Ethereum Foundation ‘initially indulged’ Virgil Griffith’s effort to engage North Korea, U.S. prosecutors say

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The Singapore-based entity that oversees the Ethereum blockchain “initially indulged” an effort to illegally engage North Korea by Virgil Griffith, a senior executive who later pleaded guilty to violating sanctions related to the country, U.S. prosecutors said in sentencing submissions filed in a New York court last week.

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The court filings also for the first time suggest there was direct communication between Canadian Ethereum co-founder Vitalik Buterin and Griffith on the matter, though Buterin is not identified by name in those allegations.

The Ethereum Foundation has long distanced itself from the case, and neither it nor Buterin is accused of any wrongdoing. But the prosecution’s allegation drags the foundation, among cryptocurrency’s biggest names, into an international scandal that has long been focused on Griffith’s personal conduct.

In a filing dated March 18, the prosecution said that Griffith, an American citizen living in Singapore, had tried to set up an Ethereum node in North Korea prior to the 2019 trip to the country over which he was eventually charged.

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A node is a computer that supports a cryptocurrency network. It is often used for “mining,” validating transactions and receiving cryptocurrency rewards in exchange. Because of the blanket of economic sanctions in place against North Korea, running one there is illegal, the prosecution said.

The prosecution invoked the war in Ukraine in describing Griffith’s conduct, saying sanctions are the main tool in fighting an aggressor state such as Russia, and that such measures only work if they are “fully enforced.”

According to the prosecution’s filings, Griffith had asked Ethereum management in April of 2018 “if we’d directly do this” and was told that, because of economic sanctions against North Korea, only “doing so through an intermediary is possible.”

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“Until they figured out the intermediary, however, Griffith wrote that the project would be ‘supported by myself, an individual,’” the prosecution wrote.

Later in 2018, Griffith forwarded an email about the matter to “the co-founder of the Ethereum Foundation and Griffith’s ultimate boss,” the prosecution’s files show. While that person was labelled only as “Individual-1,” the prosecution noted that the person had written a letter to court in support of Griffith. Buterin is not just the only Ethereum co-founder to have done so, he is also the only co-founder actively working at the foundation.

According to the prosecution’s files, Ethereum management seemed to have taken a stronger stance by then. Individual-1 and another foundation leader “appear to have discouraged Griffith from proceeding with the node,” and Griffith responded to them saying, “You two were right that this was too risky.”

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Griffith, though, the prosecution said, continued to talk about the matter with Individual-1. While Griffith was in North Korea in April 2019, he texted with Individual-1 to say the North Koreans were interested in an aspect of Ethereum and that it “could be high visibility work.”

According to messages produced by the prosecution, Individual-1 asked questions and expressed skepticism, and Griffith continued to suggest what the prosecution called “specific proposals to design blockchain services” for North Korea.

It’s unclear whether Griffith was talking to Individual-1 specifically about Ethereum Foundation work. Buterin was both Griffith’s superior and a personal friend.

The prosecution noted that Individual-1 had submitted a letter in support of Griffith “without reference to this conduct” — meaning Individual-1 had neglected to mention his communications with Griffith over North Korea.

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The Ethereum Foundation, based in Singapore, supports the eponymous blockchain network, the main platform on which NFTs (nonfungible tokens) and all manner of crypto projects run. The Ethereum network’s native token ether is the most valuable cryptocurrency after bitcoin.

According to the prosecution’s files, in October 2019, before Griffith’s arrest but after the Federal Bureau of Investigation had questioned him, he told family “that he might be fired from Ethereum.”

When Griffith was arrested toward the end of the year over his North Korea trip, the Ethereum Foundation said it “neither approved nor supported any such travel, which was a personal matter.”

Buterin and the foundation did not immediately respond to a request to comment or to address whether Buterin was “Individual-1.”

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Griffith, who is in custody, pleaded guilty in September of 2021 to conspiracy to violate the U.S. International Emergency Economic Powers Act, in a deal that outlined 5.25 to 6.5 years in prison and a fine of up to US$1 million as punishment. In the defence’s sentencing submission earlier in March, however, his lawyers proposed a sentence of two years, which could effectively be reduced due to time already served.

The defence’s sentencing submission included letters from family, friends and people from the cryptocurrency world. Buterin’s letter said he “would deeply appreciate” it if Griffith would “get a chance to productively contribute to society.”

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The package also included a letter from Griffith to the court, in which he publicly talked about his motivations for going to North Korea for the first time: “I became obsessed with seeing the country before it fell, akin to someone offered the chance to see East Berlin in its final days.”

In the prosecution’s March 18 submission, the proposed term is that of the original deal, although the fine is the maximum of US$1 million.

Griffith is scheduled to be sentenced on April 12.

Disclosure: Ethan Lou attended the event in North Korea at which Virgil Griffith spoke. He was asked to submit a statement for Griffith’s sentencing, although that statement was ultimately not filed to court.