This N.Y.U. Student Owns a $6 Million Crypto Mine. His Secret Is Out.
A legal dispute in a tiny Texas town unexpectedly reveals how Chinese nationals can move money to the U.S. without drawing the attention of authorities in either country.
A Case Study in Money Transfer
Jerry Yu, a 23-year-old student at New York University, unintentionally became a case study in how Chinese nationals can move money from China to the United States without attracting attention from authorities in either country.
Mr. Yu, a second-generation rich individual with a Connecticut prep-school education and a luxurious Manhattan condominium, is also the majority owner of a Bitcoin mine in Texas. The mine, which was acquired for more than $6 million, was purchased with cryptocurrency through an offshore exchange, allowing Chinese investors to bypass the U.S. banking system and Chinese restrictions on money leaving the country.
This method of money transfer offers anonymity and avoids the oversight of federal regulators and the scrutiny of the Chinese government, as traditional transactions through banks would be subject to reporting and regulation.
Revealing Transactions and Legal Troubles
BitRush Inc., also known as BytesRush, the company owned by Mr. Yu, encountered legal disputes in the Texas town of Channing where his mine is located. Contractors who worked on the mine claim that they were not fully paid for their services, leading to a series of lawsuits that uncovered previously undisclosed transactions by Chinese investors.
These lawsuits have brought to light the influx of Chinese investors into the U.S., who have spent hundreds of millions of dollars building or operating crypto mines after the Chinese government banned such operations in 2021. The Channing mine, which consists of specialized computers designed to mine Bitcoin, has drawn national security scrutiny due to its Chinese ownership and the strain it puts on the nation's electrical grid.
One of the lawsuits filed against Mr. Yu and BitRush alleges that the investors in the mine are Chinese citizens in influential business positions. However, the source of the funds used to purchase the Texas site remains unknown due to the use of cryptocurrency and offshore exchanges.
The Role of Cryptocurrency and Regulatory Concerns
The Channing mine was bought with cryptocurrency, providing the anonymity sought by Chinese investors. The transactions were made through the offshore exchange of Binance, which at the time was not adhering to American banking rules and faced a federal case for violating anti-money-laundering regulations.
Using a cryptocurrency called Tether, Mr. Yu's investors made it impossible to trace the source of the funds used for the purchase. This lack of transparency raises concerns about regulatory oversight in the cryptocurrency industry, as centralized intermediaries like Binance often cannot trace funds without a legal process.
Paying with Tether is a common practice in the Bitcoin-mining industry, enabling miners to avoid taxes. However, the use of cryptocurrency for transactions in this manner highlights the need for increased regulation and transparency in the sector.
