The suit offers no conclusive evidence of those ties, and the public money trail ends at Binance, a cryptocurrency exchange. By using a cryptocurrency called tether and routing it through Binance’s offshore exchange, Yu’s investors made it impossible to know the source of the funds. At the time of the transaction, Binance’s offshore operations were not adhering to American banking rules, according to the US government.
Brent Loudder, who oversaw electrical and plumbing work at the site, said contractors had issues getting paid. New York Times
Last month, Binance pleaded guilty to violating anti-money-laundering regulations, agreeing to pay more than $US4.3 billion in fines and forfeitures. At the heart of the federal case was Binance’s failure to comply with laws including the Bank Secrecy Act, obligating lenders to verify customers’ identities and flag suspicious money transfers.
Yu referred questions to Gavin Clarkson, a lawyer for BitRush, who said in an email that the company “complies with all required federal, state and local laws and regulations, including banking laws and regulations”. He said the claims made by Crypton, including that it was not paid for services at the mine, were “baseless and without merit”.
“BitRush is owed money, not the other way around,” he said. In a lawsuit against Crypton, BitRush alleges “gross negligence” and seeks $US750,000 in damages.
In Channing, the arrival of BitRush last year garnered a lot of attention, and some residents landed jobs constructing the mine, which was built next to an electrical substation.
One of them, Brent Loudder, is a judge, the town’s volunteer fire chief and the husband of the county’s deputy sheriff. Loudder, who oversaw the electrical and plumbing work for Crypton, said the contractors did not get paid until they protested by holding work stoppages. An electrical contractor, Panhandle Line Service, is also locked in a suit and countersuit with BitRush over pay.
Documents shared with The New York Times by David Huang, a lawyer for Crypton, reveal how BitRush planned to buy the Texas site: The seller, Outlaw Mining, would receive $US6.33 million in tether. Using tether, whose price is fixed at $US1, offered the anonymity of other cryptocurrencies without the price volatility of some of them. The purchase agreement listed a wallet address – a 42-character alphanumeric sequence – where the funds would go.
The records specified that $US5,077,000 was due at closing, and publicly available transaction records show that the wallet, registered to a crypto brokerage company called FalconX, accepted $US5,077,146 in tether around that time last year. The documents said $US500,000 in tether had already been paid as a deposit, with the remaining $US750,000 to come – also to be paid in tether – after BitRush took possession of equipment, supplies and materials at the site.
The source of the funds, however, was not publicly recorded and is known only to Binance, the exchange that handled the transaction. The agreement never specified exactly who would make the payment, and Clarkson said BitRush itself never sent or received any money through Binance.
FalconX “had no visibility into the origin of the funds,” Purvi Maniar, deputy general counsel for the company, said in a statement. “This illustrates why it is increasingly vital for centralised intermediaries in crypto to be regulated.”
It is an issue recognised by groups that analyse the blockchain, a digital ledger that records cryptocurrency transfers. “Once funds are sent to a centralised service on the blockchain, they can no longer be traced to the individual who sent it to that exchange without a legal process” such as a court order, said Madeleine Kennedy, a spokesperson for Chainalysis, a company that tracks crypto transactions.
Jessica Jung, a spokesperson for Binance, said that crypto wallets from three Binance accounts sent the tether payments and that all of them belonged to foreign nationals who were not US residents. “Binance.com does not have or serve any US customers,” she wrote in an email, adding that the site deploys “rigorous” procedures to verify customers’ identities.
Paying with tether is widespread in the bitcoin-mining industry. One miner in Arkansas said he used tether to buy millions of dollars of specialised computers made by a Chinese company. Another miner in Wyoming said he did the same. One of the benefits of those transactions can be avoiding sales and capital gains taxes.
One document shared by Huang identified some of the shareholders in BitRush at the time of the Channing purchase. After Yu, the biggest was an investor from IMO Ventures, a China-focused venture capital firm in San Mateo, California. Another shareholder was identified in the document as “Lao Yu,” which can translate as “Old Yu.”
The two people who signed the mortgage documents for Yu’s Manhattan apartment, Yu Hao and Sun Xiaoying, match the names of a married couple in China who own stakes in companies worth more than $US100 million, according to records on WireScreen, a company that provides Chinese business intelligence. A person named Sun Xiaoying is also listed as a BitRush director.
Clarkson, Yu’s lawyer, would not confirm the identities of the BitRush shareholders or Yu’s possible relation to any of them.
The founder of Outlaw Mining, Josey Parks, said in a phone call that he could not comment on his financial arrangement with BitRush because he was bound by a non-disclosure agreement.
“Jerry is a college student in the USA with a very wealthy family from what I was told,” Parks said later in a text message. “I don’t know of any of his investors or relation to foreign entities.”
This article originally appeared in The New York Times.
