Justin Sun will be part of a new joint venture with BiT Global (a Bithumb company) and BitGo to operate Wrapped Bitcoin (WBTC) products. However, a close review of BiT Global’s corporate filings shows concerning connections to Sun’s empire.
BitGo founder and CEO Mike Belshe took to the MakerDAO forums to defend the new joint venture, stating that Sun was “not in the management team of BiT Global nor does he have any key material access.” He also further encouraged people to “confirm that BiT Global is a licensed TCSP in Hong Kong.”
BiT Global Trust Limited is a licensed TCSP in Hong Kong (license number TC009340) but a close review of corporate records suggests Sun may be deeply involved with the firm.
The Hong Kong corporate registry lists two directors for this firm: Zhihong Liu and Yiying Jiang.
Yiying ‘Jennifer’ Jiang is also involved with other firms that have ties to Sun. This includes previously serving as a director for DTV Limited, a firm connected to BitTorrent that’s owned by Sun. Additionally, Jiang also served as a director for Augustech LLC, a firm that was set up to provide services to Sun-owned Poloniex.
Jiang was also listed as the individual who owned Huobi Technology Europe Ltd. before it was dissolved. Sun has claimed he is only an advisor to HTX (formerly Huobi). Jiang was also a director for The TRON Network Limited and is the executive who signs the attestation reports for TrueUSD, in her role as an executive for Techteryx.
TrueUSD has previously denied that Sun owns the firm, but he was listed as an ‘Asia Market Advisor,’ and the former chief exec of the firm has alleged that Sun tried to acquire the stablecoin.
Belshe highlighted during an X Spaces that regulations prevent any shareholder from holding more than 1/5 of the trust firm. Interestingly, the corporate registry for BiT Global Trust Limited lists five shareholders, all based out of the same address in the British Virgin Islands:
- Digital Frontier Technology Limited
- Digital Matrix Technology Limited
- Digital Peak Technology Limited
- Digital Times Technology Limited
- Global Ayn Limited
The last one is particularly interesting because Sun is a well-known fan of author Ayn Rand.
The WBTC DAOs
Belshe while speaking in the Spaces call highlighted that there are two decentralized and autonomous organizations (DAO) that manage WBTC.
There’s a small DAO that approves merchants and a large DAO that, according to Belshe, “owns the smart contract” and “picks, you know, how we do custody of this thing.”
Despite this claim, it doesn’t seem that the large DAO was consulted on this change in custody for WBTC.
There was further confusion during the Space, with Belshe originally claiming that WBTC has no ‘freeze’ function. However, a member of one of the DAOs later claimed that there’s a way for the DAO to freeze all tokens.
A review of the smart contract for WBTC on Ethereum does include a ‘pause’ function, but it would pause all tokens. Belshe probably meant no ability to freeze a single address like Circle, Tether, or other stable-asset issuers.
Protos reached out to BitGo for comment on why the large DAO has not voted for this change, and whether or not a freeze function exists but it was unwilling to respond on the record before publication.
Why does this matter?
There were very few details shared in the press release that announced this new WBTC joint venture about how custody and control of the keys will function. It stated that this transition would result in “diversifying both custodial jurisdictions and locations for the underlying bitcoin,” and further noted that it “will continue to use the same BitGo multi-signature technology and deep cold storage, with the only difference being the ability to distribute keys in multiple locations around the world.”
In a recent X Spaces, Belshe provided some clarification on how the keys will be custodied, noting that BiT Global will have one of the primary keys and the backup key, while BitGo will have the second signing key. This seems to mean that if it used the backup key, BiT Global could potentially move these bitcoins.
Since the Space, BitGo and BiT Global have decided to modify the plan, now intending to hold one key with BiT Global, one with BitGo Inc. in the United States, and one with BitGo Singapore Ltd.
It seems Belshe is less concerned with the possibility of bad behavior from BiT Global, noting that its legal role as a custodian “means the client’s assets (in this case the WBTC treasury) is not the property of BiTGlobal, it is not on the balance sheet of BitGlobal, and that BitGlobal is not allowed to lend, use, rehypothecate the assets, or send them out to others like JS or anyone else.
“They also must keep the assets separate from the assets of other clients. Failure to properly safeguard could have legal and criminal consequences for the individuals at BiTGlobal. The community here should think long and hard about the value of this legal and regulatory structure, as it is one of the key strengths of WBTC and none of the would-be WBTC competitors have it at all.
“With every one of the competing products, they could lend out your assets or decide to ‘generate a yield’ and you’d have no recourse. That is not possible with WBTC under BitGo or BiTGlobal.”
WBTC represents $9.4 billion worth of value on Ethereum and $16 million worth of value on other chains. This value is used across DeFi, including in lending protocols and to collateralize stablecoins like Dai. If there were ever any issues with the custody of the bitcoin, this could cause far-reaching consequences across the ecosystem.
Protos has reached out to BitGo, BiT Global, and Justin Sun to get comments on these connections between BiT Global and Sun and to seek clarification on other issues. BitGo was unwilling to provide a response on the record while Sun and BiT Global have not responded.
Read more: Justin Sun proposes billion-dollar fund to save crypto
Sun’s Other WBTC
Belshe’s criticisms of “would-be WBTC competitors” are worth considering in light of Sun’s connections to a WBTC competitor.
Sun-owned Poloniex issues its own version of bitcoin on Tron and it’s vastly larger than the BitGo-associated WBTC on Tron.
This token doesn’t disclose where its bitcoins are stored and provides no details on the security setup for those bitcoins.
Furthermore, despite these issues, this token represents the majority of all bitcoin on ‘Sun-advised’ HTX.
It is unclear why people would be rushing to collaborate with Sun or businesses that are, at the very least, run by his dependable deputies given his current difficulties operating a wrapped bitcoin on Tron product.
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Source: https://protos.com/how-involved-is-justin-sun-with-bit-global/