Crypto Bros Need to Stop Proving Jamie Dimon Right

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Do Kwon is not on the run. We know that because the cryptocurrency founder said so. Singapore authorities announced that hes no longer in their country, a South Korean court issued a warrant for his arrest, and Interpol put out a Red Notice. But that doesnt mean hes ready to reveal his whereabouts, or his legal strategy to fight the charges.

Kwons outfit is called Terraform Labs. Its one of dozens of blockchain startups built to reinvent the global financial system and challenge the fiat-based structure which has central banks atits core. Itsspin on the theme was to build a stablecoinon top of its Terra blockchain.

Instead of being backed by holdings of afiat currency like the more-famous Tether which claims to hold one US dollar for each Tether minted TerraUSD achieves price-stability via an elastic money supply.In its White Paper, the stablecoins instigators notethat the extreme volatility of Bitcoins price is Terras raison d’etre.

At the core of how the Terra Protocol solves these issues is the idea that a cryptocurrency with an elastic monetary policy would maintain a stable price, retaining all the censorship resistance of Bitcoin, and making it viable for use in everyday transactions.

Theres just one, slight, $60 billion problem. The algorithm didnt work. The peg didnt hold. TerraUSDs price collapsed, as did that of the associated Luna token. And holders of these tokens got wiped out.

That was in May, and now Kwon is on the lam. Except, he says he’s not. And he also says his nobodys business where he is, unless youre a friend, plan to meet, or are playing a location-based game (that last one is a joke, we think).

Running a bad business is not against the law. Losing $60 billion of customers money in itself is also not a crime. But authorities in Seoul are convinced he did something wrong, and seek to charge Kwon and five others for breaches of capital markets laws.

Having failed to get him to front up, South Korea went one further and asked Interpol to help, which they did, requesting law enforcement worldwide to locate and provisionally arrest a person pending extradition, surrender, or similar legal action.

This international game of cat and mouse isnt a good look for Kwon, or crypto executives anywhere.

For more than a decade, proponents have fought to shake off cryptocurrencies image as a frontier for criminals, digital blackmailers, drug lords and international arms smugglers. Yet every time the head of a cryptocurrency outfit legitimate or not drags their feet on explaining what happened to their collapsed business, or fails to outlinea legal defense to any criminal charges, theyre giving fodder to the naysayers.

They are decentralized Ponzi schemes, Jamie Dimon, chief executive officer of JPMorgan Chase & Co.,told Congress last week. Its not helpful to Kwons cause,or that of cryptocurrenciesmore broadly, that his refusal to give his whereabouts comes just as a poster child for the old-school, central-bank run fiat system points fingers at an entire industry.

To be fair to Kwon, he’s not alone. Numerous other trailblazers have faced allegations and prosecution. Some were outright scoundrels, some sailed too close to the wind, and others were victims of regulators inability to keep up with changing times. And it remains an ongoing debate which of these categories some of the more high-profile cases belong.

Tether and its affiliated exchange, Bitfinex,last year settled charges that the stablecoin wasnt fully-backed, as it had claimed, and that it had engaged in illegal commodity transactions.In another case, an employeeof a different exchange was charged with insider trading.

Theres plenty of illegal actions and weird shenanigans going on in the crypto universe to give ammunition to the detractors. The life and death of Gerald Cotten, founder of exchangeQuadrigaCX, went from a tragic tale to a conspiracy theorists dream. Following his sudden death in India at age 30, it was revealed that Cotten had various aliases and had siphoned C$250 million ($183 million) out of the exchange into wallets whose passwords had been lost.

But crypto skeptics sometimes conveniently forget that infamous Ponzi schemer Bernie Madoff didnt need new-fangled tools to bilk investors of $65 billion. And the Enron and WorldCom frauds were committed before Bitcoin was even invented.

Cryptocurrency is a new technology that attracts new business models and plenty of opportunists. Thats just how new industries work.

The oil boom of the late 19th century saw hundreds of wells sunk and dozens of schemes collapse, wiping out innumerable investors. Yet history negates the early claim that oil, as a commodity, and the industry followed that, are a total scam. Indeed, many at the time felt that the liquid dripping from underground coal seams was not enough to sustain a business.(1) In fact, the break-up of John D. Rockefellers Standard Oil neither crushed the company nor ended this new energy boom . After facing angry legislators and losing court battles in the early 20th century, the business bounced back and rewrote history.

Cryptocurrencies have the same potential as oil to upend old industries and indelibly change the world. But to get there, the crypto barons need to face the music and show the world theyve nothing to hide.

More From Bloomberg Opinion:

Coinbases End of StoryIs Just the Beginning: Lionel Laurent

Doge May Be a Hustle, But Its the Peoples Hustle: Tim Culpan

Colonial Hackers Broke the Fundamental Bitcoin Rule: Tim Culpan

(1) Daniel Yergins The Prize details early misgivings in great color.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Tim Culpan is a Bloomberg Opinion columnist covering technology in Asia. Previously, he was a technology reporter for Bloomberg News.

More stories like this are available on bloomberg.com/opinion

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