From crypto billionaire to fugitive

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Photo-Illustration: Intelligencer; Photo: Risto Bozovic/AP Photo

Now Do Kwon awaits trial in a small Eastern European country with a questionable human rights record. But just 14 months ago, he was in a much better position: sitting on billions of dollars worth of crypto he created from scratch, with millions of cheering followers behind him, as he pursued a plan for world domination.

Since then, just about anything that could have gone wrong for his master plan has. It’s no exaggeration to say that Kwon, a 31-year-old coder and Stanford University graduate, was patient zero in the series of collapses that shrunk the cryptosphere to a fraction of its former size, leaving the most of those around the world who have tried it. much poorer than they otherwise would have been. The digital currencies on which he built his fortune, terraUSD and luna, collapsed within hours, wiping out his $40 billion empire (and the wealth of many of his retail cronies). There is a straight line that connects the collapse of digital currencies Kwons to the two other major calamities that have defined 2022 as the worst year for cryptos: the crater of hedge fund Three Arrows Capital and the arrest of Sam Bankman-Fried for fraud. illegal criminal and political. -Bribery.

As law enforcement surrounded Kwon in several countries, he went on the loose for about ten months, insisting on Twitter along the way that he had done nothing criminally wrong. Then, in March, authorities in Montenegro, a small Balkan country wedged between Serbia and Albania, arrested him as he boarded a private plane bound for Dubai using a fake passport.

Kwon and his chief financial officer, Han Chang-joon, were placed under house arrest by courts in Montenegro on Friday, with their release secured on bail of around $450,000. For Kwon, being under house arrest might be a big step backwards from his former life, but it’s also a big step up from prisons in Montenegro, which were reprimanded by the State Department over reports of torture and beatings. He is now ready to begin the first of his trials in no less than three countries, that is, if he fails to escape his guards again.

What is clear about Kwon is that while he may not be a billionaire anymore, he is still rich. Bail was posted by Kwon’s wife and Hans’ wife, and the apartment they live in is worth several million, according to the court. (It’s unclear which apartment the authorities in Montenegro are referring to here. An apartment they bought last year in Serbia is worth about $2.2 million, and Korean authorities previously seized about $175 million. assets, including an apartment in Seoul.) Where does this money come from? , or how much more they have access to, is unclear. Prosecutors fear that the amount of bail is too low to guarantee the presence of the defendants to appear at other hearings. Translation: Kwon and her boyfriend might be happy to say goodbye to the bail money and the apartment and go on the run.

It’s unclear what challenges and obstacles he might face if he tries to skip his trial. Montenegro does not have the capacity to monitor Kwon with an ankle monitor, according to his lawyer. Instead, authorities will have to rely on weekly police visits to his apartment in the country’s capital, and there will be a security presence around his apartment building to watch over him. Kwons’ view is grim: Although he beats the charges in Montenegro, he has been charged with criminal fraud in the United States and South Korea. Both countries are asking for his extradition. Years of trials await us.

Since the crash of his cryptocurrencies last April, he has played a global game of catch-me-if-you-can with the authorities. At the end of 2021, just a few months before everything fell apart, he moved to Singapore. Last summer, he gave a widely mocked interview to a crypto journalist in which the Kwon company had invested. By September, local authorities could no longer find him. After South Korean officials accused him of not cooperating with their investigation, he taunted them from his Twitter account. I make no effort to hide myself, he wrote in September. (Korean officials said he was obviously on the run.) When Interpol issued a red notice for his arrest, it sowed doubt online that it was even true. (The police agency doesn’t post all of its notices online, but Korea has confirmed there is one.)

It was a very modern, very crypto version of being a fugitive, continually playing to his fans known as the Lunatics and stalking his enemies on social media while making himself rare in the meat space. But he has always been a gifted and daring influencer. He was the guy who had built his following by being an asshole and roped in with Wall Street big guys like Mike Novogratz at his crypto project. His declared ambition was nothing less than to supplant the whole idea of ​​money itself.

The Kwons project centered around a pair of linked digital tokens called terra and luna. There was a complicated relationship between them, one was theoretically stable while the other floated with the markets, a design that was meant to be an ever-changing counterweight. What matters now is that the design turned out to be unstable. In a matter of days last May, the two melted away, vaporizing an amount of wealth equivalent to Bolivia’s GDP.

There were immediate calls to bring Do Kwon to justice, accusing him of defrauding his clients, knowingly taking money from his businesses and being reckless with other people’s money. In South Korea, where many terra and luna holders lived, authorities began to investigate.

In the weeks following the crash, Kwon still seemed to believe he could just move on, as he moved on from the implosion of a smaller earlier project that resembled terra. He launched a new cryptocurrency called luna 2.0 and then retweeted messages of support for it. On the same day, he retweeted a similar message of support from Huobi, a cryptocurrency exchange believed to be controlled by Justin Sun, another digital currency billionaire who is now facing civil fraud charges in the United States. At that point, just months after bitcoin had hit an all-time high of nearly $69,000, the idea that it could just move on and instantly create another multi-billion dollar fortune was plausible at least. . But luna 2.0 soon crashed too.

After that, the sales pitch changed. He was no longer pushing cryptocurrencies very hard. Instead, he wanted his followers to buy something even more valuable, at least to him: Do Kwon’s innocence. He would defend himself as a mere fallible entrepreneur, someone who made a mistake and not an impostor. In November, consulting firm JS Held completed an audit of one of its companies, the Luna Foundation Guard its initials echoing a crypto meme meaning Lets fucking go! which had spent $2.8 billion to keep its currencies from collapsing. None of the funds in this fund have been stolen or misappropriated, the company found. I was wrong, but that doesn’t make me a hustler, he wrote in December. It is a strategy that will probably be disseminated for the first time in the judicial system of Podgorica, the capital of Montenegro.

But civil and criminal prosecutors have already said otherwise. Even before the May crash, the Securities and Exchange Commission sued him for illegally offering unregistered securities, serving a subpoena on him while on stage at an event in New York. The SEC alleged he repeatedly misled the public, as Kwon argued he lacked jurisdiction to sue him. In September, Korean authorities issued an arrest warrant for him and four former employees. According to a civil class action lawsuit filed in California, the Seoul prosecutor’s office had obtained private messages from Do Kwon allegedly telling a Terraform Labs employee to manipulate the market price of the Terra stablecoin and associated Luna cryptocurrency. After Kwon’s arrest in March, US and Korean prosecutors released the indictments.

What will happen next for Kwon is unclear. Although Montenegro does not have an extradition treaty with the United States, the country has returned convicted fraudsters in the past. When I contacted Su Zhu, the co-founder of Three Arrows Capital who was close to Kwon, to ask if he had been in touch with Kwon, he deleted an entire Telegram conversation dating back to the fall.

Still, Kwons’ assignment has won him some loyal fans. There are even some who still call themselves Lunatics, although there are fewer of them now that Kwon is much poorer than he was. One of his fans, who goes by MB and runs a Luna Telegram chat, defended Kwon even predicted that he would be up to his old tricks in no time. Do Kwon remains one of the best guys in this industry, he told me. So when the time comes and the truth comes out, he will pursue his vision of decentralized economies and money.

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