Crypto Developer Gets 5-Year Sentence for Helping N. Korea Skirt Sanctions

Here’s a tip: If you’re going to go give a speech on crypto at a conference run by a country under stiff sanctions, maybe don’t post your visa on Twitter. Especially after the State Department has denied you permission to.

Also, maybe don’t get photographed by an undercover FBI agent standing in front of a whiteboard upon which you’ve drawn a smiley face and the words, “No sanctions yay.”

Which is what former Ethereum Foundation developer Virgil Griffith did on April 27, 2019, starting on a path that led Federal Judge P. Kevin Castel of the Southern District of New York to sentence him Tuesday (April 12) to more than five years in jail and a $100,000 fine.

In Griffith’s case the rogue nation in question was North Korea (DPRK), but with Russia under sanctions following its brutal invasion of Ukraine, it wasn’t a very good time to be asking for leniency.

Which is a point the assistant U.S. attorney representing the Department of Justice made to Castel, saying “Especially amid the Ukraine war, this sentence should send a message about not undermining sanctions regimes,” New York court watcher Inner City Press reported.

See also: Amid War in Ukraine, Crypto Regulation Refocuses on the Dark Side of Digital Assets

Castel agreed.

“Some say Mr. Griffith is being persecuted for promoting crypto,” he said. “But that’s not what this case is about. … It was intentional violation of sanctions, which are intended to avoid military conflict.”

Say What?

Griffith’s legal troubles began on Thanksgiving Day in 2019, when the Singapore resident was arrested at Los Angeles International Airport.

But the case really began in April, when the former head of special projects for the Ethereum Foundation flew to North Korea to speak at the Pyongyang Blockchain and Cryptocurrency Conference on the topic of “Blockchain and Peace” — a talk he later told the FBI covered only basic concepts about cryptocurrency, blockchain and smart contracts that was widely available online, the agency said in its 2019 complaint.

See also: PYMNTS Blockchain Series: What Is Ethereum? The Blockchain That Moved Crypto Beyond Currency

The Department of Justice had a different perspective, saying in a press release that Griffith “provided instruction on how the DPRK could use blockchain and cryptocurrency technology to launder money and evade sanctions … [it] focused on, among other things, how blockchain technology such as ‘smart contracts’ could be used to benefit the DPRK, including in nuclear weapons negotiations with the United States.”

It added that he continued to help North Korea after the conference, including assisting the regime in trading cryptocurrency in South Korea. On Aug. 6, 2019, an FBI agent testified, Griffith sent a text message “to a particular individual (‘individual-2’) that stated, in sum and substance, ‘I need to send 1 [unit of Cryptocurrency-1] between North and South Korea.’ In response, Individual-2 asked, in sum and substance, ‘Isn’t that violating sanctions?’ Griffith replied, ‘it is.’”

What’s a Virtue?

Despite that, and the overwhelming evidence that North Korean state hackers have been behind some of the largest cryptocurrency thefts — to the tune of more than $1.5 billion, including $400 million in 2021 alone, according to blockchain intelligence firm Chainalysis — Griffith’s case became something of a cause célèbre in the crypto world.

Read also: DOJ Charges North Korean Hackers With $1.3 Billion Crypto, Cash Theft

At least before all the details started coming out.

In late 2019, a “Free Virgil Griffith” petition was signed by several crypto luminaries, among the Ethereum creator Vitalik Buterin, who prefaced his support by saying the Ethereum Foundation had nothing to do with the trip.

Saying “geopolitical open-mindedness is a *virtue*,” Buterin wrote on Twitter at the time, “I don’t think what Virgil did gave DRPK any kind of real help in doing anything bad. He *delivered a presentation based on publicly available info about open-source software*. There was no weird hackery ‘advanced tutoring.’”

On April 12, Buterin had not tweeted about the sentencing.

Another Day

Griffith, who pleaded guilty on Sept. 27 last year after initially saying he intended to fight the charges, was sentenced to 63 months based on a plea deal on the charges of violating the International Emergency Economic Powers Act, which oversees sanctions. He could have faced 20 years in prison.

He’s probably lucky the deal was cut before the Russian invasion of Ukraine, as the Justice Department would likely not be so lenient.

The war and sanctions regime have refocused attention on the potential for cryptocurrencies like Bitcoin to be used to bust sanctions, and to help people under an oppressive regime or caught in a war zone to survive.

See more: Use in Ukraine Lends Some Luster to Crypto’s Dark Side in Senate Hearing

For his part, Griffith told the judge he had had a change of heart about sanctions, saying, “Watching Ukraine sanctions has shown me their value. I have been cured of my stubborn arrogance, and my obsession with North Korea. My career has been damaged. I’m sorry.”

The sentiment didn’t carry much weight with Judge Castel, who said, “Check out the photo of Mr. Griffith in a North Korean tunic writing on a white board, ‘No Sanctions, yay!’ And a smiley face. Virgil Griffith hoped to come home, to Singapore, as a crypto hero.”

He added, “Virgil Griffith has no ideology. He’ll play off both sides, as long as he is at the center.”