Web3 Revolution Podcast: How The Verge's independent journalists investigate Sun Yuchen and his questionable business empire?

Web3Revolution
2022-04-20 15:55:52
Collection
How do we understand Sun Yuchen as a person? From him, we see speculation, bubbles, and even the worst parts of the cryptocurrency world. In the context of contemporary Chinese and American society, how do we understand him?

Podcast Guest: Chris Harland-Dunaway

Podcast Source: 《How this independent journalist tracked down the most notorious crypto mogul, Justin Sun, and his shady empire

Translation Contributors: JC, Alice Fang, Hana, and Chain Catcher

Introduction: The Web3 Revolution is an English podcast exploring the Web3 space, connecting the most cutting-edge participants, actors, innovators, investors, and KOLs in this social experiment through dialogue. You can subscribe and listen to the show on Xiaoyuzhou, Spotify, Apple Podcast, RSS, and other general podcast clients. This podcast is sponsored by Mask Network (Mask.io).

In this episode, host Hana (Twitter: Hanachanweb3) had an in-depth conversation with independent journalist Chris Harland-Dunaway from The Verge, discussing last month's popular article "The Verge's In-Depth Investigation: The Inside Story of Justin Sun's Regulatory Evasion," exploring the difficulties encountered during the investigation, reporting techniques, and Justin Sun's recent activities.

Here is the full text of this episode:

Hana: Who is Justin Sun? He is a well-known figure in the tech world, a cryptocurrency billionaire, a Chinese citizen who became Grenada's permanent representative to the WTO, who claims to be a disciple of Jack Ma, and the founder of the cryptocurrency platform Tron. This person spent $4.5 million in 2019 to bid for a charity dinner with Warren Buffett and ultimately had lunch with him.

On the Chinese internet, he is referred to as "Brother Sun/Sun Ge" ------ he often engages in a series of operations to harvest funds from victims and crypto investors. Recently, The Verge published an article titled "Justin Sun's Multiple Escapes." This investigative article about Justin Sun revealed a series of decisions and violations he has made over the years, including how he managed to manipulate the market and evade regulations in both China and the United States. Justin Sun has a large following in both countries, and after this article was published on The Verge, it had a tremendous impact, creating a seismic effect in the Chinese crypto industry. People discussed this article in various online communities. Every detail in the article was debated and verified before it was officially translated into Chinese, leading to many responses and even counterattacks.

One memorable quote from the article is, "If he breaks the law fast enough, no one can catch up with him."

How do we understand Justin Sun? From him, we see speculation, bubbles, and even the worst parts of the crypto world. In the context of contemporary Chinese and American society, how do we understand him? Today, we have invited the author of this article, Chris Harland-Dunaway, an independent journalist from The Verge.

Chris: I met a former employee of Justin Sun at a friend's house. While we were chatting, they began to tell me about their work. They talked about some crazy anecdotes related to Justin Sun, such as how he would yell and insult his employees. They also told me the whole story about the Buffett lunch incident. This was all new to me. They mentioned that people do not understand what really happens behind the scenes.

From a purely narrative perspective, as an outsider, it was extremely crazy and absurd. I wondered how much of it was true.

I first learned about Justin Sun in such a casual way ------ a powerful billionaire. From my conversation with this former employee, it seemed that Justin Sun mistreated his employees in a very bad way. I wanted to know what motivated him to do this. Typically, there are deep reasons why powerful people mistreat those they work with. The motivations for such behavior are buried deep in their hearts or their past. The more we understand Justin Sun, the better we can understand where this behavior comes from.

As I learned more about him, I began to talk to other former employees of his. The question that kept coming to my mind was, "How can he not stop doing these things?" He never seems to say, "Okay, that's enough. Maybe I need to back off." I wondered why these powerful people cannot stop themselves from doing ridiculous things. For me, understanding how a person gradually becomes who they are can attract readers' interest. This is a very clear workplace story: Who is abusing the employees? Who is oppressing them? I wanted to know more, and that's how it all started.

Hana: You turned a story shared at a dinner table into an astonishing investigation, and I can imagine the resistance you faced in the story. A lawyer said this story was an attempt to damage Justin Sun's reputation through bribery. I know you also interviewed many of his formal employees and gathered evidence from hundreds of pages of leaked documents. Perhaps you can tell us about the most challenging aspects of obtaining the evidence to complete this story?

Chris: The biggest challenge was that some people were very aware of important things they had personally experienced, but they didn't know if they were ready to reveal this to a journalist. It requires forming a strong trust connection with the journalist to speak the truth. For several weeks, I spent a lot of time talking privately with people, just chatting, sometimes even discussing trivial matters. We talked about Justin Sun, we talked about Tron, Poloniex, BitTorrent. I wanted to help them understand why I wanted to report on this topic and how the news process works. All of this just takes time. I think time is the biggest challenge; I needed to work hard to build trust with the interviewees so they would be willing to discuss the uncomfortable things that happened in the workplace.

Of course, many people were unwilling to communicate with me. When there are too many leads to follow, they may all end up in dead ends. I might spend two weeks working on a lead and trying to talk to 15 people, but they all hang up on you. Or they talk to you privately, but they are unwilling to discuss their backgrounds; they do not want their names to appear in the article. But some of the information and statements in the article come from them. They would be referred to as former employees or similar identities in the article.

This is a huge challenge ------ helping interviewees understand where I am coming from, what I plan to do, and what the significance of this is. Many interviewees see no reason to take the risk to speak out; they worry they might be blacklisted in the crypto industry. Or some people fear that discussing these matters with me could put them in danger. So, all of this is very difficult and time-consuming.

But at the same time, in the first story, 18 current and former employees spoke with me. In the second story, 15 current and former employees spoke with me. Many people would discuss sensitive issues within the company or within a crypto empire with me. This proves how the relationship between Justin Sun and his employees ended, as it is not just a disgruntled employee but dozens of people who either feel they have been abused or believe Justin Sun is doing potentially illegal things or making poor business decisions. For these interviewees, it is a gamble because they are likely to be insulted or harmed by Justin Sun. Therefore, the biggest challenge is finding people willing to speak openly with you and earning their trust, which takes a long time.

Hana: For many who have experienced such traumatic workplace abuse, many just want to move on and forget the past troubles. They might think, why should I discuss this with you?

Chris: In fact, some employees referred to it as psychological trauma. Some of the people I initially reached out to did not respond to me. But later, at some point, they were willing to reflect on what they saw, witnessed, and experienced while working at Tron, BitTorrent, or Poloniex.

Hana: I can certainly understand why they would want to erase that part of their memory and not want to revisit it. So, have you personally faced any retaliation or threats?

Chris: I have not received any threats, nor have any strange things happened (like a strange car parked outside my house or being threatened by passersby). My interviewees have not faced threats either. Interviewees are certainly very afraid of retaliation. The only threat The Verge and I received was legitimate, from the law firm Harder LLP, which represents Justin Sun's team (the same firm that represented Weinstein in the sexual assault case).

Harder LLP sent us a letter stating that certain things in the article might be defamatory. Because of this, I really want to say that working for The Verge is truly a freelancer's dream. When my reporting started to enter very sensitive areas, I told my editor that I was worried Justin Sun might sue us. My editor reassured me not to be afraid; The Verge would always support me.

Some media companies or news organizations would not do this for their freelancers; they would say you have to fight this battle alone. But The Verge did not; they generously provided support. I am grateful to be working with them, which allowed me to report this story honestly. Because receiving a scary letter from a law firm saying you are defaming a billionaire is a terrifying thing. Even though all I did was try to understand Justin Sun, I have no malice towards him. I am interested in him and the workplace, and I believe he should be held accountable for what he does. But receiving such a letter is still quite nerve-wracking.

After that, The Verge brought in a lawyer from Ballard Spar (which has been involved in many media cases to handle such letters) to manage it. They informed my editor and me about what we needed to do before the reporting was completed. This allowed us to complete the report without fear.

Hana: That's great. This is why this story is so profound, so shocking, and so impactful. I want to bring the topic back to Justin Sun. To this day, he still has a very solid fan base in China, and there are many followers in the United States as well. How would you describe and explain this phenomenon?

Chris: That's a very good question. His bad boy attitude is irresistible. He has no fear of the world. He enjoys shitposting (posting irony, memes, and slang online), but people find his personality interesting and amusing. At the same time, he is very self-deprecating. He can be described as a very witty person. He always says some interesting puns; he is a very smart person, but that does not prevent him from being a very cruel person who can say very cruel things to people.

I think if you are caught in a mix of fear and curiosity about the crypto industry, there is indeed something very appealing about him. When he first bought Poloniex, his former employees were very excited because he brought a spirit of moving forward in the way he did business. Some people find him persuasive. But another part of people describes him as a fraudster who takes investors' money or is suspected of insider trading. There is also a notion that a small number of people actually exploit a large number of Web3 or crypto believers to do some illegal things. If the regulatory framework in the industry is strong enough and enforcement is sufficient, it can stop such people; otherwise, they will be caught.

So I think, to some extent, Justin Sun represents a collective syndrome that arises in this emerging explosive field with little regulation. The crypto industry has very few "law enforcement officers." We have only started to see this in the past few years, but it seems that the crypto industry has been developing like a wild west world for a long time. Therefore, I think it is not surprising that someone like Justin Sun appears in such a world.

Hana: He seems smart, adept at wrapping himself in different flags, right? In the U.S., he is marginalized due to racial discrimination against Chinese entrepreneurs. In China, he has a mocking attitude towards narratives of patriotism or nationalism. I want to steer this topic towards geopolitics. For many, especially in the Chinese crypto community, there is a concern that this article could become the Covid-19 of the crypto industry, or that it could cause Justin Sun to overly represent Chinese entrepreneurs in the Web3 world, thus inciting hatred or distrust towards Chinese developers. What are your thoughts on this? What is your view on nationalism in the current geopolitical climate?

Chris: I think this is an important issue, and my editor Kevin Nguyen and I discussed it from the beginning when we were doing the first story. How can we accurately convey this part of the story? Because you are right; we do not want to perform with such a person. Whether or not he is a symbol of Chinese tech culture, we need to prove whether such claims are accurate.

Therefore, the sources of the story are very diverse; Tron, BitTorrent, and Poloniex are all very diverse companies. These companies have Chinese employees, and Chinese American employees who came to the U.S. at different stages of their lives, with different cultural blends between the two countries, Americans working in China, and coming back to understand the tech culture there.

I basically asked a lot of the same questions. What I learned is that Justin Sun, even by the standards of Chinese tech developers, is an outlier. He does not truly represent what Chinese business people are like or what these developers are like. This is what we wanted to address in the article. When someone worries that this will broadly impact the entire Chinese crypto community (meaning to shame the Chinese community), I am not surprised. That is why I wanted the focus of this story to be on telling the specific story of one person. He does intersect with these larger geopolitical issues. Reporting on these hellishly bad things and talking to as many people as possible about what really happened is important. Because, as you said, it is complex. The first story was published during the U.S.-China trade war, and the rift between the U.S. and China is incredible, considering that U.S. tech companies have been contemplating separating their supply chains from places like China.

So I think you raised a tricky question, and we tried to handle it as carefully as possible. The crypto industries in China and the U.S. have a difference; they are part of the same industry, but they operate in different regulatory environments.

So perhaps the best thing I can take from such a story is to encourage people to investigate the systems surrounding this industry where it appears because, deep down, we are all very similar. You can go anywhere, and there will be smooth-talking fraudsters everywhere. This is a bit like a small theme in a larger story; Justin Sun is an exception, but in terms of human behavior, he is not. You will find people like him anywhere. It is complex, but we did our best to ensure this is the real Justin Sun. But I think your question raises a completely relevant theme that deserves further exploration.

Hana: Thank you for acknowledging that. A few days ago, Time magazine published an article about Vitalik. I saw some comments on Twitter saying that Time magazine's way of photographing Vitalik was deliberately "othering" his appearance: intentionally portraying him as a quirky programmer rather than an ordinary entrepreneur or tech worker. Therefore, how to portray certain entrepreneurs born overseas is another interesting aspect; you can represent them fairly or fully without reducing them to some stereotype or narrowing them down to "a weird nerd."

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Chris: Exactly. It is true because I have seen the cover of Time magazine, which seems to pull back the lens on him. It is not a compact portrait. You can see his head to his waist. He looks a bit hunched over, and the photo suggests he is an awkward nerd. I think this aligns with the mainstream perspective on cryptocurrency, Web3, and decentralization. They suspend it and examine these things they consider crazy from a distance.

Hana: I have seen too many articles implying that China is strange, and I have seen too many articles implying that the crypto industry is strange. Justin Sun stands at the intersection of both, and reporting on him is undoubtedly a daunting task. I have to say you did very, very well without implying the specificity of this.

Let's move on to the next question about regulations. One of his accusations caught our attention, which is the failure to register bonds, or whether cryptocurrencies are a form of bonds. This issue has sparked countless debates, right? It seems that so far, every unregistered charge brought by the SEC has ended in a settlement, and there has been no legal conclusion on the status of cryptocurrencies. From your perspective, since your article is so influential, do you think the FBI and SEC will use Justin Sun as an example?

Chris: That's a good question; I don't know. An insider told me that the FBI had read my article before. It is hard for me to know what impact this article will have on them because they have already been conducting a grand jury investigation. As far as I know, this started even before my first story was published. So they are somewhat independent. But I think one of the main reasons they are investigating may come from Poloniex. Because when I talked about Justin Sun's "Operation Couch Cushions" (where he directed Poloniex to seize Bitcoin from users), there is a connection to the blockchain in the story, and the transaction records show that this was happening.

I am not a lawyer, but if I were a lawyer and wanted to write an indictment about theft, I would consider using information on the blockchain because it is very clear. After all, it is an immutable ledger. So far, the debate about securities has not been resolved in a clear way, meaning that crypto companies can take decisive and reliable steps to ensure their tokens are not securities. Settlements tend to indicate that these crypto companies acknowledge they are securities, but as you said, it does not leave a clear judicial opinion in all cases that they are securities.

On the other hand, securities law is quite old and rather complex. The lawyers I have talked to have told me that most of these things are securities; it just takes time to figure it out. The SEC has not issued clear guidance on this for a long time, leading to a completely unclear impression of it.

But what is interesting? Some of these tokens can start as securities and then eventually become non-securities. Because once a network is fully decentralized, whatever the project, when it is completely decentralized, it does not rely on any human. At some point, it can transition from a security to a non-security. Many people point out that Bitcoin itself is an example. But I think your question may have been most clearly answered in the Ripple case. If it goes into trial like this, it could be a big deal, drawing a clear line on such matters.

Hana: So, undoubtedly, Justin Sun has collected many titles for himself, including this strange position as Grenada's permanent representative to the WTO. I had never heard of this country before. We do not know if this title grants him any diplomatic immunity; assuming it does, this diplomatic immunity should only apply to the host country, Switzerland. So what do you think his motivation for obtaining this ambassador position is?

Chris: From what I have seen, part of what people say is for diplomatic immunity, and part is to promote crypto independence. As he said, crypto independence from regulation is to persuade countries to adopt truly generous regulatory frameworks towards these cryptos. In other words, globally, he wants to change the policies of some countries, possibly small countries like Grenada, St. Kitts, the Cayman Islands, or Seychelles, to change their laws to protect the crypto industry he favors. This is what he referred to on Twitter when discussing why he wanted to do this. However, the diplomatic immunity thing is strange because it is likely not as powerful as he thinks.

First of all, what really matters is whether the U.S. grants him diplomatic immunity. Because diplomatic immunity is a complex matter. It depends on whether other countries recognize it. I do not know, but the State Department has something called a "white list," which lists all recognized diplomats and may expand to the diplomatic community. As for the WTO and Switzerland, when I asked the WTO for a comment, they said the organization does not grant diplomatic immunity.

Then I asked the Swiss Foreign Ministry for specifics about where he obtained diplomatic immunity. They said as long as he is the designated representative to the WTO and he attends WTO meetings in Switzerland or during his work for the WTO, Switzerland will recognize his status, in which case he will receive diplomatic recognition. But he must be dealing with WTO affairs to obtain diplomatic immunity. He cannot just enjoy this diplomatic immunity while touring Geneva, right? But Swiss authorities also indicated that if the sending country Grenada changes, Switzerland could refuse him regardless of which country he represents. Or if a third country sends formal information to Swiss authorities during its prosecutorial investigation stating they do not recognize him, Switzerland would not recognize his form of diplomatic status.

During the grand jury investigation by SDNY, FBI, and IRS, if they send a letter, for example, the Justice Department sends a letter to Switzerland saying we believe this person has committed a crime, and we plan to draft an indictment. I do not know how this process works. But if they do this, Switzerland would not recognize his diplomatic immunity. This is not absolute immunity, and that is the most important thing.

Hana: It feels like the protection he seeks from diplomatic immunity only covers a very narrow situation and essentially does not provide the protection he wants.

Chris: Yes, it does not provide protection at all. I can say that through conversations with background sources, he has tried to use his diplomatic immunity in various legal disputes he is currently involved in. This is something he wants to leverage. But is it useful? That is another question.

Hana: Interestingly, just from your two articles, Justin Sun has enough problems of his own. And now there are rumors that Justin Sun is living in the Four Seasons Hotel in Hong Kong, gambling all day. I am just curious, how would you assess his risk tolerance? If I were him, I would not spend all day gambling in the Four Seasons Hotel in Hong Kong.

Chris: It is interesting that you say that because a former employee of his told me he used to stay at the Rosewood Hotel in Hong Kong. I do not know if he has moved to the Four Seasons, but the Rosewood brand is known only to super-rich people. I do not know about the gambling, but I know that when he was doing business with Poloniex, he would stay near a casino in the suburbs of Boston. That is what I know. I do not know if he is a big gambler, but in any case, he is a gambler in a more abstract sense.

His risk tolerance is indeed very high. It seems to be a calculated risk tolerance because he knows some things we do not know. He knows he has some escape plans and can go to some island nation to evade consequences. This calculation seems to illustrate his adventurous spirit more than my entry into the gray areas of the crypto industry.

For example, can I find a lawyer? Or can I push it to the edge? It is not like that. He has walked to the edge of risk with "Operation Couch Cushions," taking money from users to the edge of risk. That is the extent of risk-taking. As you said, this is gambling; he definitely knows something we do not know. We know where his backup can go; he has said it out loud. If I get into trouble here, I can leave the U.S., and I will not come back. There is no doubt that he is very adept at finding opportunities to enter gray areas or cross boundaries.

He is very good at acting quickly, making it hard to track what he is doing. There have been reports of other things unrelated to illegal activities, such as when he suddenly withdrew over $1 billion from the DeFi project Aave; you would think, how does this person have so much money at any given time?

According to the documents leaked to me, this is a large number, and I can see a lot of money flowing. Perhaps acting quickly is a way for him to feel better about the risks he is taking. But again, I cannot get into his mind, but I can only understand through what employees have told me in the documents. What we see is that it is calculated, but not in the way we expect.

Hana: Many Chinese businessmen, if they want to leave China, their classic escape route is to go to the U.S. Justin Sun went to the U.S., but he had to flee the U.S. again. I just feel that Justin Sun has refreshed the classic escape route for more people.

Chris: It seems that Justin Sun ran to the U.S., but then he seems to have completely severed ties with the U.S. But what is interesting is that the geopolitical situation we are in now is that if you sever ties with the U.S., it may make you completely favored by Chinese authorities, given the current relationship between the two countries; they might be excited that you are not on the U.S. side.

This is a strange twist; he has changed the script we thought we were familiar with, but now who knows? I am completely unclear about how safe he is with Chinese authorities now, how close he is to them, how they view him, and how acceptable he is to them. At this point, I am still unclear, but this somewhat explains why he claims to be a citizen of a small island nation. I have heard all sorts of crazy things; it seems he has extremely complex relationships with every country he has interacted with, but I have not found evidence to support these claims.

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Hana: That is why I love the cover of your article. The tension of him hanging in the air and all the visual effects of him running from one place to another. Therefore, Justin Sun is a perfect example of all the crimes a person can commit in the crypto industry. His crimes can be divided into three parts: fraud of public securities, fraud, and fraud against the government. Do you think there has been any progress on these charges against him?

Chris: I do not know the progress of the charges. I do not know if anything obtained from the investigation will turn into an indictment or something similar. I do know that they have very specific targets in the investigation, pursuing very specific entities, and there are specific things to collect evidence on. I know this because I have seen subpoenas that indicate this. This is what many reports on grand jury investigations are based on.

This process can take a long time, and there is a long way to go. I received subpoenas a long time ago and only disclosed them in my reporting later. So they have been investigating for several months. I do not know how far along they are. In these investigations, the wheels of justice turn slowly and take time.

Hana: The last question is that Justin Sun publicly responded to your work. He may be relaxing in the Four Seasons Hotel in Hong Kong now, and your work does not really stop him from doing those questionable things. Do you plan to continue tracking his reporting, or what is your next step?

Chris: That is a good question. The answer is, it depends.

After this incident, people have provided me with new information, and I have received some very crazy insider tips. I am investigating. Reporting on Justin Sun is difficult. This is a long-term project. I want to write about other things in the crypto industry; during this time, I have several other secret stories in progress. The crypto industry is in a wild world; to some extent, it is reshaping finance while not reshaping finance. The crypto industry is facing the same problems, and for all of us, finance begins in the same way.

I think this is a very interesting and special moment; we have been in the past. The time from 2016 to now has been very interesting for me. So I want to continue reporting on the people in this field, telling the specific things they are doing. Based on the information I have received, there will likely be a third story about Justin Sun afterward.

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