Yay, it happened! Jim Rogers got burned by hyping North Korea!

And just like that, crackpot investment advisor Jim Rogers joins the distinguished company of Hyundai Asan, Volvo, Yang Bin, David Chang and Robert Torricelli, Chung Mong-Hun, Roh Jeong-ho, and Orascom’s Naguib Sawaris, all of whom won Darwin Awards in North Korea. I’ve previously written about Rogers and his enthusiasm for North Korea and its worthless currency. That OFK post caught the eye of a New York Times reporter, who has just published a story on the relationship between Rogers and his self-described business partner, a Chinese entity called Unaforte:

“It’s very exciting. The kid has been opening up North Korea,” Mr. Rogers said in an interview, referring to Kim Jong-un, the country’s ruler.

But North Korea can be a murky place to tread — as Mr. Rogers’s experience shows.

A Hong Kong company called Unaforte that is involved in several North Korean businesses named Mr. Rogers as a shareholder a year ago, according to a corporate filing. Investing in a North Korean business like that would probably violate American sanctions if it happened now, though experts say it was legal at the time. [NYT, Patrick Boehler & Ryan McMorrow]

In this case, “experts” means me. Rogers’s investment came just a month before President Obama signed Executive Order 13722, which imposed sectoral sanctions on North Korea’s transportation, mining, energy, and financial services industries. That E.O. was enough to drive investor and fund manager James Passin out of North Korea. Before that, however, our threadbare North Korea sanctions probably didn’t prohibit what Rogers did. Still, staying one step ahead of the law doesn’t mean one isn’t stepping in something.

Mr. Rogers said he gave Unaforte $100 as a token of good will but never expected that it would name him as a shareholder. Asked about his stake in the company in October, he interrupted an interview with The New York Times to call Unaforte and told the English-speaking sister of its founder that the company had agreed he could not be a shareholder.

Speaking into his phone, Mr. Rogers said, “I know I have told you, ‘Never, never, never.’”

Unaforte no longer lists Mr. Rogers as a shareholder in its filings but will not release shareholder records that might show more details about the shares given to Mr. Rogers. Officials at Hong Kong’s corporate registry said they were investigating whether Unaforte is complying with the city’s disclosure laws. Unaforte did not respond to emailed questions for comment. [NYT]

The Times chronicles how Rogers quickly distanced himself from Unaforte once its reporters started asking questions (“I make speeches for hundreds of people.”). At one time, Unaforte featured Rogers prominently in its promotional materials. Its founder, Zhao Chunhui, calls himself “Jim Rogers’s business partner in China.” Then, a Unaforte website marketing its North Korea investments — a bank, an office park, and a stake in a gold mine — “went offline after The Times began to ask about its businesses.” On March 17, 2016, two days after President Obama signed EO 13722, Rogers wrote to Unaforte, asking “that it return his $100 and take back an unspecified number of shares.”

To make matters worse, Unaforte also drew a mention in the latest report of the U.N. Panel of Experts, for setting up a bank in the Rason Special Economic Zone. Sorry, my WordPress installation doesn’t read hanja:

221. A Hong Kong, China, company, Unaforte (?????????), with a Yanbian branch (?????) established the First Eastern Bank (????) in Rason in 2014 as a subordinate enterprise to provide financial support and loans to Chinese investors in mining and real estate projects in Rason (see annex 15-11). The bank is licensed by the Central Bank of the Democratic People’s Republic of Korea (see annex 15-12) and provides loans to Chinese individuals and companies in the Rason area. In its promotional materials, Unaforte claims: “The [First Eastern] Bank is fully independent and does not require proof of identity. It is not subject to the jurisdiction of China or [the] Democratic People’s Republic of Korea and is not required to report to the Chinese government or the Democratic People’s Republic of Korea government!” (see annex 15-13). The Panel notes that foreign nationals holding accounts in banks of the Democratic People’s Republic of Korea would be a violation under resolution 2321 (2016).

Under sanctions adopted by the U.N. Security Council last year, the Far Eastern Bank must now be closed. Specifically, Paragraph 31 of UNSCR 2321, adopted on 30 November 2016, requires Member States to close all existing representative offices, subsidiaries or banking accounts in the DPRK within 90 days. UNSCR 2270, paragraph 33, requires Member States to “prohibit in their territories the opening and operation of new branches, subsidiaries, and representative offices of DPRK banks,” to “prohibit financial institutions within their territories or subject to their jurisdiction from establishing new joint ventures,” except with a U.N. Committee’s advance approval, and requires member states “to close such existing branches, subsidiaries and representative offices, and also to terminate such joint ventures [and] ownership interests.”

Previously, Leo Byrne of NK News also reported on Unaforte’s exports of gold jewelry to Hawaii. The gold was allegedly mined in North Korea; thus, exports to the U.S. could have violated a 2011 executive order prohibiting imports from North Korea, except pursuant to a Treasury Department license. Rogers comes across looking like a fool, a charlatan, and a generally amoral person, but from a strictly legal perspective, not even he can be faulted for ex-post facto sanctions violations. There’s no evidence that Rogers knew of the gold jewelry exports to the U.S., but if he did, that might be his greatest legal risk.