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The name Virgil Griffith was already quite well known before his appearance in Manhattan federal court. He did, after all, help develop the decentralized, open source blockchain Ethereum. But his appearance in court gave him extra credit for all the wrong reasons – and highlighted an issue worth noting.
Actions in North Korea
In April 2022, Griffith was sentenced to 63 months in prison for lectures he gave in North Korea. The sentence came after the developer pleaded guilty to conspiring to violate the International Emergency Economic Powers Act (IEPA) – the law at the heart of the US sanctions regime.
Prosecutors say Griffith helped the North Korean state by giving a presentation in its capital, Pyongyang, on how the digital currency could be used to both launder money and evade sanctions. This, the prosecutors said, was evading the sanctions of one’s own country in order to provide services to a hostile foreign power.
In this case, it appears that Griffith’s e-mails were the modern equivalent of the smoking gun. They showed the developer’s interest in expanding Ethereum to North Korea, his willingness to put up “internet/bribe” money for the cause, and Griffith’s belief that setting up decentralized networks could be a “mildly lucrative little business for whoever does it.” Prosecutors said Griffith anticipated problems with US sanctions and planned to pursue the project through Singapore, where he lived, or China.
US regulatory response
It is a case that has a number of “newsworthy” elements. It’s high tech, involves one of America’s greatest enemies, and has a pure, all-American tech star in the making at its center. But although the case is dramatic, it is not, I would say, a complete shock. Issues related to cryptography are relatively new in courtrooms in the US and elsewhere.
This is simply because cryptoassets are a fairly new phenomenon. But as the crypto sector grew and more individuals and organizations became involved, there was always the possibility that some would see the potential for illegal use. And that – if the authorities have their way – will always make more cryptocurrency investigations and prosecutions possible.
Crypto may be the new kid on the block, but the authorities – at least in the US – have noticed its arrival. Three weeks after the conviction of Virgil Griffith, the US Securities and Exchange Commission (SEC) announced that it will nearly double the staff responsible for protecting investors in digital asset markets.
The SEC’s Crypto Assets and Cyber team will see an increase in staff from 30 to 50, with many of the new faces being investigative staff attorneys, trial attorneys and fraud analysts. Senior figures at the SEC welcomed the appointments and called them subsequent — a clear indication that the regulator has both an awareness of the problems associated with the developing crypto sector and a desire to bring perpetrators to justice.
Need a global intervention?
The SEC’s actions are proof – if any were needed – that Virgil Griffith could be one of the first in a growing line of defendants before the courts for using crypto assets as a tool for illegal activities. But this has never been—and never will be—an issue unique to the US.
There is a need for the British police to take similar steps as in the United States. Over the past 12 months, the US has been increasingly vocal about the need to regulate crypto-assets – while also putting tools in place to crack down on those who use them for illicit means. But it should not be done in isolation.
Given that cryptocurrencies can cross borders in milliseconds, there is a clear need for a global effort to address these issues. The fact that Griffith’s case involves at least four countries is a sign of this. There seems to be, at least in some countries, a growing awareness of the problems posed by cryptoassets and the need to address them. The main question at this point is when and how such recognition of the situation turns into real, worthwhile action.
A coordinated worldwide response is needed to the illegalities that have affected the crypto sector. No one could dispute that. For a prominent figure to go to prison for his crypto-offenses is a significant achievement for the authorities. But Virgil Griffith, along with those who prosecuted him – and their colleagues around the world – will all know that, at least in theory, many more could and should face a similar fate.
Syed Rahman
Partner, Rahman Ravelli
Syed is widely recognized for his sector-leading and pioneering work on cryptocurrencies, having secured a number of notable legal champions representing institutions and individuals in such cases. In addition, Syed has significant experience in serious fraud, financial crime and multi-jurisdictional investigations and is skilled in civil and criminal cases involving allegations of corporate wrongdoing. Syed has significant experience advising corporate entities and their directors and officers in connection with investigations conducted by all major enforcement agencies. He has also built an impressive reputation in the area of tracing and asset recovery, with a respectable track record in international disputes requiring immediate assistance involving order freezing and the recovery of misappropriated assets.
Compliance with the law Crypto crime
