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Marine Chain

Date:: 2018

Tags:: 💼

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  • "Registered in Hong Kong on 12 April 2018, Marine Chain Platform Limited 40 was set up as a blockchain-enabled platform for vessel transactions that offered partial ownership of maritime vessels in exchange for digital tokens. According to a Member State, Marine Chain had ties with the Democratic People’s Republic of Korea, and at least one company employee had links to Democratic People’s Republic of Korea cyber actors who have extorted Bitcoin from online companies. The Member State further indicated that Marine Chain’s start-up funds likely came from the extortion of cybercurrencies."

  • "In terms of the company’s financial operations, Foong undertook multiple transfers on behalf of Kim from his company account in a Singaporean financial institution. Foong stated, “I would use my Singclass account (which is my business separate from Marine Chain) to make some of these payments upon receiving payments from Tony and upon Tony’s instructions to pay them. This was because the Singclass account was the only USD account that I had”. The payments into the account from Kim (in amounts ranging from - $30,000 to - $150,000) were all done through Hong Kong front companies, with a separate company used for each transaction. The payments processed by Foong through Singclass Interna tional Pte Ltd included some that appeared suspicious (see annex 29). A summary of further findings on this case is contained in annex 27. "

The UN Security Council's 2019 Midterm Report included:

The Panel takes positive note of information provided by Member States on action that they have taken to counter losses due to attacks by Democratic People’s Republic of Korea cyber actors (see annex 23). Asset-backed cryptocurrency company using blockchain technology to generate revenue

Registered in Hong Kong on 12 April 2018, Marine Chain Platform Limited was set up as a blockchain-enabled platform for vessel transactions that offered partial ownership of maritime vessels in exchange for digital tokens. 41 According to a Member State, Marine Chain had ties with the Democratic People’s Republic of Korea, and at least one company employee had links to Democratic People’s Republic of Korea cyber actors who have extorted Bitcoin from online companies. The Member State further indicated that Marine Chain’s start-up funds likely came from the extortion of cybercurrencies. The Panel investigated Marine Chain for evasion of financial sanctions and the prohibition of cooperative entities pursuant to paragraph 18 of resolution 2375 (2017).

Marine Chain Platform Limited was closed on 17 September 2018. Information from the Investor Deck and other company documents describing its business plan and activities are contained in annex 24.

The Panel’s investigation found that, while Captain Jonathan Foong Kah Keong was formally listed as the Chief Executive Officer of Marine Chain Platform Limited (Hong Kong Companies Registry No. 2679578), in reality, Julien Kim was the owner, sole investor and de facto Chief Executive Officer, directing all company activities through orders that he gave to Foong and other consultants. All documents and communications issued by Kim were done in the name of his alias, “Tony Walker”, with the exception of an internal company phone list describing “Julien Kim aka Tony Walker” as “Brain child and main investor” and a consultancy contract that Kim had signed with Foong on 18 January 2018 to set out his responsibilities as Kim’s external face and facilitator, with a number of tasks relating to setting up the company and bank account and signing all official paperwork (see annexes 25–28).

In terms of the company’s financial operations, Foong undertook multiple transfers on behalf of Kim from his company account in a Singaporean financial institution. Foong stated, “I would use my Singclass account (which is my business separate from Marine Chain) to make some of these payments upon receiving payments from Tony and upon Tony’s instructions to pay them. This was because the Singclass account was the only USD account that I had”. The payments into the account from Kim (in amounts ranging from $30,000 to $150,000) were all done through Hong Kong front companies, with a separate company used for each transaction. The payments processed by Foong through Singclass Interna tional Pte Ltd included some that appeared suspicious (see annex 29). A summary of further findings on this case is contained in annex 27.

According to a Member State, such buying and selling of marine vessels through digital tokenization could facilitate the relatively anonymous ownership and management of vessels and enable investors to convert their share to other cryptocurrency platforms.

Foong has been active in the maritime industry in Singapore for decades and his company, Singclass, has served as the classification society for two Democratic People’s Republic of Korea-flagged vessels, the Hung Tae 1 (IMO No. 8604541) and the Pyong Hua (IMO No. 8510518). Foong was first approached by Kim in October 2017 when Kim presented himself as a blockchain expert who, according to Foong, “needed my expertise on shipping issues to ensure the success of this start up”.

The Curious Case of Marine Chain: The DPRK cyberscam

One curious example described in the Panel’s report is the case of Marine Chain. Registered in Hong Kong on 12 April 2018, Marine Chain Platform Limited was set up as a blockchain-enabled platform for vessel transactions and offered partial ownership of maritime vessels in exchange for digital tokens. On the Crunchbase database, the company is listed simply as a “next-generation global maritime investment marketplace enabled by blockchain technology,” intended to function as an asset tokenization platform and a digital asset exchange. Its main selling point: to allow vessel owners to “tokenize” ownership of vessels and list part of this asset for sale while allowing accredited individuals and institutions to purchase and trade fractional ownership of these marine assets. In essence, by investing in a Vessel Token Offering, an alternative cryptocurrency based on the Ethereum blockchain platform, investors would be able to own parts of ships and then trade with other buyers.

According to the UN report, in October 2018, a Member State informed the Panel that “a start-up company in the process of establishing itself as a Hong Kong-registered blockchain platform named Marine Chain has at least one DPRK individual behind it”. The same Member State also expressed concern that “the platform could be used to generate money for the regime and as a potential means of evading sanctions on shipping by creating a new method of obscuring the ownership of a vessel”. It also noted that Marine Chain “claimed to be an Etherium(sic)-based blockchain platform with its own crypto-currency token that will facilitate the buying and selling of marine vessels worldwide through digital tokenization”.

This led the Panel to launch an investigation into Marine Chain’s Chief Executive Officer, Singaporean national Capt. Jonathan Foong Kah Keon, on suspicion of violating paragraph 18 of UNSC Resolution 2375 (2017), which prohibits States and their nationals from operating any joint ventures or cooperative entities with the DPRK. The Panel also requested information on a suspected national of the DPRK]] who had been presenting himself as a Marine Chain adviser. In his correspondence with the Panel, Foong reportedly provided contradictory information and documentation that did not meet the experts’ evidentiary standards. He claimed that Marine Chain had been shut down, arguing, “the biz was closed because the owner/investor is not paying his bill”. Moreover, on the whereabouts of and his communications with the “owner/investor”, he stated “although I have informed the owner to foot all outstanding bills (Owning (sic) close to 500K US$) he remained silent and we lost communication shortly thereafter”.

It is unclear exactly how much revenue the company raised before it shut down six months later. While it was still active, its website, www.marine-chain.io, was promptly flagged by Reddit users as the exact replica of another site, www.shipowner.io. Additionally, it was shown to have been hosted at four different IP addresses since its registration, though it has since also been taken offline. Additionally, cybersecurity researchers from Inskit Group at Recorded Future in October 2018 released a report titled Shifting Patterns in Internet Use Reveal Adaptable and Innovative North Korean Ruling Elite, stating that Foong had been working to help North Korea evade international sanctions since at least 2013. According to this research, Capt. Foong’s Linkedin profile originally cited a decades-long career in the maritime industry in Singapore – although that profile, too, has now been taken down. Foong has reportedly spoken at numerous events, citing his position at Marine Chain or as the founder of marine-chain.io. Further research published by North Korea-specific policy research website 38North.org in 2015 reveals that Capt. Foong had been identified as either working for or advising companies in Singapore that “have facilitated illicit activity on North Korea’s behalf and that have dealings with UN-sanctioned entities” twice before – once, as an advisor to the Korean “Myohyang International Maritime Institute,” a company then owned by Leonard Lai, a known individual in North Korea’s Singaporean network, and a second time as a Director for the Mongolia Ship Registry Pte. Ltd. in Singapore, which at the time was associated with Sovereign Ventures, another entity linked to “flag of convenience” schemes that routinely used the national flag registries of third countries to obfuscate DPRK-linked vessels or mask illicit North Korean operations at sea.

Alas, as with all things DPRK, the complexities of these associations run deep. The connections to Marine Chain and the discoveries behind it may not be the first time North Korea has turned to cryptocurrencies to circumvent punitive measures, but they do mark the first documented case in which the worlds of maritime sanctions, shipping and blockchain technology converge. This comes as no great surprise – as the UN Panel itself has stated, cryptocurrencies are harder to trace, can be laundered multiple times, are processed in a distributed manner rather than through a central authority and, above all, are (still) independent from government regulation. But perhaps even more significantly, the apparent use of cryptocurrencies by North Korean actors to generate funds for the Kim regime by paying directly for goods, services and resources that are explicitly prohibited by international sanctions is an evident sign of the ever-shifting sandscape that is the sanctions world, and demonstrates yet again that the DPRK is not only willing, but also very able to adapt to new challenges by embracing emerging technologies as part of its strategy to stay ahead of the sanctions curve.

Meanwhile, in Pyongyang, plans are going ahead for an international blockchain and cryptocurrency conference scheduled for 18 to 25 April 2019. Though no other details of the agenda are provided, for €3,300 (£2,900), conference attendees are invited to come together to “share their knowledge and vision, establish connections and discuss business opportunities” around these topics, while also being treated to a seven-day tour of the country. As part of the package, delegates will receive an all-inclusive stay in North Korea, replete with activities such as skating, bowling, shooting and shopping. The cryptocurrency conference concludes with a trip to the Daedonggang Beer Factory on the seventh day.

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