The very public life of a crypto fugitive on the run

[ad_1]

SAN FRANCISCO — Shortly after the South Korean government issued an arrest warrant for him, Do Kwon, a cryptocurrency entrepreneur turned fugitive, joined a livestream with two popular crypto podcasters.

They had arranged for Kwon to speak alongside Martin Shkreli, a former pharmaceutical executive who was sentenced to seven years in prison for fraud. “Hey, Do,” Shkreli said on the stream in November. “I just wanted to let you know that prison isn’t so bad. It’s not the worst thing ever. »

Kwon smiled and nodded. “Good to know,” he said.

Kwon, 31, was arrested in Montenegro’s capital Podgorica on Thursday as he and a fellow traveler tried to board a private flight to Dubai in the United Arab Emirates. They were apprehended after using fake Costa Rican passports, authorities said, and they were also carrying travel documents from Belgium that appeared to be forged.

The arrest was the culmination of a remarkable story of international intrigue and crypto industry chutzpah. Kwon became the target of criminal investigators in at least three countries after two cryptocurrencies issued by his company, Terraform Labs, crashed virtually overnight.

The crash triggered a market meltdown that sent prices for popular digital coins such as bitcoin and ether plummeting and plunged the crypto industry into crisis. In just a few days, Kwon went from industry luminary to industry villain. Some investors in its virtual currencies have lost their savings.

After his business collapsed, Kwon traveled across Europe and Asia, from Singapore to Serbia to Montenegro, while insisting on Twitter that he was not “‘on the run’ or anything similar”.

Even as authorities around the world demanded his arrest, Kwon gave interviews to journalists and podcasters, and he attempted to revive his crypto business with a new digital coin. In a brief call with The New York Times earlier this month, Kwon said he had not “refused requests” to share his position with authorities.

“They obviously know where I am,” he said.

His arrest is now set to spark a battle for his extradition. On Thursday, federal prosecutors in the Southern District of New York charged Kwon with eight counts of fraud. Authorities in his native South Korea have also charged him with financial crimes.

South Korea plans to “continue the extradition process in accordance with international law and agreements,” the country’s justice ministry said in a statement on Friday.

A year ago, Kwon was one of the richest and most powerful figures in the crypto industry. After earning a degree in computer science from Stanford University, he started Terraform Labs, which issued two closely related digital currencies: TerraUSD, a stablecoin with a price of $1, and Luna, a more traditional cryptocurrency with fluctuating value.

TerraUSD was designed to maintain its $1 value through financial engineering that connected it to Luna. The coins have become extremely popular and the value of all Luna in circulation has soared to $40 billion as the crypto market exploded in 2021 and early 2022.

Kwon cultivated a brash persona on Twitter, dismissing criticism with tweets such as “I don’t debate poor people.” His passionate followers called themselves “Lunatics”. One of her top venture backers, Mike Novogratz, even had a Luna-themed tattoo of a wolf howling at the moon.

Then Kwon’s business collapsed. In May, Luna’s price fell precipitously, dragging TerraUSD down with it. The implosion erased tens of billions of dollars of value and caused a domino effect that led to the collapse of major crypto companies, including FTX, the exchange founded by Sam Bankman-Fried.

Soon, Kwon was the target of criminal investigations. In September, South Korean prosecutors charged him and five others with violating the country’s financial laws. Interpol, the international police organization, issued a “red notice” demanding his arrest. Singapore police also said they were investigating Kwon.

According to Interpol’s office in Seoul, South Korea, Kwon arrived in Singapore in April, before leaving for the United Arab Emirates in September, the month South Korea issued the arrest warrant for him. Investigators believed the trip to the United Arab Emirates was a stopover on the way to Serbia, where Kwon had been hiding with Han Chang-joon, Terraform’s former chief financial officer.

Even after Luna’s epic meltdown, Kwon believed he could make a comeback in the crypto industry and unveiled a new digital coin. He told an acquaintance that he aimed to make his coin one of the top 10 most valuable cryptocurrencies, without tying it to a stablecoin, according to a person familiar with his thinking.

After Bankman-Fried’s business collapsed, Kwon began posting frequently on Twitter. On Dec. 7, he linked to a Times article that reported that the Justice Department was investigating whether Bankman-Fried engaged in market manipulation that caused Luna’s collapse.

“What is done in darkness will come to light,” he wrote.

During the recent call with The Times, Kwon said he started open source projects, using a term that usually refers to software built on code made available to the public. “I call it, like, tech philanthropy,” he said. “He doesn’t really have any business models or tokens or anything like that.”

But the pressure on him was increasing. In February, the Securities and Exchange Commission charged him with orchestrating a multi-billion dollar securities fraud. Privately, he confided that he was going through a midlife crisis and was spending too much time thinking and not enough coding, according to the person familiar with his thinking.

Kwon arrived in Montenegro about 10 days ago, said Dritan Abazovic, the country’s prime minister. Thursday, he went to the airport with Han, his colleague from Terraform. They presented Costa Rican passports, which immigration controls revealed were fake.

Montenegrin police arrested Kwon and Han at 9 a.m. local time and informed the Interpol office in Seoul, asking for confirmation that they had correctly identified them, according to the South Korean Justice Ministry statement. A fingerprint match confirmed their identity.

During the arrest, the Montenegrin authorities confiscated the travel documents, as well as several mobile phones.

“Montenegro gives very strong support in the fight against all types of criminals,” Abazovic said in an interview on Friday. “It is our duty to try to be cooperative with other partners.”

Kwon spent Thursday night in police custody. After the arrest, he was pictured being driven into a police vehicle in Montenegro, wearing a gray Nike sweater and sweatpants. He was due to appear in court on Friday evening, according to his local attorney, Branko Andelic. A representative for Kwon and Terraform Labs did not respond to a request for comment.

The next step in the case will likely involve extradition, a complex legal process that can sometimes take months to complete. Nick Biase, spokesman for the U.S. Attorney’s Office for the Southern District of New York, said U.S. prosecutors are seeking Kwon’s extradition. The South Korean government said on Friday it was also considering extraditing Kwon.

“We will see what the first request is, and after that we are ready to proceed with the extradition to the country that is looking for him,” Abazovic said in the interview.

Whatever Kwon’s ultimate fate, news of his arrest was met with celebrations in the crypto community, where he has become a deeply unpopular figure since the collapse of Luna and TerraUSD.

“I’ve been waiting for this moment for a long time,” tweeted an account that tried to mobilize Luna crash victims.

This story originally appeared on nytimes.com. Read it here.

[ad_2]