On September 27, 2021, the U.S. District Court in Manhattan announced that a U.S. citizen pled guilty to conspiring to aid Democratic People’s Republic of Korea (North Korea) evade economic sanctions through the use of financial technology to hide illegal transactions.
Crypto expert, Virgil Griffith, 38, pled guilty to conspiracy to violate the International Emergency Economic Powers Act and Executive Order 13466, a law that prohibits U.S. citizens from “exporting any goods, services, or technology to the DPRK without a license from the Department of the Treasury, Office of Foreign Assets Control (“OFAC”).” Griffith allegedly violated that law by engaging with North Korean officials, advising them on how to evade sanctions.
Virgil Griffith’s Aid to North Korea
Griffith alleged interactions with North Korea dates back to 2018 when he developed and funded cryptocurrency channels. He allegedly was aware that these platforms could financially help North Korea by dodging U.S. sanctions and funding illegal activities such as nuclear weapon development programs.
Then in April 2019, Griffith traveled to North Korea, even though the State Department did not give him permission to do, to give a presentation on blockchain and cryptocurrency at the “Pyongyang Blockchain and Cryptocurrency Conference” (the “DPRK Cryptocurrency Conference”). The presentation focused on how to use these services to evade sanctions and launder money. He mainly focused on “how blockchain technology such as ‘smart contracts’ could be used to benefit the DPRK, including in nuclear weapons negotiations with the United States.” Griffith and his co-conspirator allegedly answered questions and gave advice on the subject matter.
Even after the conference, Griffith continued to engage with North Korea. He aided in a cryptocurrency exchange between North Korea and South Korea – with full knowledge that such actions would violate the sanctions against South Korea. His actions were not authorized under the OFAC requirements.
The authorities caught up with Griffith in November 2019 and arrested him in Singapore.
Griffith’s sentencing hearing is set for January 2022; his charge carries a maximum of 20 years in prison.
Audrey Strauss, the United States Attorney for the Southern District of New York, praised the work of the Federal Bureau of Investigation and its New York Field Office, Counterintelligence Division, and thanked the U.S. Department of State’s Diplomatic Security Service, the Department of Justice’s National Security Division, Counterintelligence and Export Control Section, the Department of Justice’s Office of International Affairs, and the Singapore Police Force for their assistance.”
The use of crypto assets has been one of the main mechanisms by which North Korea has tried to circumvent the United Nations and U.S. sanctions. Griffith’s actions in speaking at a conference and then helping the North Korean government in a crypto currency exchange platform clearly were prohibited without a license, for which Griffith did not apply. The plea and the facts indicate how difficult it is to implement effectively and enforce sanctions.
On September 21, 2021, the U.S. Department of Treasury sanctioned SUEX, a crypto currency exchange owned by a Russian and incorporated in the Czech Republic, which was allegedly processing ransomware payments. The U.S. and G7 governments have identified crypto exchange exchanges as one of the elements of the ecosystem of ransomware operatives, so prosecuting a person who has helped the North Korean government use crypto assets and crypto currency exchanges fits within that strategy.