This NYU student owns a $6 million crypto mine. His secret has been revealed.
Jerry Yu has the charm of what the Chinese call the second-generation rich. He claims a Connecticut pre-school education. He is the son of former General Electric chief executive Jeffrey R. Lives in a Manhattan condominium purchased from Immelt for $8 million. And he is the majority owner of a Bitcoin mine in Texas, which was acquired last year for more than $6 million.
Mr Yu, a 23-year-old New York University student, has also – unwittingly – become a case study in how Chinese citizens can move money from China to the United States without attracting the attention of authorities in either country.
The Texas facility, a large computing center, was not purchased with dollars. Instead, it was purchased with cryptocurrency, which provides anonymity, with the transaction being conducted through an offshore exchange, preventing anyone from knowing the origin of the financing.
Such secrecy allows Chinese investors to avoid monitoring by the US banking system and federal regulators, as well as circumvent Chinese restrictions on funds leaving China. In more traditional transactions, the bank receiving the funds will know where they are coming from and will be required by law to report any suspicious activity to the US Treasury.
None of this would have been known if Mr. Yu's company – Bitrush Inc., also known as Bitrush – hadn't run into problems in the small Texas Panhandle town of Channing. population 281Where contractors say they were not paid in full for their work at their mine.
A flurry of lawsuits in the works has stirred up loose documents that brought to light transactions not normally made public as Chinese investors mine crypto in the United States after the Chinese government banned such operations. Cost hundreds of millions of dollars to build or operate. In 2021.
The mines are a way for Chinese investors to generate cryptocurrencies, primarily Bitcoin, which they can redeem as US dollars on exchanges. The Channing mine, built in the open field, consists of several dozen buildings, designed to house 6,000 special computers that can work day and night and guess the correct sequence of numbers, yielding new bitcoins, They currently cost more than $40,000 each. The New York Times has reported that such sites could burden the country's electrical grid, and their Chinese ownership has made them the subject of national security investigations.
In one of the lawsuits involving Mr Yu – who is a Chinese citizen and resident of the US – Texas-based Crypton Mining Solutions alleges that investors in the Channing mine “are not merely Chinese citizens, but also hold highly political and influential business positions. Are citizens.”
The lawsuit provides no conclusive evidence of those ties, and the trail of public funds ends at Binance, a cryptocurrency exchange. By using a cryptocurrency called Tether and routing it through Binance's offshore exchange, Mr. Yu's investors made it impossible to trace the source of the funds. At the time of the transaction, Binance's offshore operations were not in compliance with US banking regulations US government,
Last month, Binance pleaded guilty to violating anti-money laundering regulations and agreed to pay fines and forfeitures of more than $4.3 billion. Binance case was at the center of the federal case failure to comply With laws including the Bank Secrecy Act, lenders are obliged to verify customers' identities and flag suspicious money transfers.
Mr. Yu referred questions to Bitrush lawyer Gavin Clarkson, who said in an email that the company “complies with all required federal, state and local laws and regulations, including banking laws and regulations.” He said the claims made by Krypton, including that it was not paid for services at the mine, were “baseless and without merit”.
“Bitrush is owed money, not the other way around,” he said. In a lawsuit against Crypton, BitRush alleged “gross negligence” and sought damages of $750,000.
In Channing, the arrival of bitrush last year attracted a lot of attention, and some residents got jobs at the mine, which was built next to an electrical substation.
One of them, Brent Lauder, is a judge, the city's volunteer fire chief and the husband of the county deputy sheriff, Mr. Lauder, who oversaw electrical and plumbing work for Crypton, said contractors did not get paid until they protested by stopping work. An electrical contractor, Panhandle Line Service, is also closed in a suit and countersuit On payment with Bitrush.
Documents shared with The Times by Crypton lawyer David Huang reveal how Bitrush plans to buy the Texas site: The seller, Outlaw Mining, will receive $6.33 million in tether. The use of Tether, whose price is fixed at $1, offers the anonymity of other cryptocurrencies without the price volatility of some of them. Purchase Contract Listed A wallet address – A 42-character alphanumeric sequence – where the money will go.
Records specify that $5,077,000 was due at the time of closing, and publicly available transaction records show that the wallet registered at a crypto brokerage company called FalconX accepted $5,077,146 in Tether around that time last year. The documents state that $500,000 in Tether has already been paid as a deposit, with the remaining $750,000 to come – also to be paid in Tether – after Bitrush takes possession of the equipment, supplies and materials on the site. after.
However, the source of the funds was not publicly recorded and is known only to Binance, the exchange that handled the transaction. The agreement never specified who would make the payments, and Mr. Clarkson said Bitrush never sent or received any money through Binance.
Purvi Maniyar, the company's deputy general counsel, said in a statement that FalconX had “no visibility into the origin of the funds.” “This shows why it is important to regulate centralized intermediaries in crypto.”
This is an issue identified by groups that analyze blockchain, a digital ledger that records cryptocurrency transfers. Madeleine Kennedy, a spokeswoman for the company Chainalysis, said, “Once the funds are sent to a centralized service on the blockchain, they cannot be traced back to the person who sent it to that exchange without some legal process” such as Court order. Which tracks crypto transactions.
Binance spokeswoman Jessica Jung said the crypto wallet sent Tether payments from three Binance accounts and they all belonged to foreign nationals who were not U.S. residents. “Binance.com does not have or serve any US customers,” he wrote in an email. He also said the site employs “rigorous” procedures to verify the identities of customers.
Payments from Tether are widespread in the Bitcoin-mining industry. A miner in Arkansas said he used Tether to buy millions of dollars worth of specialized computers made by a Chinese company. Another miner in Wyoming said he did the same. One benefit of those transactions may be the avoidance of sales and capital gains taxes.
A document shared by Mr Huang identified some shareholders in BitRush at the time of the Channing purchase. Was the biggest investor after Mr. IMO VenturesA China-focused venture capital firm in San Mateo, California. Another shareholder was identified in the document as “Lao Yu”, which can be translated as “Old Yu”.
The two people who signed the mortgage documents for Mr. Yu's Manhattan apartment, Yu Hao and Sun Xiaoying, match the names of a married couple in China who own stakes in companies worth more than $100 million, according to records. . wire screen, a company that provides Chinese business information. An individual named Sun Xiaoying is also listed as a Bitrush director.
Mr Yu's lawyer, Mr Clarkson Bitrush, would not confirm the identity of the shareholders or Mr Yu's possible relationship with any of them.
Outlaw Mining's founder, Josie Parks, said in a phone call that he could not comment on his financial arrangement with Bitrush because he was bound by a nondisclosure agreement.
“As I was told, Jerry is a college student in the United States and his family is very wealthy,” Mr. Parks later said in a text message. “I am not aware of his ties to any investors or foreign entities.”
alain delaquarriere Contributed to research.