Do Kwon, Crypto Fugitive, Lived a Very Public Life While on the Run

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

They had arranged for Mr Kwon to speak alongside Martin Shkreli, the former pharmaceutical executive who was sentenced to seven years in prison for fraud. “Hey, Do,” Mr. 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. »

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

Mr 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. Mr 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 like Bitcoin and Ether plummeting and threw the crypto industry into crisis. In just a few days, Mr. Kwon went from industry luminary to industry villain. Some investors in its virtual currencies have lost their savings.

After his business collapsed, Mr 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 global authorities demanded his arrest, Mr. 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, Mr 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 Mr. 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, Mr. 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.

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

Then Mr. 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, Mr. 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 Mr Kwon.

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

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

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

During the recent call with The Times, Mr. 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 having a midlife crisis and spending too much time thinking and not enough coding, according to the person familiar with his thinking.

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

Montenegrin police arrested Mr. Kwon and Mr. 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 ministry’s statement. of Justice. 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.”

Mr. Kwon spent Thursday evening 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 Mr. 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. The South Korean government said on Friday it planned to seek Mr Kwon’s extradition.

US authorities have made no public statement about the extradition process. Representatives of the Department of Justice and the U.S. Attorney’s Office for the Southern District of New York did not respond to requests for comment.

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

Whatever Mr. 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 attempted to mobilize the victims of the Luna crash.

Alisa Doggramadzieva contributed reporting.