The many escapes of Justin Sun

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How does a crypto hype man stay ahead of regulators? He keeps running.

Justin Sun, a budding Chinese cryptocurrency mogul, walked through the shiny lofted atrium of the departure terminal at South Korea’s Incheon International Airport. It was September 2017, an early height of the crypto craze, and Sun had every reason to be nervous after his first ICO. An ICO, or initial coin offering, is like an initial public offering for a new stock. It’s the first time cryptocurrency traders have the opportunity to buy a brand-new token.

“I was kind of scared,” the former employee told me. “He was doing the so-called market making, insider trading all the time.” The tale of Sun’s escape became well-known in San Francisco’s Tron office. In his telling, it was an anti-communist sob story about a businessman escaping China to fulfill his God-given capitalist ambitions. A former employee said they’d often get a message when Sun emotionally retold the story at Tron: “Justin cried again.”

When another former employee asked Sun’s top lieutenant in Beijing what “market making” meant, he chuckled and said, “You know how the Chinese folks do it, right?” He apparently explained that the market-making team’s job was to work with “whales” who were wealthy cryptocurrency spenders outside of Tron. “We have a way to pump the price [of TRX],” he said. “You know those folks that have a lot of money and don’t have a lot of brains? You can influence them to do whatever you want them to do.

Insider trading prohibitions apply to financial products called securities. A “security” is an old-fashioned 1930s term for an investment — stocks or bonds, for example. The government regulates securities because they can easily be exploited by well-connected whisper networks to make enormous riches while conning the public out of fair market conditions. The multi-billion-dollar question is whether most cryptocurrencies are securities or not. It depends on a case-by-case basis.

After hiring Labhart, Sun seemed emboldened. Within days, he made another initial coin offering. ICOs aren’t banned in the United States like they are in China. The new one was BitTorrent Token, or BTT. A former employee who was generally effusive about Sun explained that when he acquired BitTorrent, it came with upwards of 100 million active users. Issuing a coin would be incredibly lucrative, a “kind of a no-brainer.” A former employee told me Labhart was considerably less understanding.

Sun made a radical change in his crypto empire when he bought a cryptocurrency exchange called Poloniex. Crypto exchanges function like stock exchanges, but instead list tokens. They are cryptocurrency’s white-knuckled marketplaces.

 

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