From Crypto Billionaire to Fugitive

Photo illustration: Intelligencer.Photo: Liszt Bozovic/AP Photo

Now Dokwon is awaiting trial in a small Eastern European country where human rights issues are questionable. But just 14 months ago, he was in a much better position. As he pursued his plans for world domination, he sat on billions of dollars worth of cryptocurrency he created from scratch with millions of enthusiastic backers.

Since then, just about everything that could have gone wrong with his basic plan has worked. Kwon, a 31-year-old programmer who graduated from Stanford University, has been a victim of a series of collapses that have shrunk the cryptosphere to a fraction of its former size, leaving most of the world’s dabblers behind. It is no exaggeration to say that In it they were much poorer than they otherwise would have been. The digital currencies he built his wealth on, terraUSD and luna, plummeted to zero in a matter of hours, wiping out his $40 billion empire (and the wealth of many of his retail followers). Kwon’s Digital Currency Collapse and Two Other Catastrophes that Make 2022 the Worst Year for Cryptocurrencies: The Craterization of Hedge Fund Three Arrows Capital and Sam Bankman Freed on Criminal Fraud and Illegal Political Charges His arrest can be connected in a straight line. – Influence peddling.

For nearly 10 months, Kwon continued to insist on Twitter that he had done nothing criminally wrong, as law enforcement in several countries surrounded him. And in March, authorities in Montenegro, a small Balkan country sandwiched between Serbia and Albania, arrested him for boarding a private plane to Dubai on suspicion of a false passport.

On Friday, Kwon and Chief Financial Officer Han Chang-jun were placed under house arrest by a Montenegrin court and their release was secured on bail of about $450,000. For Kwon, house arrest may be a big step up from his former life, but it’s also a big step up from a Montenegro prison where he was reprimanded by the State Department for reports of torture and assault. He is now set to start his first trials in up to three countries. That is, if he could not escape the watchers again.

What is clear about Kwon is that he may not be a billionaire anymore, but he is still wealthy. The bail was sent by Kwon’s wife and Han’s wife, and the apartment they live in is “worth millions,” he said. (It’s not clear which apartment Montenegrin authorities are referring to here. The apartment they bought in Serbia last year was valued at around $2.2 million, while South Korean authorities previously said the Seoul apartment was worth around $175 million. million dollars of property.) Where did this money come from? , or even how much more access is unknown. Prosecutors are concerned that bail is too low, meaning that it “does not guarantee that the defendant will appear” at future court hearings. Translation: Kwon and his friends may say goodbye to bail and apartments and start living again.

It’s unclear what challenges or hurdles you’ll face if you try to miss the trial. Kwon’s lawyers say Montenegro does not have the ability to monitor him with an ankle monitor. Instead, authorities will be forced to rely on weekly police visits to his apartment in the capital, with guards stationed around his building to monitor him. From Kwon’s perspective, the outlook is bleak. Even though he was acquitted in Montenegro, he has been indicted for fraud in the US and South Korea. Both countries want his extradition. Years of trials await.

Since the cryptocurrency crash last April, he has been playing a global “catch me if you can” game with authorities. In late 2021, months before everything fell apart, he moved to Singapore.this summer he widely ridiculed Interview with a cryptocurrency reporter from a company Kwon invested in. By September, local authorities had failed to find Mr. Kwon. After South Korean authorities accused him of not cooperating with the investigation, he mocked them on his Twitter account. “I make no effort to hide,” he said. I have written in September. (South Korean officials said he was “clearly on the run.”) When Interpol issued a red notice for his arrest, he said it was online. It made me question whether it was even true. (Police officials don’t post all notices online, but South Korea has confirmed they have.)

It’s a very modern, very cryptic version of being a fugitive, continuously performing to his fans known as Lunatics, trolling his enemies on social media while earning money at Meetspace. continued. But he was always gifted and a daring influence. This was the man who built his following as an asshole and connected Wall Street heavyweights like Mike Novogratz to his crypto project. His stated ambition was to replace the very concept of money itself.

Kwon’s project centers around a pair of linked digital tokens called terra and luna. There was a complicated relationship between them. While one was theoretically stable, the other was a design that was supposed to oscillate according to the market and create an ever-changing counterweight. The point here is that the design turned out to be unstable. Both melted down in a few days last May, evaporating wealth equivalent to Bolivia’s GDP.

There were immediate calls for Do Kwon to be brought to justice for defrauding customers, deliberately withdrawing money from the company, and recklessly using other people’s money. In South Korea, where many Terra and Luna holders lived, authorities launched an investigation.

A few weeks after the crash, Kwon still seemed to believe he could bounce back from the implosion of a previous smaller project similar to terra. He issued a new cryptocurrency called Luna 2.0 and later retweeted messages cheering him on. “FTX he supports Luna 2.0,” Kwon said. Posted On May 25, there was a link to a deleted tweet from the now-bankrupt exchange.that same day he retweeted A similar message of support came from Huobi, a cryptocurrency exchange allegedly controlled by fellow digital currency billionaire Justin Sun, who is currently facing civil fraud charges in the United States. The highest at the time was about $69,000, but the idea that he could move on and quickly build another billion-dollar fortune was at least plausible. But luna 2.0 also crashed immediately.

Then the sales pitch changed. He was no longer promoting cryptocurrencies so enthusiastically. Instead, he wanted his supporters to buy him something more valuable, at least to him: Do Kwon’s innocence. He may defend himself simply as a fallible entrepreneur, someone who has done it wrong, but he is by no means a fraud. In November, consulting firm JS Held completed an audit of one of his firms, the Luna Foundation Guard. Its initials reflect the meaning of the cryptic meme. let’s go! — spent $2.8 billion to prevent a currency crash. The company found that no funds from the fund were stolen or embezzled. “I was wrong, but that doesn’t make me a cheater.” I have written in December. The strategy will likely be adopted for the first time by a court in Podgorica, the capital of Montenegro.

But civil and criminal prosecutors are already saying otherwise. Even before the May crash, the Securities and Exchange Commission had sued him for illegally selling unregistered securities, issuing subpoenas while he was on stage at an event in New York. The SEC argued that Kwon had no authority to sue him and that he repeatedly misled the public. In September, South Korean authorities issued arrest warrants for him and four of his former employees. According to a civil class action lawsuit filed in California, the Seoul prosecutor’s office issued a “personal message from Do Kwon who allegedly instructed Terraform Labs employees to manipulate the market price of the Terra stablecoin and related cryptocurrency Luna. I got the After Kwon was arrested in March, US and South Korean prosecutors sealed the indictment.

It is unclear what will happen to Kwon next. Montenegro does not have an extradition treaty with the United States, but the country has already repatriated convicted fraudsters. When I reached out to Three Arrows Capital co-founder Su Zu, who is close to Kwon, to ask if he had been in touch with Kwon, he deleted the entire Telegram conversation back in the fall. .

Still, Kwon’s posts have retained some fans. Some still call themselves lunatics, but fewer now that Mr. Kwon is much poorer than he used to be. One of his fans, who goes by the name MB and runs a Luna Telegram chat, defended Kwon and even predicted that he would soon get used to his old ways. “Do Kwon is still one of the leaders in this industry,” he told me. “So even when the time comes and the truth comes out, he will continue his vision of decentralized economy and money.”