Evading North Korean Sanctions 101 – Crypto Critics' Corner
Today Bennett and Cas talk about the unfortunate tale of Virgil Griffith, who was recently sentenced to over five years in prison for helping North Korea attempt to evade US sanctions.
The story is absurd for a number of reasons, including, but not limited to:
• generally, as a rule of thumb, don't evade US sanctions
• if, indeed, you plan on continuing with your sanctions evasion plan, don't write it down
• the US sentencing and prison system isn't fair
Here's some of the documentaries mentioned:
A State of Mind: https://vimeo.com/ondemand/astateofmind
Secret State of North Korea: https://youtu.be/N-cX1d4BSCI
This episode was recorded on Tuesday, April 12th, 2022.
In this episode Cas Piancey and Bennett Tomlin discuss the sentencing of the former Head of Special Projects for the Ethereum Foundation Virgil Griffith who was helping North Korea evade sanctions.
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English transcript:
Cas Piancey: Welcome back, everyone. Cas Piancey: I am Cas Piancey, and I am joined as usual by my partner in crime, Mr. Cas Piancey: Bennett. Cas Piancey: Tomlin, how are you today? Bennett Tomlin: I'm doing well. Bennett Tomlin: How are you, Cas? Cas Piancey: I'm doing good. Cas Piancey: We're are talking about guess to me what was the biggest news of the day, which was the sentencing of Virgil Griffith. Bennett Tomlin: Who was he was a head of special projects and a senior researcher. Cas Piancey: So quick backstory for anyone that just doesn't know the facts so that we're not throwing you into something totally unknown and incomprehensible. Cas Piancey: Virgil is this guy who's quite fluent in cryptocurrencies Ethereum particularly. Cas Piancey: And basically he took a trip to North Korea to show them how to evade sanctions. Cas Piancey: I mean, that's really what it boils down to. Cas Piancey: And that pretty much sums it up. Cas Piancey: He kind of bragged about it and then they went after him. Cas Piancey: So we'll get into that a little bit more. Cas Piancey: But I want to start this off. Cas Piancey: I don't usually do this, but I want to start this off because North Korea is something I've been obsessed with for a very, very long time. Cas Piancey: There's a huge South Korean population here in Los Angeles. Cas Piancey: So I grew up around, like a lot of my best friends growing up in all the schools that I attended were South Korean people. Cas Piancey: So I've always been really interested in that conflict. Cas Piancey: And it is a crazy story. Cas Piancey: So I just want to quickly recommend two documentaries to everybody. Cas Piancey: The first one is called A State of Mind, which I'll leave a link in the show notes. Cas Piancey: I think you have to pay for it. Cas Piancey: Unfortunately. Cas Piancey: There might be a YouTube video that you can find, but I'm not going to link to it, so good luck. Cas Piancey: Otherwise, yeah. Cas Piancey: A State of Mind is a documentary that kind of follows. Cas Piancey: There's an event in North Korea called the Mass Games that are put on. Cas Piancey: I don't know if it's every year or every four years. Cas Piancey: It might be every four years. Cas Piancey: And they're the largest event in the world. Cas Piancey: And they're put on for the leader, one of the Kims, whoever that Kim is at the time. Cas Piancey: And this documentary follows two young North Korean girls who are gymnasts and are trying to be like front of the Mass Games for the supreme leader. Cas Piancey: And what I really loved about that documentary was how it humanized a country and a people that I think we in America try our best to dehumanize, like they're just pure evil. Cas Piancey: Everything about North Korea is bad. Cas Piancey: There can't be human beings there. Cas Piancey: So I think this does a really good job of comparing some of the things that they do with the things that we do. Cas Piancey: They have like a Pledge of Allegiance. Cas Piancey: Of course, it's to the Kims, but I remember doing that as a kid. Cas Piancey: I'm sure most of everybody in America remembers having to do the Pledge of Allegiance every morning in school. Cas Piancey: And yeah, their dreams felt so similar to the dreams of American children, which the best way to humanize any evil nation state is to just talk to kids because they're just trying to live their best lives. Cas Piancey: They're not like us with our weird evil intentions and stuff. Cas Piancey: And by us, I just mean adults. Cas Piancey: I'm not talking about cryptocurrency scorner in particular, though. Cas Piancey: That's a whole other tale. Cas Piancey: But yeah. Cas Piancey: So I highly recommend that if you just want to understand the humanity of what's going on in North Korea. Cas Piancey: But for a more typical understanding, if you don't know anything about what happens in North Korea, about the concentration camps, if you don't know about how horrible the Kim regime has been, there's a documentary called Secret State of North Korea. Cas Piancey: It's by Frontline PBS. Cas Piancey: You can find it on YouTube. Cas Piancey: They made it, I think, two or three years ago. Cas Piancey: It's up to date. Cas Piancey: And as far as the US audience is concerned, I think it's pretty fair regarding at least the negative aspects of the Kims. Cas Piancey: But we're talking about North Korea right now because of Virgil Griffith and what happened. Cas Piancey: Why don't you give them Fuller explanation, Bennett, of why he was sentenced to over five years in prison today? Bennett Tomlin: Yeah, it's really an interesting story. Bennett Tomlin: And you mentioned the conference already, but there was this whole big lead up to the conference where you could tell that he was trying to lay the groundwork to outright help North Korea evade sanctions. Bennett Tomlin: And it seems to be rooted in his ideological belief that these sanctions themselves are unethical or unjust. Bennett Tomlin: And so evading them, even if illegal, is a moral thing to do. Bennett Tomlin: And I can certainly imagine that argument, but I don't think documenting it in writing as thoroughly as he did is a prudent decision. Bennett Tomlin: And that was one of the most interesting things to me, really, in reading the sentencing memo is how much of this stuff was just explicitly written down. Bennett Tomlin: At one point, he wrote, if you find someone in North Korea, we'd love to make an Ethereum trip to DPRK and set up an Ethereum node. Bennett Tomlin: And when questioned whether the plan made economic sense, his response was, it does actually. Bennett Tomlin: It'll help them evade or it'll help them circumvent the current sanctions on them. Bennett Tomlin: Like even from the beginning. Bennett Tomlin: Well, before this conference was even planned, his stated goal was to help North Korea evade sanctions. Bennett Tomlin: And he just continues to do this in conversation after conversation like he had this one British friend who does tours of North Korea, who he was communicating with and who the Department of justice got the communications for. Bennett Tomlin: And he was talking about shipping in a mining rig and possibly helping them set up a cryptocurrency exchange and all of these different things, repeatedly referencing the fact that these things would be helpful in evading sanctions. Cas Piancey: Yeah. Cas Piancey: He puts it in writing often. Cas Piancey: I think being a criminal is not something we urge anyone to do shouldn't go about breaking laws, even generally, if you disagree with them, it's best to not break them if you can avoid it. Cas Piancey: But if you are going to do that and you are going to break the law on a nation state level, my honest recommendation is at least don't f****** put it in writing, please. Cas Piancey: Holy. Cas Piancey: Good Lord. Cas Piancey: This is, like, just incredible. Cas Piancey: Yeah. Cas Piancey: The things that are being another benefit of an Ethereum note in DPRK is it will make it possible for them to avoid sanctions on money transfer. Cas Piancey: This seems like something that would interest them. Cas Piancey: Why are you putting this in writing? Cas Piancey: What if they're funding their drug trade and nuclear program with crypto? Cas Piancey: Griffith replied, Unlikely, but they'd probably like to start doing such. Cas Piancey: So why are you helping them, bro? Cas Piancey: What are you doing? Cas Piancey: It's some real kind of megalomaniac behavior. Cas Piancey: When this person is recognizing the they are recognizing all of the problems with what they're doing, the fact that what they're doing is illegal and easy for them to get caught doing as much. Cas Piancey: And then when you see these pictures that are getting shared on social media afterwards where he says stuff like, Avoid sanctions, Yay, happy face. Cas Piancey: These people are really, really smart, and I don't doubt that. Cas Piancey: Actually. Cas Piancey: I'm sure this guy is incredibly intelligent, and I'm not going to try to deny that in any sense, but I think he's obviously really smart with cryptocurrencies. Bennett Tomlin: It's interesting you said that he seems like a megalomaniac, because part of the defense strategy they settled on was the fact that while he was in jail leading up to the sentencing, a psychiatrist diagnosed him with narcissistic personality disorder and obsessive compulsive personality disorder, and they tried to use that as extenuating circumstances that should affect his sentencing. Bennett Tomlin: So in many sense, he is a megalomaniac, right? Bennett Tomlin: He's got narcissistic personality disorder, and he does clearly become fixated on certain ideas, even when those ideas repeatedly get pushback from people saying, if you do this, it seems like you'll be breaking the law and you'll go to prison. Cas Piancey: So we'll get back on track here. Cas Piancey: But basically throughout this memo, which we will also link to, this sentencing memo from the US government, basically lays out what he went and did while he was in North Korea, which was to repeatedly tell them, here's how you can evade sanctions with the blockchain. Cas Piancey: Here's how to use cryptocurrency to further gain control over your population. Cas Piancey: That stuff is what actually grosses me out is the stuff where he's talking about, like, the Central Bank of North Korea being able to control their money even further and control the population with the money even further, using it will be even better for them. Cas Piancey: That goes against every principle that these libertarians and voluntarists are supposed to be about. Cas Piancey: So I don't know. Cas Piancey: All of this is like, it's incredibly disturbing to me, really. Cas Piancey: It's not even about going and help. Cas Piancey: I guess you could argue this is for any government contractor at all who is going and working with the US government or whomever. Cas Piancey: I get that there's a grossness to doing that work regardless. Cas Piancey: But helping the Kims is really not good. Bennett Tomlin: And there was specifically a part of his work there that I thought was especially bad. Bennett Tomlin: And he describes how basically North Korea could put a module on a missile, launch the missile, and then have an Oracle solution that waits to see if sanctions get lifted. Bennett Tomlin: If sanctions get lifted, the missile deactivates harmlessly. Bennett Tomlin: If they don't, the US or South Korea gets bombed. Bennett Tomlin: Right. Bennett Tomlin: And he talks about this both at the conference. Bennett Tomlin: But then the other thing that struck me was he had this later conversation with someone identified as individual one to talk about what actually setting up this type of Oracle solution would look like. Bennett Tomlin: And he also discusses with the same individual one who I think might be Vitalik, but we don't actually know that for certain. Bennett Tomlin: He discusses with individual one how North Korea wants his help to set up an Augur prediction market contract where any journalist that comes in will need to make a deposit. Bennett Tomlin: And if there's unflattering coverage of North Korea from this journalist, then they'll lose their deposit. Bennett Tomlin: He is specifically helping enable some of the gross abuses of the Kim. Cas Piancey: Yeah. Cas Piancey: There is a part that was in there where a friend of his specifically says, like, oh, did they take you on a tour of the concentration camps, too? Cas Piancey: And he's like, oh, well, they acknowledge that they exist. Cas Piancey: And you're just like, isn't that enough? Cas Piancey: Shouldn't that be enough for you to be, like, questioning whether or not this is a regime that you should be doing business with? Cas Piancey: I mean, they have concentration camps that they admit to. Cas Piancey: Granted, I've been really obsessed with North Korea for a long time. Cas Piancey: So the idea of visiting North Korea is actually something I've always wanted to do. Cas Piancey: I get the desire to go visit the place. Cas Piancey: I don't get the desire to try to money launder and tax evade and sanction evade and do all this other stuff to help a horrible regime. Cas Piancey: Like why it's like helping them on a grand scale versus, like, I guess if I go as a foreigner and I'm a tourist, that's also helping them on a smaller scale. Cas Piancey: But I can't imagine. Cas Piancey: I just can't imagine. Cas Piancey: And like you said, I mean, I guess if a psychiatrist gave him these diagnoses, I'm not going to question that. Cas Piancey: And I think mental illness sucks. Cas Piancey: Clearly, this is not a person who's thinking entirely rationally throughout this stuff. Cas Piancey: I do believe that. Bennett Tomlin: And that's kind of the tension with this case. Bennett Tomlin: Right. Bennett Tomlin: He clearly intended to violate the law. Bennett Tomlin: He specifically discussed enabling some of these pretty gross abuses of the Kim family. Bennett Tomlin: Right. Cas Piancey: And he talks about being able to get off like, oh, they won't do anything. Cas Piancey: The first time you do something like this. Bennett Tomlin: Yes. Bennett Tomlin: And he specifically made plans to violate the sanctions. Bennett Tomlin: Right. Bennett Tomlin: And had like, a counter party who was going to help him transmit the funds so they could do this. Bennett Tomlin: And you can see where his moral argument is coming from. Bennett Tomlin: And it makes sense to me insofar as sanctions often do end up being kind of broadly targeted, they hurt a lot of innocent people. Bennett Tomlin: Right. Bennett Tomlin: And so it's possible to construct the moral argument that the sanctions themselves are unjust. Bennett Tomlin: But he wasn't just specifically trying to help the citizens of North Korea. Bennett Tomlin: Right. Bennett Tomlin: He was working with this regime and trying to give them the ability to launch a missile connected to these oracles to try to get more artillery in the DMZ and then to try to make it so journalists can't write bad things about them. Bennett Tomlin: And so he's not just worried about the populace. Cas Piancey: Yeah, I hear that. Cas Piancey: And I agree with it as well. Cas Piancey: But I do think part of the argument as well seems to be that he didn't give them anything. Cas Piancey: He didn't supply them with the stuff they needed to do the things that he said they could do with cryptocurrency. Cas Piancey: Reflecting on that did give me pause and made me think that I understand he gave them ideas. Cas Piancey: He certainly gave them a lot of ideas. Cas Piancey: And as an expert, hearing those ideas from him probably like maybe push them in the direction further than they had been before. Cas Piancey: But it's hard for me to rationalize him not making like, an actual transaction, basically getting five years for talking about how they can use OTC desks and stuff, which no s***. Bennett Tomlin: Yeah. Cas Piancey: Like, of course they can use OTC desks. Bennett Tomlin: Yeah. Bennett Tomlin: I think as is often the case in the United States, the sentencing seems disproportionate. Bennett Tomlin: And I think it's clear that in the middle of this, Russia Ukraine conflict was perhaps the worst political time for his sentencing to come up. Cas Piancey: Definitely. Bennett Tomlin: And they even kind of talk about that in the memo about how they're almost trying to make an example of him. Bennett Tomlin: And it does seem disproportionate to what he was able to successfully accomplish. Cas Piancey: I think what generally happens maybe I'm not a lawyer, so I have no idea. Cas Piancey: But I think people usually get time off for good behavior. Cas Piancey: And he's not been accused of previous stuff. Cas Piancey: It's a nonviolent crime. Cas Piancey: So you hope to see that several of those years get cut off his sentence. Cas Piancey: But I do think that, like you said, it's way over the top. Cas Piancey: And I think something that I half don't want to bring this up, but I half feel like we need to is that he's like a well to do white kid and that he expected to be able to just kind of not go to prison, and that there might be an argument that if he was any other race or gender perhaps, or any other number of minority type rights that he could be facing even more time in prison than right now and certainly wouldn't have ever thought like, oh, I can get away with it the first time. Cas Piancey: That's a very privileged mindset to be in. Bennett Tomlin: What you're saying is making me think about how since his indictment, there's been a group of people in the cryptocurrency community who've tried to almost lionize him, make him like a hero, a martyr for some grand cause. Bennett Tomlin: And that doesn't really seem consistent with the facts of this case. Bennett Tomlin: He wasn't some grand hero. Bennett Tomlin: And even if it was at least in part rooted in a belief about the morality of sanctions, there are still talks in his messages about how the business that partners with him to build this will end up making these profits, and they could set up this exchange and do all these things. Bennett Tomlin: So there's absolutely, like, this bit of selfishness that runs through it. Bennett Tomlin: And then when his bail was shortened and he was denied bail initially, there was a bunch of people who reacted to that as if it was unthinkable. Bennett Tomlin: Like the messages, too. Bennett Tomlin: You hear him discussing his plans to get a second passport and how he tried to renounce his US citizenship. Bennett Tomlin: And it's like all the things he's doing talking about funneling money to China and Singapore, getting this other passport, renouncing his US citizenship are things that would make him immediately a flight risk. Bennett Tomlin: And it seemed like because he had already been deified, that many people on cryptocurrency, Twitter and in the community were aghast, that he was initially denied bail. Bennett Tomlin: And he ended up on bail for ten of the months that he was held so far. Bennett Tomlin: But for a period, he was denied it because he was perceived as a flight risk. Bennett Tomlin: Not without reason, in my mind. Cas Piancey: Yes, I did see people criticizing the judge for sentencing him to this. Cas Piancey: And while we might disagree with 63 months as a rational time period, time frame for, like we said, not having done, there's no money, there's no money laundering. Cas Piancey: There was no like, there was no actual sanctions evasion in terms of, like, he didn't bring a bunch of stuff with him to North Korea and give it to them or something like that. Cas Piancey: It was sanctions evasion in terms of you shouldn't have been there. Cas Piancey: The State Department literally told him, you cannot go and do this, which I think is actually an important point. Cas Piancey: The State Department denied him that trip. Cas Piancey: They said no. Cas Piancey: And then he still went. Cas Piancey: And yeah, he did clue them into some ideas that I'm sure China will already help them out with as soon as they are interested. Cas Piancey: So I do think that it's harsh, but criticizing the judge for doing altogether, he's paying $100,000 and five years was the smallest time that the prosecutor was asking for. Cas Piancey: So it's a hefty sentence, but it isn't the worst that he could have gotten. Cas Piancey: And really criticizing the judge for handing down what's based on the law, a relatively fair sentence, I think is not fair and not who should be being criticized here. Cas Piancey: You can criticize the US prosecutor. Cas Piancey: You can criticize the laws and the way they're put in place and how they attack people who they choose to go after and why. Cas Piancey: I'm sure there's dozens of people who have actually contracted with sanctioned countries who are not going to prison right now just because they've been smarter about it or know the right people. Cas Piancey: It's not fair in its totality, but don't attack the justices and the judges for what they're doing. Cas Piancey: It was a weird flex. Bennett Tomlin: Yeah, it seemed to be in line with sentencing guidelines. Bennett Tomlin: And US sentencing guidelines were often unnecessarily cruel. Bennett Tomlin: But that's a broader issue. Bennett Tomlin: Virgil is just a really strange character. Bennett Tomlin: Sorry, did you catch the part in the sentencing memo where he admitted that he hadn't been filing his tax returns for several years? Bennett Tomlin: One of his friends text him and goes, if you had this conversation with the FBI, double check your taxes. Bennett Tomlin: That's often how people end up getting in trouble. Bennett Tomlin: And he goes, oh, my taxes are fine. Bennett Tomlin: Taxes won't be my issue. Bennett Tomlin: And then later to another cryptocurrency company, he goes, I discovered I didn't file a tax return for years 2015 to 2018. Bennett Tomlin: But, weirdly, the IRS hasn't contacted me about it. Bennett Tomlin: I'm considering just filing my taxes in 2019 and just pretend I had no one in 2015 to 2018. Bennett Tomlin: I know that's illegal, but I was basically a student in 2015 to 2017 doing post docs. Bennett Tomlin: I had less than 100K income on those years. Bennett Tomlin: I know this is illegal. Bennett Tomlin: It's a thing you should stop putting in writing. Cas Piancey: I actually want to just say this to our listeners, because what's illegal? Cas Piancey: There is not the fact that you can misfiling taxes. Cas Piancey: You can screw that up and you can actually just pay fines on it. Cas Piancey: Right? Cas Piancey: That is not the illegal part. Cas Piancey: The illegal part that he's talking about is pretending he wasn't working at all. Cas Piancey: That is absolutely illegal. Cas Piancey: If you are late, just report it. Cas Piancey: Just file your taxes. Cas Piancey: Don't do what he was suggesting he should do. Bennett Tomlin: My understanding is the IRS will even like, if the fines is large will enter into, like, a payment plan with you and do stuff like that, like, they want to collect it today. Cas Piancey: They want to get paid. Cas Piancey: They don't want you in jail. Cas Piancey: They want to get paid. Cas Piancey: They're reasonable debt collectors at the end of the day. Cas Piancey: So it's like, please, I'm begging our listeners. Cas Piancey: I know they're going to call me a bootlegging statist or something. Cas Piancey: Please, I'm just begging you. Cas Piancey: I'm looking out for your best interests. Cas Piancey: If you didn't file them like he didn't for several years, just file them now. Cas Piancey: Just file them and pay the late fees and that'll be the end of it, I swear. Cas Piancey: Please, you got to do it you've got to do it. Cas Piancey: It's so much better than the alternative, truly. Cas Piancey: You don't want to renounce your citizenship and go through the bullshit. Cas Piancey: You really don't. Cas Piancey: Yeah. Cas Piancey: So it's been a weird one. Cas Piancey: This has been a weird one. Bennett Tomlin: Man, because if you're traveling for a business conference and the people at the other end of the conference are convincing you that it'll be okay because they won't stamp your passport, pause for a moment. Bennett Tomlin: Pause for at least one moment and think. Cas Piancey: I am sure it worked for thousands and thousands of Americans every year. Cas Piancey: I'm sure it was totally fine. Cas Piancey: And if you're a tourist who just wants to go visit a place that you're not supposed to go to, I'm much more empathetic with that than whatever the f*** this was, which is just craziness. Cas Piancey: Again, the basic s***, don't do illegal stuff. Cas Piancey: If you're going to do illegal stuff, don't document it. Cas Piancey: Don't send it through text messages and emails. Cas Piancey: Don't send it to like six different people. Bennett Tomlin: Don't get your picture taken in a North Korean uniform next to a whiteboard that says no sanctions. Bennett Tomlin: Yay. Cas Piancey: I don't know how we have to explain this to anybody, but apparently we do. Cas Piancey: So please don't do crime. Cas Piancey: And if you do, don't document your crime. Bennett Tomlin: Otherwise you might have to reveal your identity. Cas Piancey: Yeah, here we are. Cas Piancey: Full circle. Cas Piancey: But I think it sucks. Cas Piancey: I don't feel good about what's going on with Virgil. Cas Piancey: I'm not like, running around in circles going like, Ha ha, got you. Cas Piancey: It's a bummer. Cas Piancey: I wish he didn't have to face this much time. Cas Piancey: I'm sure I would never like this kind of person if I met him. Cas Piancey: He sounds very full of himself, but I also don't think anybody should go to jail for something so at least not spend five years in jail or prison for something so seemingly trivial. Cas Piancey: That's my last take. Cas Piancey: I don't know if you have anything else you want to add. Bennett Tomlin: But largely the same thing. Bennett Tomlin: This guy clearly wasn't a hero, was clearly doing things he knew he shouldn't have been doing. Bennett Tomlin: But yeah, it does seem unfortunate that he ends up spending five years in a federal prison because he shared information and described things that were accurately possible with the technology. Bennett Tomlin: It's not ideal. Cas Piancey: It's f***** up on all ends. Cas Piancey: Let's not help North Korea and the Kims, but also let's not give jail time to people who just talk theoretically about stuff, or at least don't give them long jail sentences. Cas Piancey: It's really silly. Cas Piancey: Anyway, that's going to do it. Cas Piancey: For another episode of Crypto Critics' Corner. Cas Piancey: I am no longer on probation, but Bennett said that I won't be able to receive a paycheck for the next six years, which is like a weird timeline. Cas Piancey: It's a long timeline, but I guess he said I still get to keep my my equity, so I'm cool with that. Cas Piancey: Whatever. Cas Piancey: Leave a high rating or review. Cas Piancey: If you think Bennett Tomlin deserves. Bennett Tomlin: It. Cas Piancey: His paycheck is the one that actually depends on it.
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