negotiated numerous settlements with cryptocurrency businesses and even charged company executives with selling unregistered securities.
Whatever the conclusion of this lawyerly debate over crypto, Sun embarked on an obsessive quest to secure Tronโs lawful legitimacy. 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.
Since the SEC was the watchdog that might bite at Sunโs heels, it made sense when a former employee heard him muse in a meeting, โYou know what would be amazing? If we had somebody from the SEC be part of the company.โ Sun zeroed in on David Labhart, a lawyer and eight-year veteran of the SECโs compliance division. He could be Tronโs chief compliance officer.
During his interview with Sun, Labhart proposed completely revamping the compliance process at Tron, working directly with BitTorrentโs legal counsel to ensure everything at Tron was legally compliant. Unsurprisingly, the former regulator was thinking like a regulator. Sun listened. โJustin was very iffy about that,โ a former employee said, and Sun countered Labhart: โJustin was trying to pitch to him that he wanted [Labhart] specifically for proving that TRX is not a security, but a utility token.โ (A legal expert on securities told me there was no reason to believe the โutility tokenโ argument was valid anyway and that thereโs no judicial opinion that describes tokens this way.)
The former employee described Labhartโs puzzled expression as, โAre you kidding? Iโm from the SEC.โ The conversation stalled. Then, โJustin asserted his dominance and was like, โIโm the boss, and youโll be working under me, and these are my needs.โโ Despite his apparent concerns, Labhart signed the contract.
After hiring Labhart, Sun seemed emboldened. Within days, he made another initial coin offering. ICOs arenโt banned in the United States like they are in China. The new one was BitTorrent Token, or BTT. A former employee who was generally effusive about Sun explained that when he acquired BitTorrent, it came with upwards of 100 million active users. Issuing a coin would be incredibly lucrative, a โkind of a no-brainer.โ A former employee told me Labhart was considerably less understanding. At the time, the SEC provided little to no legal guidance on how to do an initial coin offering that wasnโt selling a security. It was fuzzy and, according to Labhart, incredibly risky.
Sun supposedly wanted Labhart to write a legal opinion to protect him if he were later charged for selling unregistered securities and โavoid liability,โ a former employee explained. Apparently, Labhart refused. Then Sun announced the company would dole out BTT to the public for free โ a so-called โairdrop.โ These crypto giveaways are a kind of marketing ploy, which is also dangerous because it looks like marketing for an investment opportunity โ a security. โI think that was the straw that broke [Labhartโs] back.โ He resigned.
โJustin would be in trouble, but he didnโt care,โ a former employee believed. Sun ordered the office in China to carry out the airdrop instead.
David Labhart declined to comment.
Sun was still exposed. He apparently fumed after trying and failing to get BitTorrentโs general counsel to write a finding to protect his kingmaking token, TRX, from securities law regulation. โIn the end, they got somebody โ a lawyer from Hong Kong โ to write a finding that TRX is a utility.โ The former employee was puzzled by the idea. โCan we do that? Hong Kong? Are you sure? Doesnโt really make sense,โ they remembered saying. Leaders in the Beijing office assured them it would be fine. The former employee never learned the identity of the Hong Kong lawyer, and itโs unclear if they even had a license to practice law anywhere in the United States.
One of the crypto-finance lawyers I talked to warned, โBusiness execs should never go lawyer to lawyer until they get a โyes.โ Youโre not looking for counsel โ youโre looking for a yes man.โ Sun was often able to find them at his companies, and as his business decisions became more risky, few resisted the way Labhart did. 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.
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. They are cryptocurrencyโs white-knuckled marketplaces.
Poloniex โ or โPolo,โ as enthusiasts called it โ was an incredibly popular and incredibly risky place to trade crypto, held together by what some employees called โduct tapeโ code. โPolo used to be shitcoin casino numero uno,โ a former employee said. โIt would list everything.โ That is, the exchange listed tokens of unbelievably tenuous legitimacy (โshitcoinsโ). The trading community was ruthless. โPeople would constantly do pump-and-dumps on it. It was just, like, completely Wild West,โ a former employee said.
In 2018, Poloniex was purchased by a crypto-finance firm called Circle, which sought to purge illicit activity from the exchange and transform it into something approaching the Nasdaq stock exchange, but for crypto. They enforced new โknow-your-customerโ rules, or KYC, which are often set by governments but also written by companies to proactively prevent fraud on their platforms. This usually meant asking users for government-issued ID cards. KYC information is often checked against databases of known criminals who are banned from the international financial system, but as it turned out: Poloniexโs prior lack of customer scrutiny was what made it so appealing in the first place. Once KYC was enforced, trading volume plummeted.
Sunโs new ownership was revealed during a company all-hands when he slipped out of a sliding side door. โIt was pretty gangster,โ one employee said. Sun planned to take Poloniex back to its earlier gray-area infamy, and some employees were eager to get back aboard โthe Polo pirate ship.โ
Sun moved Poloniex to the Seychelles islands. The archipelago has few regulations for cryptocurrency exchanges. The fact that roughly 50 to 70 Poloniex employees were headquartered on High Street in downtown Boston didnโt matter. The Bostonians were now employed by a blandly named company โ Augustech, LLC โ set up to provide โtechnology and IT servicesโ to Poloniex Seychelles. โThe corporate structure is like a Russian nesting doll of obfuscation,โ a former employee said. And it wasnโt just confusing โ employees said it also would be a pain in the ass for any customer who wished to sue Poloniex. Theyโd likely have to go to court in the Seychelles. The company reshuffle was carried out by Sunโs new favorite lawyers, Fenwick & West, a blue chip firm that also represents Silicon Valley titans like Amazon, Google, and HP. Employees said Fenwick & West were now part of his retinue of personal lawyers. But according to a former employee, once Sun had his new lawy firm, he took even greater risks. For the former employee, the combination made Fenwick & West โthe scariest lawyers Iโve ever met.โ
(Fenwick & West did not respond to a request for comment.)
Everywhere else at Poloniex, token listing requirement approvals slackened โ a return to โYOLO Polo,โ as one employee described it. Sun also began impatiently bulldozing Poloniexโs KYC rules, which were slowing Poloniexโs user adoption in China to a crawl. A former employee said the logjam enraged Sun. โFake the KYC!โ he screamed at one meeting. โFake it!โ
To approve new customers as quickly as possible, Poloniex built an automated KYC system, but according to a former employee, it was permissive. It virtually rubber-stamped government IDs of any kind, they explained โ โDidnโt matter if they submitted a pic of Daffy Duck.โ
Sun also seemed to have found a completely different way to use Poloniex. As one former employee put it: โI think over time, he started to see all the possibilities of using Polo as more or less his personal bank.โ But just one problem: all the money on the exchange belonged to the users.
โJustinโs tolerance for risk is absurdly high. Like, absurdly high.โ
It started with a project officially known as โOperation Couch Cushions.โ Poloniexโs 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, as though buried in the deep recesses of a sofa. Employees called traces of lost crypto โdust,โ and eventually, engineers discovered a gold mine. Over the years, customers accidentally deposited Bitcoin to wallets only designed to accept a popular crypto called Tether. The Bitcoin was blocked out of the wallets, undelivered, in a kind of suspended animation. It was unrecoverable by users, seemingly forgotten for years.
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. โYouโd turn a rock over and find a million dollars,โ a former employee said. After the rest of the company learned about the operation at an all-hands meeting, many people objected. They argued the money didnโt belong to the company.
When engineers finished searching, their ballpark estimate for the dust they found was roughly 300 bitcoin, or about $20 million.
Gradually, employees involved in Operation Couch Cushions realized the Bitcoin would never become โalternative revenueโ for Poloniex. According to current and former employees, they understood Justin Sun would take the Bitcoin personally. According to a former employee, Sun continually asked people involved with the project one question: โWhereโs my 300 Bitcoin?โ
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 todayโs value.
All the dust landed in an anonymous wallet. Within half an hour, the no-name wallet transferred almost its entire haul into one of Poloniexโs communal wallets. Here, the dustโs trail is lost amidst flurries of Bitcoin being withdrawn and deposited by Poloniex users.
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.
One former employee pointed to a clause in Poloniexโs terms and conditions that allows them to deduct a โdormancy fee.โ To them, it looked like the terms and conditions could have been changed to at least provide a policy cover to take the Bitcoin dust.
Despite Sunโs 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. โItโs definitely a crime to convert customer funds for personal use,โ Verstein said.
During interviews, not a single former employee believed Sun would be held personally accountable for his pattern of malfeasance. A majority seem to believe he exists beyond the fingertips of American law.
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 havenโt 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.
One former Poloniex employee thought Sun had found a way to live in the liminal shadow of the law: โJustinโs tolerance for risk is absurdly high. Like, absurdly high. And I donโt know if itโs because he knows more than I do, like he just believes fully in his bones that heโs set up legally to protect himself.โ
It was during a meeting about a legally risky business decision that Sun hinted how heโd truly protect himself. A former employee was present. โWhatโs the big deal?โ Sun asked. โThe worst thing may be that I will never come to the US anymore.โ
All along, it seems Sun had been paving another escape route.
Former employees told me Sun was fixated on one island nation. In 2018, Sun sent a Tron employee to a blockchain conference in Malta, where they joined a VIP party inside the presidential palace. Caviar and champagne were served beside a prodigious swimming pool with twinkling string lights overhead. There, surrounded by waiters, the mingling crypto glitterati, and business reporters, Tronโs representative met Maltaโs then-president, Marie-Louise Coleiro Preca. The meeting was perfunctory, but she told Tronโs emissary, โWe welcome Tronโs investment in the Maltese economy.โ
The next day, the Tron employee went to the offices of Maltaโs minister economy and industry, Silvio Schembri. They sat together in a conference room. The emissaryโs goal was to orchestrate a one-on-one meeting between Sun and the countryโs former prime minister, Joseph Muscat, who has been accused of corruption. At the preliminary meeting with Schembri, the finance minister said Sun โneeded to invest first.โ
Sun invested โ in secret. At the time, Malta was infamous for essentially selling citizenship to wealthy individuals around the world for approximately $1 million, so long as they established residence on the island. The passport sale process is officially called โThe Individual Investor Programme.โ
This 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.
(Maltaโs government did not respond to a request for comment. Silvio Schembri did not respond to a request for comment either.)
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. 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 companyโs founding couldnโt say whether it conducted any meaningful business. According to them, Sun made zero commercial investments that might have stimulated the Maltese economy.
Meanwhile, Sun wired thousands of dollars to lawyers assisting him with his citizenship application. According to a prominent Maltese immigration lawyer, an โindividual investorโ is โrequired to contribute at least โฌ650,000 to Maltaโ in order to qualify for citizenship. Itโs unclear exactly how Sun made his contribution. Sun received his residency card for Malta, and in 2020, his Maltese company, Tron Limited, dissolved.
In some ways, Sunโs Maltese citizenship isnโt 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 Sunโs relationship with Malta. According to multiple Tron employees, Sun made two additional โฌ50,000 โinvestmentsโ in Malta. He had applied for citizenship for his father and mother.
Sunโs desire to bring his parents along suggests Malta could be his final destination if he gets caught in the crosshairs of regulators in the US or China. The other nations he claims paper allegiance to seem to serve more fleeting interests. After all, if you donโt live in a place, you donโt owe it anything.
Sun is something of a connoisseur of bank accounts. When Sun said he would chase citizenship for Guinea-Bissau, he urged a worker to start opening bank accounts there if it worked out. In the United States alone, he controls at least 13. When he opened a checking account at First Republic Bank, he was vague about his occupation, saying he was a technology services provider, and told a former employee never disclose to his cryptocurrency work to bankers. He also told them that banks froze his money so frequently he needed to spread his fortune across numerous accounts. The employee believed Sunโs bank account strategy was designed to avoid becoming ensnared in anti-money-laundering laws. For cryptocurrency moguls like Sun, cashing out vast sums of crypto can be an intractable problem. The traditional financial system has historically steered clear of cryptocurrency.
Many of Sunโs bank accounts could just be waypoints for moving money. As a former employee who knew about Sunโs banking speculated, โIf he has to cash out all his cryptocurrencies, he has to do it outside both the US and China,โ where theyโre closely scrutinized or banned outright.
โEvery billionaire, thatโs all they think about: tax evasion, tax optimization.โ
According to another former employee, Malta was not just a physical escape route but a monetary one. Citizens of Malta have access to banking throughout most of Europe. Allegedly, Sun urged an employee to submit applications to open eight bank accounts there. A potential explanation for Sunโs excessive number of bank accounts came from a former close associate of Sunโs, who told me he looks for ways to pay as little in taxes as possible. As one former employee succinctly put it, โHe thought taxes were stupid.โ As the close associate of Sunโs explained, โEvery billionaire, thatโs all they think about: tax evasion, tax optimization.โ
Multiple former employees told me that Sun can never return to China. Sun dodged the ICO ban, and in the midst of the trade war, he ignored the Chinese authoritiesโ attempts to contact him and demand he abandon a highly publicized lunch with Warren Buffet (to which he also invited President Trump). In retaliation, the Chinese authorities detained six senior Tron employees and tried to sully Sunโs name in the press with corruption allegations.
It seems Sun then began making amends to Chinese officialdom. In China, many citizens are required to read communist writings inside a smartphone app called โStudy Xi, Strong Nation,โ which is a pun in Chinese alluding to its intellectual father, Xi Jinping. It usually features doctrines of the communist party, but recently, the app published a piece about blockchain technology written by Justin Sun. 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 back to China, possibly out of self-preservation.
The sudden turn in Sunโs relationship with China seemed inexplicable. After all, the authorities had alleged he was corrupt. But thereโs evidence he may have reconnected with the Chinese authorities in secret. The strange story begins with a distressed phone call.
Not long after Sun first arrived in San Francisco, he disappeared for months and was completely incommunicado. Eventually, an employee got a hold of him and asked where he was. โIโm in the forest with this lama,โ he said. (The term โlamaโ is often reserved for Buddhist spiritual leaders.) โYou canโt be bothering me right now,โ Sun went on. โYou canโt understand what kind of pressure Iโm under from โleaders,โ and a lot is on the line.โ
This didnโt seem to be some wavy spiritual retreat attended by Silicon Valley tech founders. As the employee pushed Sun for more details, he started to crack, his voice filled with an assertive but desperate stress. โYou donโt understand. Iโm a slave. My time is not my own time; my body is not my own.โ He kept repeating that he needed to please โleaders.โ
When Sun returned to San Francisco from his visit with the โlama,โ he ordered an employee to send two Google Fi phones as a favor to someone at a Beijing address. โMake sure this leader is taken care of and gets what he wants,โ he said. The recipient was called โBrother Rainbow.โ
An employee learned that Brother Rainbow wanted the Google Fi phone to read news normally censored by Chinaโs so-called โGreat Firewall.โ The former employee insisted that Sun has a powerful Chinese contact who can protect him, and they think Brother Rainbow plays a part.
The Google Fi phones were sent to Brother Rainbow at an address, which, according to satellite images, is a residence within the so-called Zone 1 of Beijing โ the ancient downtown widely known to be reserved for government officials and celebrities. 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.
Eventually, I obtained Brother Rainbowโs phone number. The same number appears in a dark web database of hacked Chinese phone numbers and personal information and identifies the owner as Luo Dan. The phone number also matches Luo Danโs 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.
In a since-deleted post on Weibo, the Chinese equivalent to Twitter, an official from Chinaโs National Committee Consultative Congress said that Luo Dan is a special assistant to the Panchen Lama, the second holiest figure in Buddhism behind the Dalai Lama. But unlike the Dalai Lama, who lives in exile, the Panchen Lama was installed by the Chinese Communist Party and is influential in Beijing.
Part of Luo Danโs WeChat presence is defined by incessantly posting about the Panchen Lamaโs political appearances. While Luo Dan may be an access point to influence for Sun, itโs unclear what Luo Dan has gained from the relationship, other than possibly two Google Fi phones he can read the news with.
I spent a week calling his number at the same time every day. It rang, but no one ever answered.
If Sun truly curried favor with someone powerful inside the Chinese government who could protect him, he might have been wise to do so.
Just before Christmas, one former employee got a call from their apartment buildingโs front desk. โThe FBI are coming,โ they said. The former employee was shocked: โWait, did you say the FBI, FBI?โ
The former employee wasnโt home, but about 10 minutes later, the FBI called. The agent on the other end arranged to meet them at a restaurant that serves dessert in New Yorkโs Koreatown. The former employee had a friend shadow them to the meeting in case it was a hoax by someone dangerous. The former employee stepped into the restaurant, bought a puff pastry, and sat down.
A man in a dark jacket and jeans walked in and held his wallet up to the employee at the front of the restaurant, allowing the billfold to fall open to reveal their identification. They waved him through, and he sat down at the former employeeโs table. He identified himself as an agent from the IRS. He said an FBI agent was also coming, but they were still looking for parking.
While they waited, the IRS agent told the former employee they were investigating Justin Sun but didnโt 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. They even called Sun an โIRS criminal,โ the former employee said. The agents handed over a letter asking the former employee to forward them information relevant to their investigation and listed a court date, remarking, โIt sounds like you really want to help us.โ To which the former employee said, โOh yeah, because I want to screw him.โ The agents, amused, said they had heard that before.
When people surrounding Sun lost track of right and wrong, it made it easy for him to blithely escape without consequence.
Other employees who worked for Sun have received grand jury subpoenas. The prosecutorโs office from the Southern District of New York, which normally handles financial crime on Wall Street, is searching for criminal evidence against Justin Sun.
The investigation is being led by the FBI. Sun has already retained a top-flight whitecollar defense lawyer named Telemachus Kasulis, who used to prosecute fraud for the US Attorneyโs office. (Kasulis did not respond to a request for comment.)
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. But that could be futile. As the source pointed out, any number of Sunโs employees may already be cooperating with the government. โTheyโve kept this close to the vest for a long time,โ they said.
As the dragnet closes in around Sun, the grand jury is exploring a long list of potential charges. According to the subpoena (one of which was shown to me), they are: wire fraud, conspiracy or intent to commit wire fraud, swindling, money laundering, spending the spoils of a criminal enterprise, failure to register a security and lying about it, aiding and abetting a crime, 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 welcomed tips on financial crimes. The FBI and US Attorneyโs Office for the Southern District of New York did not respond to requests for comment.)
Sun left the States right before the pandemic struck and has never returned.
Cryptocurrency is full of colorful personalities and idealistic people who want to push the possibilities of finance. โI think there are a lot of people who really believe in the power and promise of crypto. And in a lot of ways, itโs a really sort of generous, giving community,โ a former employee who worked closely with Sun explained. โI think that makes you too trusting. And I think con artists everywhere can spot an easy mark. And unfortunately, the crypto community is just awash in easy marks.โ
These โeasy marksโ are not just everyday investors โ many are the people who work in crypto. A combination of โdelusional optimism,โ as one former employee described it, and a lack of legal guidance from regulators has allowed an atmosphere of anything-goes to fester. There were employees at Poloniex who were unsure whether Sunโs Bitcoin dust heist was illegal or not. When people surrounding Sun lost track of right and wrong, it made it easy for him to blithely escape without consequence.
Sunโs endgame is unclear. The past two years, heโs spent millions on art and NFT auctions, bagging a $500,000 digital image of a rock on the one hand and a $78.4 million sculpture by Alberto Giacometti on the other. He also revealed that, for a cool $28 million, he won Blue Originโs auction for a seat on one of its craft destined for space.
Sun also announced heโs now Grenadaโs ambassador to the World Trade Organization, where he says heโll advocate for favorable cryptocurrency policy. Because of the new title, one of his senior employees issued proper guidance to workers on Slack for how to correctly refer to Sun as โhis excellency.โ Former employees speculated the ambassadorship is a play for diplomatic immunity. But so far, heโs most notably used his public office to promote Tron. Sun met with Russiaโs representative to the WTO after their military invaded Ukraine and tweeted, โWe discussed humanitarian use case of how blockchain like Bitcoin/TRON can be implemented for Russian civilians who lack access to financial payment system.โ The tweet was later deleted.
(A spokesperson for the WTO said they were not aware of this event and thus had no comment. They also said the WTO has no right to bar any representative from meetings and they had no further comment.)
If the United States does indict Sun, it has active extradition treaties with every country I learned he has citizenship for, with the exceptions of China and Guinea-Bissau โ if the claim he made to a former employee that he bought citizenship there is true.
Over the past year, the international community has signaled theyโre fed up with various small nations serving as legal trapdoors for tax avoidance and financial crime. Itโs hard to imagine Sun will be able to stay one step ahead forever, though itโs perhaps still possible.
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. The employee speculated without hesitation.
โIf he breaks so many laws at such a rapid pace, itโd be impossible for anyone to catch up to him.โ
So far, no one has. And so far, itโs always worked.