Cryptocurrencies have been a hot topic for some time… and have been quite volatile over the last year. There has also been a fair share of scandals related to cryptocurrency and their exchanges, leaving many to wonder if cryptocurrency will survive. But interestingly, there remains tremendous interest in digital coins, and much of this interest involves the potential benefits they offer. Purchases made in cryptocurrency can offer anonymity in many instances and a way to pursue currency exchanges. It might also help one avoid regulators and unwanted taxes. As such, it has become evident that foreign nationals are using these strategies to acquire U.S. real estate, and in some instances, the real estate purchased actually involves China-linked Bitcoin miners. It is therefore becoming increasingly important to explore these cryptocurrency investment scams in greater detail.
Thanks to a recent lawsuit from a small-town mining construction firm, strategies involving such cryptocurrency investment scams are being uncovered. The site where the cryptocurrency mine was developed was sold to a Chinese national/U.S. citizen living in Manhattan. While the site purchase was acquired via cryptocurrency and completed, reportedly workers didn’t receive full payment. This prompted the lawsuit, but more importantly, also made public documents that otherwise would not have been. In the process, it appears China-linked Bitcoin miners likely funded the purchase. As such, it would seem this is a new strategy using cryptocurrency investment scams to acquire foreign assets. And to mine cryptocurrency along the way!
“[Investors in the Channing mine] are not only Chinese citizens, but citizens in highly political and influential business positions.” – Crypton Mining Solutions claim in lawsuit
Background of the Mining Lawsuit
The discovery of China-linked Bitcoin miners occurred somewhat unexpectedly. In the small town of Channing, Texas, a company called BitRush Inc., directed by Jerry Yu, made a rather large purchase. The company paid site owner Outlaw Mining $6.3 million for the property where several buildings existed. These buildings would eventually contain over 6,000 computers involved in Bitcoin mining. And notably, the site just happened to be adjacent to an electrical substation. Channing effectively became a Bitcoin boomtown overnight. But the most interesting part of the story is that the purchase was made in Tether cryptocurrency rather than U.S. or Chinese currency. The transactions of the purchase occurred through Binance, a cryptocurrency exchange. As such, it was impossible to see exactly where the funds originated, despite the purchase being made by BitRush.
All of this would never have been discovered had the construction company involved claimed they had not received full payment. Outlaw Mining filed suit against BitRush, and through due process, site purchase information was revealed. Funds were indeed deposited to the 42-alphanumeric sequence via Binance to Outlaw Mining. But once again, the origins of the funds, whether China-linked Bitcoin miners or not, remain unknown. This is relevant since these types of cryptocurrency investment scams allows foreign nationals to acquire U.S. properties. More importantly, it also offers an opportunity to obtain cryptocurrency mining operations abroad by China-linked Bitcoin miners. This raises not only national security concerns but also issues involving electrical grid consumption.
“Once funds are sent to a centralized service on the blockchain, they can no longer be traced to the individual who sent it to that exchange without a legal process.” – Madeleine Kennedy, Spokeswoman for Chainalysis
Binance and Cryptocurrency Investment Scams
In order to appreciate what the Texas lawsuit revealed, it’s worth knowing a bit of cryptocurrency history. This is especially true when it comes to Binance and cryptocurrency investment scams. Binance is a cryptocurrency exchange, which allows various cryptocurrency transactions to take place. But because of its blockchain nature, these exchanges provide anonymity to those funding the transactions. Thus, while Jerry Yu and BitRush might have been the purchaser, others likely provided the actual Tether cryptocurrency. This includes China-linked Bitcoin miners and investors. By making such a real estate purchase through Binance, those paying in Tether avoid U.S. banking regulators. This is a way for Chinese Nationals to acquire U.S. property without being detected. And it allows these same individuals to acquire cryptocurrency mines abroad since they were banned in China in 2021.
Cryptocurrency investment scams aren’t something new, particularly as they relate to exchanges like Binance. Binance was recently found guilty of violating U.S. anti-money laundering regulations. In essence, they violated the Bank Secrecy Act that obligates lenders to verify customer identities. It also requires them to flag superstitious money transfers and notify banking authorities. As a result of Binance’s indiscretions, they paid a sum of $4.3 billion in fines and forfeitures. As it would seem, China-linked Bitcoin miners and cryptocurrency investors appreciate the advantages that a Binance platform offers. Such exchanges allow unknown sources to cash in cryptocurrencies into U.S. dollars through real estate purchases. This is precisely what happened in Channing, Texas.
Waging a Silent Crypto War
The key to the alleged cryptocurrency investment scams by foreign nationals requires one key stakeholder. In the case involving Channing, Texas, this stakeholder is Jerry Yu. Though he operates BitRush, Inc., he is unlikely to be the source of the millions involved in the mining site purchase. Certainly, Yu is a successful individual and similarly bright, having graduated from a Connecticut prep school. But China-linked Bitcoin investors are behind him footing the bills in all likelihood. These same backers explain why Yu resides in his own $8 million condo in Manhattan. He is also listed as the majority owner of the Bitcoin mine at $6 million invested. He might be wealthy, but the source of his wealth likely links to Chinese investors wanting to advance their crypto-stake.
While much debate exists when it comes to cryptocurrency exchange regulations, there’s little doubt transparency is needed. Given the impact of Bitcoin mines on the environment, operational information is needed. This includes understanding who’s investing in the mine and fueling its operations overall. This is the only way to expose cryptocurrency investment scams that skirt around existing laws and regulations. And it’s the only way to know when China-linked Bitcoin miners are involved.