The New York Times: Lawyer Kyle Roche and the video controversy with Ava Labs, who is the mastermind behind it?

Original title: "He Went After Crypto Companies. Then Someone Came After Him."

Original author: John Carreyrou

Translation by: Qianwen, ChainCatcher

The mantis stalks the cicada, unaware of the oriole behind.

Kyle Roche was a rising star in the field of cryptocurrency law - until his career took a turn for the worse. Who orchestrated the downfall of this promising star?

In a secretly recorded video, lawyer Kyle Roche describes his close relationship with his cryptocurrency clients.

I. Rising Star

By the end of January 2022, when Kyle Roche arrived in London, he was making waves. Despite being only 34 years old, he was already one of the seasoned players in the emerging field of cryptocurrency litigation. He had his own law firm bearing his name and had filed lawsuits against over a dozen cryptocurrency companies, including one notable case that resulted in a substantial judgment against Bitcoin's alleged founder.

Now, new opportunities were beckoning him.

Two businessmen arranged for a plane to pick up Roche from Miami to discuss investing in a new business venture he was in the process of forming. A car brought him to a luxurious townhouse in Mayfair where they would meet.

That evening, Roche had dinner with one of the men who introduced himself as Villavicencio, hailing from Argentina. They chose one of London's most luxurious restaurants - Jean-Georges at the Connaught Hotel.

Roche said that when he woke up the next morning, he felt dizzy. He couldn't remember anything except being very certain that he had spotted Ager-Hanssen, a Norwegian man who claimed to be Villavicencio's business partner, lingering at a nearby table. The feeling of dizziness struck him as odd because he didn't think he had drunk too much. Several days later, when Roche flew back to Miami, he still couldn't shake off the feeling that something was not right.

A few months later, one day in the summer of last year, Roche's world started to crumble. A website called Crypto Leaks released over twenty secretly recorded videos of his meetings with Villavicencio and Ager-Hanssen.

These videos portray Roche and his law firm, Roche Freedman, as tools for making money from cryptocurrency clients. In one clip, Roche reveals that the client is a company called Ava Labs, which provided him with millions of dollars worth of digital tokens, making him grateful to the company and its founder, whom he compares to his own brother.

In other video clips, Roche gives the impression that he only cares about promoting the interests of Ava Labs, even when representing other clients. He boasts of successfully diverting regulatory investigations into Ava Labs and suggests that his lawsuits against other cryptocurrency companies are aimed at hurting Roche's competitors.

In Jean-Georges' video, Roche appears heavily intoxicated, waving his hands, cursing, and calling the jurors idiots.

In the initial shock, Roche realizes he has a big problem on his hands. These videos make him look corrupt and unethical. In an attempt to defend himself, he publishes an article on Medium, claiming that the videos were illegally obtained, taken out of context, and denying any collusion with Ava Labs.

But it's too late. One after another, companies sued by Roche file motions to disqualify his firm from their cases. In October, the first motion is successful: a federal judge in New York removes Roche Freedman from the case against Tether, the most widely used stablecoin operator in the world.

Within days, Roche is forced to resign from the law firm he founded. He says that with the collapse of his career, he has taken an ethics course and started seeing a therapist.

Roche's downfall is a result of his loose tongue and overly close relationships with clients. But he is also a victim of an international trap. Who is the mastermind behind it all?

II. The New Sheriff in the Cryptocurrency World

Roche grew up in a working-class family in Buffalo. He is the oldest of four siblings and shared a bedroom with his intellectually disabled twin brother. Witnessing his siblings struggle with even simple tasks while he excelled in school, Roche felt guilty but determined to succeed in order to support them one day.

In the fall semester of 2013, after entering Purdue University and working as a management consultant for several years, he entered the Pritzker Law School at Northwestern University. During this time, he became fascinated with cryptocurrencies. According to his classmates' recollection, he would constantly check the bitcoin prices on his laptop during class. Roche cashed out before the token prices plummeted, earning a profit of approximately $100,000. He used this money to pay for his tuition.

At the time, Roche was in his junior year and collaborated with a professor to write a paper discussing the advantages of bitcoin as the first government-free currency. The article was later published by the Wall Street Journal.

He said, "That was the first time I thought, maybe I can do something with this."

At that time, Roche was a first-year lawyer at Boies Schiller Flexner. He was starting to make a name for himself as a cryptocurrency prodigy. After The New York Times article was published, a colleague from Miami approached him with a bitcoin-related case - he seized the opportunity.

In this case, a person named Ira Kleiman confronted the Australian computer scientist Craig Wright, who claimed to be the mysterious creator of bitcoin, Satoshi Nakamoto. Kleiman sued Wright for defrauding his brother, David (a paralyzed computer forensics expert who passed away in his 40s), and profiting from billions of dollars' worth of bitcoin they mined together in the early days.

The whole incident was shrouded in mystery: there was evidence suggesting that Wright and David were indeed friends, and reportedly, David always had an encrypted hard drive around his neck, potentially containing the password to a bitcoin wallet. However, many believed Wright was a fraud, questioning his claim to mining early bitcoin blocks, let alone defrauding others of their money.

For Roche, that's what made this case intriguing. If he could compel Dr. Wright to hand over his documents during discovery, he might be able to unravel the biggest mystery surrounding bitcoin: the true identity of Satoshi Nakamoto. Roche and his colleague, Velvel Freedman, soon devoted most of their time to this case.

In 2019, with the Kleiman case gradually heading to trial, Roche encountered a new client who was entangled in a dispute with a cryptocurrency company. In just a few days, he negotiated a lucrative settlement on behalf of the client. As a token of gratitude, the client agreed to invest $7.5 million in Roche and Freedman to start their own law firm. Initially, Roche operated the company in a co-working space in Brooklyn, but later, due to the pandemic, he joined Freedman's team in Miami. Their company, Roche Freedman, quickly made a splash.

At that time, many start-ups were issuing new coins, riding the wave of Bitcoin, driving up prices, and eventually causing a crash. This reminded him of a very common stock market scam called "pump and dump," where fraudsters would publish various information online to inflate prices, and then sell short before the prices drop, taking all the profits.

Since regulatory agencies seemed to take no action, Roche decided to take matters into his own hands. On April 3, 2020, Roche Freedman filed a lawsuit against seven digital currency issuers, seeking class-action status, claiming that they used false statements to inflate the prices of unregistered securities, and then dumped them, causing retail investors to suffer losses.

The company also sued four cryptocurrency exchanges for facilitating issuers and provided some legal arguments for lawsuits against Binance and Coinbase by the U.S. Securities and Exchange Commission.

These lawsuits were just the beginning: 16 months later, Roche filed the largest securities fraud case of his career. The case accused British entrepreneur Dominic Williams and his controlled entities of defrauding investors out of billions of dollars through aggressive promotion and sale of a digital coin claiming to revolutionize computing.

Williams boldly claimed that his Internet Computer blockchain (a decentralized computer network powered by a digital token called ICP) would replace the large cloud services provided by Amazon and Microsoft as the primary computing platform for humanity. After the launch of ICP, the price skyrocketed, making it one of the most valuable cryptocurrencies, but later plummeted by 92%—Roche's lawsuit attributed this collapse to massive selling by Williams and other insiders. (Williams denied these allegations).

If cryptocurrencies are the Wild West of the financial industry, Roche has declared himself the new sheriff. But he will soon learn that where there is a sheriff, there are also enemies.

III. Massive Judgement

Emin Gun Sirer operates Ava Labs, a cryptocurrency company in which Roche has acquired equity, and its tokens were worth millions at their peak.

Around the time when Roche was handling his first pump and dump lawsuit, he met Emin Gun Sirer, a computer science professor at Cornell University, who incubated his own cryptocurrency project at the Brooklyn co-working space where Roche initially worked. Roche agreed to provide legal services to Dr. Sirer's company in exchange for equity and a small percentage of its planned cryptocurrency token issuance.

This arrangement is not uncommon in the tech industry. Roche's former boss, David Boies, had a similar agreement with Theranos, the blood-testing company whose founder, Elizabeth Holmes, was later convicted of fraud. Scandals involving Theranos and another client, Harvey Weinstein, severely damaged Boies' reputation, but for Roche, he remains a role model.

When Roche entered into the deal with Dr. Sirer in September 2019, he was unsure if the doctor's project would succeed. At that time, the tokens in his possession were worth less than 3 cents each.

A year later, Sirer's blockchain, Avalanche, officially launched. As the cryptocurrency market heated up, the price of the AVAX tokens skyrocketed, surpassing $100, and Roche became a multimillionaire.

Roche and Roche's compensation agreement should have been confidential, but anyone looking to gather information about him can quickly find relevant information. In February 2021, Roche Freedman fired one of its partners, Jason Cyrulnik. In retaliation, he disclosed the share of each partner in AVAX tokens through a lawsuit.

In the fall of the same year, the Kleiman v. Wright case was tried in a U.S. District Court in Miami. Roche delivered a fierce opening statement, repeatedly directing blame towards Dr. Wright.

Ultimately, the trial did not resolve the question of whether Dr. Wright actually invented Bitcoin. However, the jury ordered him to pay $100 million in compensation to Ira Kleiman, who inherited a company from his deceased brother. (The judge later added $43 million in interest.) Roche's law firm earned over $10 million in fees.

With the conclusion of the Kleiman trial, Roche turned to a project he had been discussing with Dr. Sirer: Ryval, a company that helps people raise funds on Avalanche to pay for lawsuits. Roche sees it as a for-profit crowdfunding platform targeting litigation, believing it can create a fair legal competition environment between individuals and large companies.

But as he plans his new venture, someone is plotting his downfall.

Chapter 4: The Hongmen Banquet

Norwegian venture capitalist Christen Ager-Hanssen is one of the people who invited Roche to London.

According to copies of emails reviewed by The New York Times, in December 2021, Roche received an email from an acquaintance introducing him to Villavicencio. Villavicencio claimed to be a colleague of Ager-Hanssen, a venture capitalist who was interested in Roche's new project. Roche didn't know who these two individuals were, but he welcomed the approach: he was raising funds for Ryval, a project that had garnered some attention in the cryptocurrency media.

After a phone call, Roche agreed to fly to London next month with their funding.

They met in Ager-Hanssen's office, and things quickly took a strange turn: according to Roche, Ager-Hanssen pressed his index finger to Roche's forehead—"I don't think it was a gun gesture, but I think he was trying to intimidate me"—and said that if he was going to invest with him, he needed to understand all of Roche's capabilities.

Looking back, Roche wished he had walked away at that moment. Instead, he took it as a cue to sell himself even harder. According to Roche, Ager-Hanssen spent the next few hours coaxing him into boasting about his relationship with Ava Labs, while Villavicencio, sitting across from him, secretly recorded him.

Ager-Hanssen used information he had gathered from the lawsuit filed by Roche Freedman, his fired partner, to trick Roche into thinking he already had access to 1% of Avalanche's AVAX token supply. At the time, this was equivalent to more than $100 million. (Roche claims he exaggerated the 1% figure, and the AVAX tokens later dropped 80% in value).

Ager-Hanssen then asked Roche for examples of how he would be influential at Ava Labs.

In the video, Roche talks animatedly, saying, "I make sure the S.E.C. and C.F.T.C. have other companies to worry about." "Lawsuits can be a weapon in the arsenal of competition."

Image source, CryptoLeaks

He said that on the night when Roche arrived at Jean-Georges, he found Villavicencio waiting at a table with a drink beside him. Roche remembered Ager-Hanssen arriving about 15 minutes later and sitting at a nearby table with a tall, blond man. Roche said he had no memory of the rest of the evening. He now believes that there were drugs in the drink, although he has no evidence.

In a video clip from the restaurant, Roche boasts about his power to use lawsuits to bring down companies. In another video, Villavicencio asks him if Ava Labs has sued any of its competitors. Roche answers, "No, they have me do it in the form of class-action lawsuits." This suggests that he was instructed by Ava Labs to file class-action lawsuits against other cryptocurrency companies.

After dinner at Jean-Georges, Roche never saw Villavicencio again, although he had a final meeting with Ager-Hanssen in New York.

On August 26th, Roche was attending a wedding in California when one of his clients saw the videos from CryptoLeaks on Twitter and sent him a link.

He was shocked and quickly tried to find out when and where these videos were recorded. Once he had a general understanding of the situation, he called Freedman and contacted clients to control the situation from escalating.

Roche's biggest concern is his statement that he filed the lawsuits to harm Ava Labs' competitors and divert regulators' attention. He said it was baseless boasting and that he only wanted to leave a good impression on potential investors because of his humble background. He said he had started preparing the first batch of lawsuits a month before he met Dr. Sirer, the founder of Ava Labs.

Dr. Sirer denies any involvement with these lawsuits or Ava Labs, stating that he strongly opposes some of the lawsuits. Six weeks before Crypto Leaks released the video, Ava Labs' general advisor wrote an article criticizing one of Roche Freedman's lawsuits as baseless.

To protect his law firm, Roche withdrew from participating in Roche Freedman's lawsuits against cryptocurrency companies, sold his shares in Ava Labs back to the company, and stopped representing the company. (Roche refused to disclose whether he profited from this sale).

But he realized that these actions were not enough, so he resigned from the company, which was renamed Freedman Normand Friedland.

The elusive mastermind Roche hid under the Williamsburg Bridge in Brooklyn, where he stayed for some time after the video emerged in August.

From Gili Benita, The New York Times

One week after the video surfaced, Roche suffered another blow. According to an affidavit later submitted to the court, a friend of one of his colleagues reported hearing rumors of Roche being in mortal danger during a cryptocurrency event. Frightened, Roche and his fiancée hid in a short-term rental in Brooklyn.

Roche felt like his world was collapsing. He said he couldn't sleep or eat properly and lost 10 pounds. Weeks later, he and his fiancée returned to Miami but still worried about their safety and chose to move to a rental apartment owned by a relative.

When Roche's business was impacted, Ager-Hanssen called for the revocation of Roche's legal qualification and published a report about Roche on Twitter, which largely repeated the allegations of Crypto Leaks. He also sent an email to former Roche Freedman partner Cyrulnik, offering to help him substantiate his accusations against Roche and its former company.

For Roche, the whole thing is self-evident: Ager-Hanssen set him up.

In an interview, Ager-Hanssen denied this. He said, "This was not at all an action under my control; it was done by others." He said he was really interested in investing in Ryval, and Villavicencio filmed those videos in his office without his knowledge, and he wasn't even at the Jean-Georges hotel that night. Ager-Hanssen said he believed he knew who the mastermind was, but he wasn't willing to reveal their identity.

Villavicencio seems to have disappeared. He cannot be reached through the phone number and email address he left with Roche.

Ager-Hanssen said he doesn't know Villavicencio's whereabouts. He said he only met this person a few weeks before coming to London for Roche and suspects that Villavicencio may not be his real name. "He is a non-existent person," he said.

However, besides running his venture capital firm, Ager-Hanssen has long had a sideline of digging up scandals involving wealthy businessmen trapped in commercial disputes in the United Kingdom and the Scandinavian Peninsula.

On multiple occasions, he secretly recorded his targets. For example, in an interview in 2014, he described how he used a hidden microphone to induce a Swedish financier's opponent to boast about employing former intelligence officers from the CIA, MI6, and Israeli intelligence and special operations agencies.

But if Ager-Hanssen did indeed frame Roche, then who hired him to do so—and why?

V. A series of clues

The British entrepreneur Dominic Williams is a litigation target of Roche, and he says he appreciates the reporting of Crypto Leaks. From Stephen McCarthy/Sportsfile, Getty Images

Many people have reasons to celebrate the downfall of Roche.

At the top of the list is Dr. Wright, who claims to be Satoshi Nakamoto, and the gambling tycoon Calvin Ayre who provided funding for Dr. Wright. Dr. Wright quickly used these videos to file an unsuccessful motion to disqualify Roche in the Kleiman case. After the videos were exposed, Ager-Hanssen became the CEO of nChain, a company funded by Ayre and hired Dr. Wright as the Chief Scientist.

Through a female spokesperson, Ayre acknowledged that he and Dr. Wright were thrilled when the videos were exposed. But they denied any involvement in the London fraud.

Roche believed them because they thought they knew who hired Ager-Hanssen: Williams, the British entrepreneur, was the main target of Roche Freedman's high-profile liquidation case.

A series of clues recorded in court documents by his former law firm led Roche to this conclusion. The first clue is that on May 12, 2022, Williams wrote on Twitter that he came for his critics. On the same day, the domain cryptoleaks.info was registered.

On June 9, 2022, the Crypto Leaks website went live. The website claims to be a defender of the "integrity of the cryptocurrency community" and published two reports defending Williams' interests. The first report supports Williams' previous complex theory about the collapse of the ICP token on Twitter.

The second attack was directed at an article published by The New York Times about the sharp drop in ICP prices. Williams posted a link to the Crypto Leaks report on Twitter, describing it as shocking. Dfinity Foundation is a Swiss nonprofit organization created by Williams to oversee its blockchain, and the foundation has filed a defamation lawsuit against The New York Times in New York (The New York Times is seeking to have the lawsuit dismissed).

Roche's video is the core content of Crypto Leaks' third exposure. After the release of these videos, Williams and Dfinity filed a motion to disqualify Roche Freedman as the plaintiffs' attorney in the case, claiming that Roche's statements showed a blatant disregard for the integrity of the judicial system.

In opposition to the motion, Roche's former company alleges that Williams is the mastermind behind the cryptocurrency leaks and accuses him of deep-faking the videos shot by Jean-Georges. It also accuses Williams of spreading rumors about threats to Roche's life.

Dfinity and Williams' spokesperson, Pete Padovano, deny that any death threats were made by the foundation. When asked about his connection to Crypto Leaks, Williams said: We appreciate Crypto Leaks' reporting, and we believe their articles speak for themselves.

Roche had a low profile last autumn but has recently been rebuilding his career as an independent practitioner.

In April of this year, he won a $12.5 million judgment representing six former Cantor Fitzgerald partners who sued the company for withholding their compensation. The appeal of this judgment by Cantor opened the way for Roche to file a separate class-action lawsuit against the company. Roche also represents dozens of investors in disputes with Binance.

However, Roche's video statements continue to haunt him and his former company. Last month, the judge overseeing the fraud case granted Williams' motion and disqualified Freedman Normand Friedland from serving as plaintiffs' attorneys.

The judge's reasoning is that Freedman and Roche have a long-standing friendship and they jointly control a cryptocurrency wallet with over one million AVAX tokens. He also expressed concern that the law firm has significant malice towards Williams, which could result in rejecting reasonable settlement proposals.

Unless the lead plaintiff is able to recruit a new lawyer by August, the lawsuit is essentially difficult to overturn. In Roche's view, the conspiracy against him is operating perfectly.