Case asks if Asian last name is roadblock to land ownership

A Brooklyn entrepreneur who wants to build crypto-mining operations in Arkansas says the state is using a law designed to keep foreigners from buying up farmland to drive citizens with Asian names out of business.

Exhibit A in Jimmy Chen’s lawsuit against the state: A December 2023 news release by Gov. Sara Huckabee Sanders publicizing an investigation into Chen’s “significant ties to China,” a probe that Chen says ultimately torpedoed the purchase of his second cryptocurrency mining site. Chen, a U.S. citizen, came to this country when he was 10 years old.

Arkansas Act 636 and a companion law, Act 174, were passed soon after a Chinese surveillance balloon soared across much of the country, spurring legislators to outlaw foreign ownership of farmland and cryptocurrency operations, which are expanding in Arkansas due to cheap land and electricity. 

The laws technically prohibit entities based in any of the countries subject to a U.S. arms-control regulation from buying land, including China and Russia. Chen’s lawyers say Arkansas has used them to harass people based on little more than Asian-sounding names, however. State investigators targeted a large Walmart supplier, for example, including turning off its water and garbage services until learning the owner was actually a U.S. citizen from Tawain. 

“There's a way you can stir up populist sentiment by talking about foreign land ownership and China is a convenient target,” said Robert Chang, a University of California-Irvine professor who is representing Chen as executive director of the Fred T. Korematsu Center for Law and Equality.

Chen’s lawsuit may be the first to go to trial challenging laws now in half the states that prohibit foreign ownership of cropland. A federal judge issued temporary injunctions prohibiting enforcement of the Arkansas laws earlier this year, which the state has appealed to the Eighth Circuit Court of Appeals. 

Any resolution might overturn a century-old U.S. Supreme Court decision upholding a Washington law banning Chinese land ownership. That case, like the Korematsu decision allowing the internment of Japanese-American citizens during World War II, has long been considered a constitutional aberration in need of being reversed.

Many of the current crop of foreign-ownership laws were passed in the wake of the 2023 Chinese surveillance balloon incident and specifically target Chinese owners, says the Committee of 100, a Chinese-American rights organization.

The Arkansas Constitution specifically protects the right of resident aliens to own land. The state believes it has gotten around that by banning land ownership only by foreign residents and companies. 

Chang agreed a general law against foreign ownership might pass constitutional muster. “But they’re targeting certain aliens,” Chang said.

Chen worked for Walmart in Arkansas early in his career, then returned to build various businesses including a crypto-mining operation now called Jones Eagle. His troubles began after the legislature passed acts 636 and 174, creating a new Office of Agricultural Intelligence within the Agriculture Department to investigate foreign ownership of cropland. Anti-Asian sentiment was high at the time. In legislative discussions, Sen. Bryan King compared the opening of a cryptocurrency operation in one town with being “Pearl Harbored.”

The state soon drew up a list of suspicious transactions, and Chen’s among them, although his lawyers allege most of the tips came not from the Agriculture Department but state politicians, news articles and other sources. One target was a 378,000 square-foot factory owned by Olivet International, a Walmart supplier owned by a Taiwanese immigrant. The Arkansas Chamber of Commerce called it a “nearly a colossal screw-up” after the state acknowledged the plant actually was owned by an American citizen and avowed foe of China.

Gov. Sanders also accused Risever Machinery of being “linked to the CCP” or Chinese Communist Party. In fact, the family-owned machine-tool maker had been recruited to Arkansas with a $1 million grant by previous Republican Gov. Asa Hutchison. The AG’s office ultimately found the claims of Chinese government control baseless.

Sponsors of these laws say they address national-security concerns by preventing hostile foreign interests from gobbling up farmland needed to provide food for American consumers. But Chen’s lawyers say the Arkansas law, along with another one specifically targeting Chinese-owned cryptocurrency operations, has been used to harass U.S. citizens based on nothing more than their Asian last names. 

In the lawsuit, they cite internal communications in which a staffer in the governor’s office acknowledged the state hadn’t proven Olivet was Chinese-owned but would “rather have a media hit and have to walk it back later” than wait to nail down the connection, which turned out to be false.

Chen’s legal team suggests the tip to the Attorney General’s Office may have come through Rep. Bart Schulz, who “began coordinating an investigation together with the seller Matt Reynolds” and exchanged texts on its progress with Alexandra Benton, a lawyer under Attorney General Tim Griffin. (Schulz didn’t respond to a request for comment.) Chen had an agreement to purchase a second crypto-mining site when Benton issued subpoenas to Jones Eagle, the seller and the title company, seeking records and communications regarding Jones Eagle’s ownership and details of the transaction. 

The day before the transaction was supposed to close in February 2024, Benton told Reynolds’ lawyer she planned to “pull the trigger” on the subpoenas. The lawyer emailed back to say the transaction had been cancelled and Benton responded with a single word: “Perfect.” A Texas cryptocurrency operator later bought the adjacent property for a much higher price, Chen’s lawyers said, with no apparent interference from the state.

In March 2024, Reynolds texted Rep. Schulz, “So far everything is stopped I don’t know if they actually found out if they were Foreign Entities or not but all the Information about there [sic] names and stuff were.”

Chen said he is the controlling shareholder of Jones Eagle, although there are minority shareholders he declined to identify. Earlier this year, U.S. District Judge Kristine Baker issued an injunction against enforcement of acts 636 and 174. In her order, the judge concluded “it is at least arguable” Jones Eagle violates Act 174, since the law prohibits any Chinese ownership, no matter how small. But she concluded acts 636 and 174 conflict with federal regulation of foreign investments in the U.S.

By avoiding the constitutional question, Judge Baker is delaying resolution of longstanding disputes over how far states can go in prohibiting foreign ownership of land. In a 1923 decision, Terrace v. Thompson, the U.S. Supreme Court upheld a Washington law that barred aliens “ineligible for citizenship” from owning land. At the time, federal law prohibited Chinese immigrants from obtaining citizenship, unlike immigrants from most other countries.

The 1923 decision seemed to conflict with the court’s landmark Yick Wo v. Hopkins decision in 1886 that struck down a California law that excluded Chinese immigrants from the laundry business. And in years after, the court struck down laws barring immigrants from fishing and practicing law and an Oregon law barring foreign citizens from buying property unless their home country extended the same inheritance rights as the U.S. But Terrace is still on the books.

The 11th Circuit Court of Appeals cited Terrace when it refused to strike down a Florida law barring Chinese residents from buying land, saying “it doesn’t matter how `moth-eaten’ the foundation” of that decision is. The appeals court also sidestepped the core constitutional question, however, ruling the plaintiffs didn’t have standing because they lived in Florida and couldn’t show they would face prosecution.

For now, Arkansas is committed to defending the laws. In a statement, AG Griffin said “we appealed the district court’s decisions in both cases and continue to vigorously defend the constitutionality of Acts 636 and 174.” At least one judge at the Eighth Circuit seemed to sympathize, telling a lawyer for the Crypto Mining Association at an Oct. 20 hearing he considered the injunction “way overbroad” and the plaintiffs should wait until the state enforces the law against someone before challenging it.

Others in Arkansas have an interest in supporting Chen, who has said he pays $10,000 a month in taxes on his crypto-mining business. Electric utilities welcome the crypto miners, because they not only buy lots of electricity, but can balance loads on the grids by turning on and off in response to shifts in demand. Several publicly traded crypto-mining firms appear to be avoiding the state, given the difficulty of proving none of their shareholders live in restricted countries.

The conservative Cato Institute filed a brief with the Eighth Circuit, saying the laws “draw overbroad, slapdash classifications that subject aliens from two dozen countries to second-class treatment.”

Chen’s lawyer Chang said his client’s main complaint is Arkansas has interfered with his business while letting others, like the Texans who bought a property next to the one he lost, operate with no apparent oversight.

“He’s being harmed because of the cloud he is under whereas somebody else is able to come in and do the same kind of business,” Chang said.