Why the arrest of Multichain’s CEO shouldn’t come as a surprise

Last month, Multichain chief exec Zhao Jun was detained and ultimately arrested by Chinese law enforcement.

His team avoided admitting to the dire straits for as long as they could, but eventually conceded that the man who basically controlled the DeFi protocol was in the hands of the Chinese authorities.

Given the ‘decentralized’ protocol’s highly centralized nature, fellow executives have decided to shut down Multichain. But while many industry insiders were shocked by this turn of events, they shouldn’t have been: it’s all happened before.

Laundering, evasion, and overconfidence

Back in 2018, one of the biggest names in cryptocurrency in China was Zhao Dong, a Bitfinex shareholder, founder of the VC fund D Fund, and owner of a cryptocurrency exchange called RenRenBit.

From time to time, the wealthy executive had run-ins with foreign law enforcement, but there was no reason to foresee problems for Dong or his slew of high-profile investments — which included helping to start Tether Yuan and creating a token for his exchange.

However, it all came to a sudden halt in early 2020 when Dong — who is usually quite vocal on Twitter, Telegram, and Chinese social media — fell silent. Other executives at RenRenBit attempted to quash rumors of his detainment, but it eventually became clear that he’d been arrested.

Family, friends, and co-workers were unable to contact him while he sat in prison for a year without trial. In 2021, Dong was quickly sentenced to three years behind bars on charges of money laundering and operating without a money services business license. As a result, RenRenBit eventually shuttered and Tether never issued another Tether Yuan.

Read more: ‘Giancarlo’ keys managed poorly says post-hack Bitfinex security report

Chinese realizing risk

While the West may still be sleeping on the risks Chinese cryptocurrency founders and investors face, the same can’t be said for those on the Mainland.

A widely-shared post on Weibo has gone point-by-point into detail as to how individuals involved in crypto need to prepare for government intervention and unexpected detentions.

The six-point post doesn’t beat around the bush with regard to what founders and investors need to be aware of:

  • Lawyers that are unwilling to defend them
  • Knowing better than to hand over private keys or important information to law enforcement, even after being detained
  • A need to have legal representation before getting neck-deep in cryptocurrency from the outset

Crypto’s come-to-God moment

Once Sam Bankman-Fried (SBF) was shipped from the Bahamas back to the US, the Securities and Exchange Commission (SEC) began its crusade against cryptocurrencies. Crypto-friendly banks and trusts started to close and conspiracy theorists began to spin tales of a government plot to destroy crypto and DeFi.

But, as is often the way, the reality is far more mundane and far more in line with the Chinese way of thinking: scammers and fraudsters have overrun the industry and regulators and law enforcement have had enough.

The current crypto landscape is years in the making, with thousands of unregistered securities going unchecked, money launderers running a circus of amateur tax evaders, and simple phishing scams making off with millions.

Whether you’re a good or bad actor, in China or the US, the time to lawyer up was likely yesterday.

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