Not lengthy after the South Korean authorities issued a warrant for his arrest, Do Kwon, the cryptocurrency entrepreneur who turned a fugitive, joined a livestream with two fashionable crypto podcasters.
They’d organized for Mr. Kwon to talk alongside Martin Shkreli, the previous pharmaceutical government who was sentenced to seven years in jail for fraud. “Hey, Do,” Mr. Shkreli mentioned on the stream in November. “I simply wished to let that jail’s not that unhealthy. It’s not the worst factor ever.”
Mr. Kwon smiled and nodded. “Good to know,” he mentioned.
On Thursday, Mr. Kwon, 31, was arrested in Podgorica, the capital of Montenegro, as he and a journey companion tried to board a non-public flight to Dubai, United Arab Emirates. They have been apprehended after utilizing solid Costa Rican passports, based on the authorities, and so they have been additionally carrying journey paperwork from Belgium that gave the impression to be falsified.
The arrest was the fruits of a outstanding story of worldwide intrigue and crypto business chutzpah. Mr. Kwon turned a goal of prison investigators in a minimum of three international locations after two cryptocurrencies issued by his firm, Terraform Labs, collapsed just about in a single day.
The crash set off a market meltdown that tanked the costs of fashionable digital cash like Bitcoin and Ether and despatched the crypto business into disaster. In just some days, Mr. Kwon went from business luminary to business villain. Some buyers in his digital currencies misplaced their life financial savings.
After his enterprise collapsed, Mr. Kwon traveled round Europe and Asia, from Singapore to Serbia to Montenegro, whereas insisting on Twitter that he was not “‘on the run’ or something related.”
Whilst the worldwide authorities sought his arrest, Mr. Kwon gave interviews to reporters and podcasters, and he tried to revive his crypto enterprise with a brand new digital coin. In a quick name with The New York Occasions early this month, Mr. Kwon mentioned he hadn’t “declined requests” to share his location with the authorities.
“They clearly know the place I’m,” he mentioned.
His arrest is now poised to arrange a battle over his extradition. On Thursday, federal prosecutors within the Southern District of New York charged Mr. Kwon with eight counts of fraud. The authorities in his native South Korea have additionally accused him of economic crimes.
South Korea plans to “proceed with the extradition course of in accordance with the legislation and worldwide agreements,” the nation’s Ministry of Justice mentioned in a press release on Friday.
A yr in the past, Mr. Kwon was one of many richest and strongest figures within the crypto business. After graduating from Stanford College with a level in laptop science, he began Terraform Labs, which issued two carefully linked digital currencies: TerraUSD, a stablecoin with a value of $1, and Luna, a extra conventional cryptocurrency with a fluctuating worth.
TerraUSD was designed to keep up its $1 worth via monetary engineering that related it with Luna. The cash turned wildly fashionable, and the worth of all of the Luna in circulation climbed to $40 billion because the crypto market boomed in 2021 and early 2022.
Mr. Kwon cultivated a brash persona on Twitter, dismissing critics with tweets like “I don’t debate the poor.” His passionate followers referred to as themselves “Lunatics.” Certainly one of his outstanding enterprise capital backers, Mike Novogratz, even had a Luna-themed tattoo of a wolf howling on the moon.
Then Mr. Kwon’s enterprise crashed. In Might, the value of Luna dropped precipitously, bringing TerraUSD down with it. The implosion erased tens of billions of {dollars} of worth and induced a domino impact that led to the collapse of main crypto corporations together with FTX, the alternate based by Sam Bankman-Fried.
Quickly Mr. Kwon was the goal of prison investigations. In September, South Korean prosecutors charged him and 5 others with violating the nation’s monetary legal guidelines. Interpol, the worldwide police group, issued a “crimson discover” demanding his arrest. The police in Singapore additionally mentioned they have been investigating Mr. Kwon.
In line with the Interpol workplace in Seoul, Mr. Kwon arrived in Singapore final April, earlier than leaving for the United Arab Emirates in September, the month that South Korea issued the arrest warrant for him. Investigators believed the journey to the Emirates was a cease on the way in which to Serbia, the place Mr. Kwon had been in hiding with Han Chang-joon, Terraform’s former chief monetary officer.
Even after Luna’s epic collapse, Mr. Kwon believed he may make a comeback within the crypto business and unveiled a brand new digital coin. He advised an acquaintance that he aimed to make his coin one of many 10 most respected cryptocurrencies, with out linking it to a stablecoin, based on an individual aware of his pondering.
After Mr. Bankman-Fried’s firm collapsed, Mr. Kwon began posting ceaselessly on Twitter. On Dec. 7, he linked to a Occasions article that reported the Justice Division was investigating whether or not Mr. Bankman-Fried had engaged in market manipulation that induced the collapse of Luna.
“What’s completed in darkness will come to gentle,” he wrote.
Within the latest name with The Occasions, Mr. Kwon mentioned he had launched some open-source tasks, utilizing a time period that usually refers to software program constructed on code that’s made publicly out there. “I name it, like, know-how philanthropy,” he mentioned. “It doesn’t actually have enterprise fashions or tokens or something of that kind.”
However the stress on him was rising. In February, the Securities and Change Fee charged him with orchestrating a multibillion-dollar securities fraud. Privately, he confided that he was having a midlife disaster, and that he was spending an excessive amount of time pondering and never sufficient coding, based on the individual aware of his pondering.
Mr. Kwon arrived in Montenegro about 10 days in the past, mentioned Dritan Abazovic, the nation’s prime minister. On Thursday, he went to the airport with Mr. Han, his Terraform colleague. They introduced passports from Costa Rica, which immigration checks revealed have been forgeries.
The Montenegrin police arrested Mr. Kwon and Mr. Han at 9 a.m. native time and notified the Interpol bureau in Seoul, asking for affirmation that that they had appropriately recognized them, based on the assertion by South Korea’s Justice Ministry. A fingerprint match confirmed their identities.
Throughout the arrest, the Montenegrin authorities confiscated the journey paperwork, in addition to a number of cellphones.
“Montenegro is giving actually huge assist to battle towards each type of prison,” Mr. Abazovic mentioned in an interview on Friday. “It’s our obligation to attempt to be cooperative with different companions.”
Mr. Kwon spent Thursday evening in police custody. After the arrest, he was photographed being led right into a police automobile in Montenegro, carrying a grey Nike sweater and sweatpants. He was scheduled to look in courtroom on Friday night, based on his native lawyer, Branko Andelic. A consultant for Mr. Kwon and Terraform Labs didn’t reply to a request for remark.
The following step within the case is more likely to contain extradition, a fancy authorized course of that may generally take months to unfold. Nick Biase, a spokesman for the U.S. lawyer’s workplace for the Southern District of New York, mentioned prosecutors in america have been in search of Mr. Kwon’s extradition. The South Korean authorities mentioned on Friday that it was additionally planning to have Mr. Kwon extradited.
“We’ll see what’s the first request, and after that we’re able to make the extradition to the nation which is in search of him,” Mr. Abazovic mentioned within the interview.
No matter Mr. Kwon’s final destiny, the information of his arrest was greeted with celebrations within the crypto group, the place he has turn into a deeply unpopular determine for the reason that collapse of Luna and TerraUSD.
“I’ve been ready for this second for a very long time,” tweeted one account that has tried to mobilize victims of the Luna crash.
Alisa Dogramadzieva contributed reporting.
