Crypto expert thought it would be ‘cool’ if North Korea mined ether: source

NEW YORK (Reuters) - A U.S. digital currency expert who was arrested last week for allegedly aiding North Korea in violation of sanctions told acquaintances last year that he thought it would be “really cool” if the reclusive state mined cryptocurrency ether, according to one person with direct knowledge of the matter.

The exchange rates and logos of Bitcoin (BTH), Ether (ETH), Litecoin (LTC) and Bitcoin Cash (BCH) are seen on the display of a cryptocurrency ATM of blockchain payment service provider Vaerdex at the headquarters of Swiss Falcon Private Bank in Zurich, Switzerland May 29, 2019. REUTERS/Arnd Wiegmann

Virgil Griffith, 36, a U.S. citizen who works for the Ethereum Foundation, told fellow digital currency experts in April 2018 about his intention to arrange the delivery into North Korea of equipment to create ether, two sources told Reuters at the time.

Cryptocurrencies, like bitcoin and ether, are created through a computer process called mining, which requires powerful hardware. Once generated, they can be exchanged on anonymous online platforms for fiat currencies such as the U.S. dollar, which in turn can help illicit activities like evading sanctions or laundering money.

One of the sources said Griffith said it would be “really cool” if ether were mined in North Korea.

Reuters was unable to determine whether Griffith’s plans to send the equipment to North Korea, which have not been previously reported, came to fruition. Federal prosecutors in Manhattan charged Griffith for a different incident, accusing him of sharing valuable technical information during a conference in North Korea in April 2019.

“We dispute the untested allegations in the criminal complaint,” said Brian Klein, Griffith’s attorney, in a written statement. “Virgil looks forward to his day in court, when the full story can come out.”

Klein added that he was pleased that a judge found that his client should be released from jail pending trial.

A spokesman for the Ethereum Foundation declined to comment on the mining plans.

U.S. prosecutors did not respond to a request for comment.

According to the federal complaint, Griffith traveled to North Korea via China this April to attend the Pyongyang Blockchain and Cryptocurrency Conference, despite being denied permission by the U.S. Department of State to go.

There, he and other attendees discussed how cryptocurrency technology could be used by Pyongyang to launder money and evade sanctions, the prosecutors said.

Griffith, who faces up to 20 years in prison, acknowledged in a consensual interview with the FBI in November that his presentation amounted to a transfer of technical knowledge to other attendees, the complaint said.

The Ethereum Foundation said in a written statement that it is aware of the recent charges filed against Griffith and that it was not represented in any capacity at the events outlined in the Justice Department’s filing. The “Foundation neither approved nor supported any such travel, which was a personal matter”, it added.

The complaint says Griffith and others combined and conspired to violate rules in the International Emergency Economic Powers Act from as early as August 2018. But the two sources said Griffith was talking about his interest in helping North Korea create ether at least since April that year, when cryptocurrency and blockchain experts gathered for an industry conference in Seoul’s Walkerhill Hotel.

Griffith, who lives in Singapore, said that he planned to get the equipment through China into North Korea with the help of a Singaporean friend who was going to be in Pyongyang to participate in the annual marathon, the people said.

Griffith, who has a doctorate from the California Institute of Technology, said at the time the plan was to have someone hand deliver the equipment to North Korea’s telecom agency, one of the sources said.

Reporting by Anna Irrera. Additional reporting by Gui Qing Koh and Elizabeth Dilts. Editing by Paritosh Bansal