Jerry Yu, a 23-year-old student at New York University, has become a case study on how Chinese nationals can move money from China to the United States without drawing the attention of authorities. Due to the secrecy of using cryptocurrency for big transactions, the origin of the financing for Jerry Yu’s $6 million purchase of a Bitcoin mine in Texas was not known until Mr. Yu’s company ran into legal troubles in Channing, Texas, and contractors were not fully paid.
The transaction was routed through an offshore exchange, preventing anyone from knowing the origin of the financing. Chinese investors use this method to avoid the U.S. banking system and to sidestep restrictions on money leaving China. According to New York Times, Chinese investors have been spending hundreds of millions of dollars to build and run crypto mines in the U.S. following the Chinese government’s ban on such operations.
Mr. Yu’s company, BitRush Inc., alleges that the claims made by Texas-based Crypton Mining Solutions, including that it was not paid for services at the mine, were “baseless and without merit.” Meanwhile, several residents of the Texas town have found court documents revealing how BitRush planned to buy the site.
The transaction was made through cryptocurrency, specifically using a cryptocurrency called Tether and routing it through an offshore exchange, to make it impossible to know the source of the funds. Last month, Binance pleaded guilty to violating anti-money-laundering regulations, agreeing to pay more than $4.3 billion in fines and forfeitures. Mr. Yu’s lawyer has stated that “BitRush complies with all required federal, state and local laws and regulations, including banking laws and regulations.” However, the public money trail ends at Binance.
One of the benefits of these transactions can be avoiding sales and capital gains taxes. Although it’s known that Mr. Yu is a U.S. resident and Chinese national, the identities of the shareholders in BitRush at the time of the purchase are unknown. This case of crypto transactions from offshore sources for significant investments has drawn national security scrutiny and has revealed the potential for evasion of financial laws and regulations.
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