Justin Sun is threatening CoinGeek with legal action over its reporting of the growing popularity of his Tron blockchain with Islamic terror groups.
On November 29, CoinGeek was contacted by Tron representatives regarding an article published on this site. The article detailed the latest reporting by Reuters on terror groups having shifted their blockchain-based financing activities from BTC to Tron.
Tron’s reps claimed the “tone” of CoinGeek’s article was “defamatory against Tron and Justin Sun in virtually all aspects.” For instance, Tron’s reps took exception with CoinGeek’s claims that “Sun has long since grown accustomed to ignoring court orders and law enforcement ‘requests.’”
The article in question quoted an ex-Mossad agent telling CNBC that Tron was “dodging requests from Israel to cut off accounts linked to Hamas.” CoinGeek also cited a recent Court of Amsterdam ruling that imposed financial penalties on the parent company of Sun’s HTX exchange (formerly Huobi) for ignoring a court order compelling the exchange to freeze a wallet containing digital assets obtained via fraudulent means from a Dutch citizen.
The CoinGeek article noted a Sun tweet stating that, while Tron was “committed to combating terrorist financing,” the chain’s “top priority” remained “providing instant, affordable and reliable transactions.” Sun also extended his “great appreciation to everyone in our industry who is contributing to the widespread adoption of cryptocurrency.”
The CoinGeek article stated that “[g]iven the context, Sun’s comments could well be interpreted as ‘terrorists have rights, too.’” The article acknowledged that this “may be an uncharitable interpretation” but CoinGeek argued to Tron’s reps that Sun’s statement on Tron’s priorities appeared to deprioritize taking action to lessen the likelihood of terror groups’ using Tron to finance their activities.
In a follow-up communication, Tron’s reps argued that neither Sun nor Tron had the ability to freeze/seize Tron wallets due to its “public and decentralized” nature. CoinGeek responded by noting that Tron’s delegated proof of stake (DPoS) consensus mechanism relies on a small handful of super representatives (SRs) to validate Tron transactions. CoinGeek argued that these SRs have the ability to prevent specific transactions from being included in new blocks on the chain.
Since mining pools on other chains have recently demonstrated the capacity to prevent transactions flagged by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) from making it into new blocks, CoinGeek asked whether Tron had initiated discussions with its SRs—whose ranks include multiple Sun-linked entities—for a similar effort by Tron’s SRs. CoinGeek received no response to this query from Tron’s reps.
Point/counterpoint
On November 30, CoinGeek received a letter from the law firm of Harder Stonerock, litigation counsel for Tron Network Ltd.
This letter accused CoinGeek of making “false and defamatory statements” in a separate article about a letter sent to the U.S. Senate Banking Committee from the watchdog group Campaign for Accountability (CFA). The CFA requested that the committee “turn their attention to the role crypto entrepreneur Justin Sun, his blockchain TRON, and the US-based stablecoin issuer Circle may be playing in the financing of terrorist organizations.”
Harder Stonerock listed an eight-point summary of the CoinGeek article, citing quotes the firm believes are “false and defamatory.” The letter went on to say that Harder Stonerock “hereby demand that CoinGeek remove the Defamatory Statements from the Story and publish a full, fair, and conspicuous retraction and apology as to each of the statements.”
Of these eight points, three were direct quotes from the CFA letter, while a fourth was a CoinGeek summary of the CFA’s urging of the Committee to target bad actors’ use of ‘chain hopping’ to obfuscate the trail of illicit assets. This quote mentioned neither Sun nor Tron.
Another point cited by Harder Stonerock was a quote from a November 12th Wall Street Journal article. Similar excerpts from the WSJ article were quoted in coverage by other blockchain media outlets, including CoinDesk, as well as on social media.
That leaves just three points cited by Harder Stonerock that are purely CoinGeek’s doing: the headline (“Justin Sun, Circle targeted in letter to US senators re ‘crypto’ terror funding”); the lede (“Justin Sun’s Tron blockchain is once again being flagged as terror groups’ go-to financing option, while USDC issuer Circle is catching some rare political flak for its Tron ties.”); and a partial quote from the article regarding Sun having “spent much of his life on the run from multiple agencies.”
CoinGeek maintains that neither the headline nor the lede contain any defamatory information. Indeed, the day before CoinGeek received its letter from Harder Stonerock, the Atlantic Council GeoEconomic Center tweeted a clip from a recent event in which a panelist declared that “92% of terror financing occurs on the TRON blockchain, mostly in the stablecoin Tether.”
Thursday also saw Chinese blockchain analysts Bitrace tweet that Tron “has become a blockchain network mainly used by black and gray activities.” Actions by Israeli intelligence agencies have also detailed Tron’s growing popularity among terror groups, leading to reporting by mainstream media outlets like Forbes.
Other blockchain media outlets—including Cointelegraph, DL News and others—also reported on the original CFA letter, quoting some of the same passages as CoinGeek. It’s unclear whether Sun or Tron have issued similarly threatening letters to these outlets for reporting the same publicly available information.
Circle issued its own rebuttal to the CFA letter that devotes a whole section to distancing itself from Sun/Tron. Circle claimed that it “does not ‘bank’ Justin Sun. Neither Mr. Sun nor any entity owned or controlled by Mr. Sun, including the TRON Foundation or Huobi Global, currently have accounts with Circle.” Circle notes that it “terminated all accounts held by Mr. Sun and his affiliated companies in February 2023,” without providing any details on why Circle took this action.
Sun on the run
As for the Harder Stonerock letter’s point #8, the one referencing Sun’s flight from multiple agencies, The Verge published a deep dive into Sun/Tron in March 2022 titled, “Tron founder Justin Sun and his many escapes.” Among other details, the article notes that in September 2017, Sun abruptly left China for South Korea (and from there to the U.S.) following the initial coin offering (ICO) for Tron’s TRX token:
The Chinese government’s ICO ban was why, a week later, Sun was waiting for a flight in Incheon International Airport. Sources who heard him tell this story say Justin believed he was a fugitive and was ready to take off at a moment’s notice. Sun’s true escape route from Beijing to Seoul remains cloaked in rumor. But the reason for his getaway was simple: he likely knew the ICO ban was coming and went through with it anyway.
The Verge also detailed Sun’s stateside legal peril:
The prosecutor’s office from the Southern District of New York, which normally handles financial crime on Wall Street, is searching for criminal evidence against Justin Sun. The investigation is being led by the FBI […] As the dragnet closes in around Sun, the grand jury is exploring a long list of potential charges. According to the subpoena (one of which was shown to me), they are: wire fraud, conspiracy or intent to commit wire fraud, swindling, money laundering, spending the spoils of a criminal enterprise, failure to register a security and lying about it, aiding and abetting a crime, and conspiracy to defraud the United States.
Sun left the States right before the pandemic struck and has never returned.
More recently, the U.S. Securities and Exchange Commission (SEC) detailed its difficulties in locating Sun so he could be served with a summons in connection with the SEC’s civil complaint for offering unregistered securities to the public. While that complaint was filed in March, it wasn’t until mid-July that the SEC was able to successfully serve its summons on Sun. This delay occurred despite the SEC attempting service at “multiple attempts at known addresses” in Sun’s reported home of Singapore and Sun tweeting his awareness of the complaint the day it was filed.
You can’t handle the truth
Harder Stonerock is a heavyweight crew that has successfully handled civil suits on behalf of Hulk Hogan, former President Donald Trump and former first lady Melania Trump. As such, we’d be ill-advised to offhandedly dismiss their threats of litigation.
However, CoinGeek believes the media has the responsibility to report on bad actors, particularly in the blockchain sector, which over the past few years has endured a tsunami of regulatory and criminal crackdowns based on the actions of these same bad actors. It’s these individuals and entities that have poisoned the public mind regarding digital assets and contributed to slower enterprise adoption of blockchain technology.
Sun has long promoted his close relationship with Binance founder Changpeng ‘CZ’ Zhao, even as CZ has sought to downplay these ties as professional, not personal. But CZ’s recent $4.3 billion settlement with the U.S. Department of Justice to atone for Binance’s years of ignoring anti-money laundering and ‘know your customer’ (KYC) responsibilities offers a hint of the fate that may await Sun.
The Verge article details how, after Sun acquired the Poloniex exchange from Circle in 2019, Sun informed staff that they were no longer required to observe the strict KYC rules that Circle imposed on Poloniex customers:
Sun also began impatiently bulldozing Poloniex’s KYC rules, which were slowing Poloniex’s user adoption in China to a crawl. A former employee said the logjam enraged Sun. “Fake the KYC!” he screamed at one meeting. “Fake it!”
To approve new customers as quickly as possible, Poloniex built an automated KYC system, but according to a former employee, it was permissive. It virtually rubber-stamped government IDs of any kind, they explained — “Didn’t matter if they submitted a pic of Daffy Duck.”
Before last month’s guilty plea, CZ had a habit of using his social media platforms to reject each new report detailing allegations of criminal activity at Binance. Sun seems equally determined to push back on claims that he and his platforms can be tarred with the same brush. CZ is now looking at between 18 months and 10 years in a U.S. prison cell. Is Sun currently negotiating his own plea agreement with U.S. prosecutors? Only time will tell. So watch this space.
Read the letter from Harder Stonerock here.
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