Do Kwon Arrested in Montenegro as U.S. Charges Crypto Fugitive With Fraud The creator of the failed TerraUSD stablecoin was detained as he attempted to board a flight to Dubai, authorities said Do Kwon’s stablecoin lost its dollar peg, setting off a chain reaction that wiped out some $40 billion in value from the digital-currency markets.PHOTO: WOOHAE CHO/BLOOMBERG NEWS By Alexander Osipovich , Bojan Pancevski and James FanelliUpdated March 23, 2023 11:12 pm ET 20 The Justice Department charged South Korean crypto entrepreneur Do Kwon with fraud on Thursday as officials in Montenegro arrested the creator of the failed TerraUSD stablecoin. In an indictment unsealed in a New York federal court, Mr. Kwon was charged with eight criminal counts of fraud and is accused of conspiring with an unnamed U.S.-based investment firm to use trading strategies to alter the price of the stablecoin in May 2021. That month, TerraUSD fell beneath its $1 peg but recovered, a rebound that Mr. Kwon later cited as evidence of its stability. Mr. Kwon lied in television interviews and on social media about Terra’s blockchain technology and the effectiveness of an algorithm ensuring the stability of TerraUSD, federal prosecutors said. Crypto’s Crash Has Been Swift but Largely Self-Contained. Here’s Why. YOU MAY ALSO LIKE Crypto’s Crash Has Been Swift but Largely Self-Contained. Here’s Why.Play video: Crypto’s Crash Has Been Swift but Largely Self-Contained. Here’s Why. Illustration: Mallory Brangan Earlier on Thursday, Montenegro’s interior minister said a person believed to be Mr. Kwon was arrested after months in hiding. Montenegro Interior Minister Filip Adzic said on Twitter that the suspect was detained in the airport of the country’s capital of Podgorica with false documents. South Korean police identified the individual detained earlier as Mr. Kwon, saying the fingerprint information collected by Montenegro authorities matched with the identification records of Mr. Kwon. Mr. Adzic and representatives of Mr. Kwon’s company, Terraform Labs Pte. Ltd., didn’t respond to requests for comment. A lawyer representing Mr. Kwon in the U.S. criminal charges didn’t respond to a request for comment. NEWSLETTER SIGN-UP WSJ Crypto Smart and accessible crypto market analysis for investors. Subscribed The Justice Department will seek Mr. Kwon’s extradition to the U.S., according to a spokesman for the Manhattan U.S. attorney’s office, which brought the charges. Mr. Kwon was detained Thursday along with another South Korean national as the two attempted to board a flight to Dubai using forged Costa Rican passports, the Montenegro Interior Ministry said on Twitter. The two men are being held on forgery charges, the ministry said. There was no official record of them entering Montenegro, it said. South Korean police identified the second individual as Han Chang-joon, the former chief executive of Chai Corp., the maker of a South Korean payments app that previously partnered with Mr. Kwon’s Terraform Labs. Mr. Han and Chai couldn’t immediately be reached for comment. TerraUSD, a so-called algorithmic stablecoin that sought to maintain a price of $1, again lost its dollar peg in May of last year, setting off a chain reaction that wiped out some $40 billion in value from the digital-currency markets. Unlike in the earlier, May 2021 episode, TerraUSD didn’t recover. The crash hurt thousands of investors worldwide, including some who lost their life savings. Authorities in the U.S. and beyond have stepped up the pressure on the crypto industry after a series of recent blowups that hurt investors in the digital-currency markets. Federal prosecutors in New York have charged Sam Bankman-Fried, the founder of the failed FTX crypto exchange, with fraud in connection with FTX’s implosion. Mr. Bankman-Fried has pleaded not guilty and the case is set to go to trial in October. International law-enforcement agencies have also repeatedly busted operations connected to crypto crime. The arrest of Mr. Kwon marks the end of a monthslong manhunt that spanned Asia and Europe. During that time, the once-outspoken booster of TerraUSD occasionally surfaced on social media to promote a new cryptocurrency project and to defend himself against accusations of fraud. Just one year ago, Mr. Kwon was a high-profile crypto entrepreneur backed by some of the industry’s biggest investors and trading firms. The Stanford University graduate spoke at digital-currency conferences and had numerous fans dubbed “Lunatics,” after TerraUSD’s sister cryptocurrency, Luna. Before the collapse, he often boasted online about TerraUSD’s stability and derided critics who questioned the underlying financial mechanism that kept it pegged to the dollar. Investors both large and small flocked to TerraUSD because of a project called Anchor Protocol that allowed them to earn up to 20% annual yields by parking it in the stablecoin. The collapse of TerraUSD shredded his reputation and triggered a number of investigations and lawsuits around the world. Do Kwon has previously denied committing fraud.PHOTO: WOOHAE CHO/BLOOMBERG NEWS South Korean authorities issued a warrant for Mr. Kwon’s arrest in September and obtained a so-called red notice for him from global policing body Interpol, effectively putting law-enforcement agencies worldwide on the lookout for him. The Wall Street Journal reported last week that the U.S. Justice Department was investigating the collapse of TerraUSD and had questioned former Terraform Labs team members. The Securities and Exchange Commission sued Mr. Kwon and the company for alleged securities fraud last month in connection with the TerraUSD collapse. A lawyer for Mr. Kwon and Terraform has said in court that they would seek to dismiss the SEC’s lawsuit. Mr. Kwon has previously denied committing fraud. In an interview with the Journal last year, he said that he believed in TerraUSD and personally lost money when it collapsed. “There is a difference between failing and running a fraud,” he said then. Police in Singapore have also said they are investigating Terraform Labs, where the company is based. Mr. Kwon was living in Singapore until he disappeared from public view six months ago. According to South Korean prosecutors, he left Singapore in September, traveling to Dubai and then to Serbia. Montenegro neighbors Serbia. Mr. Kwon denied being on the run but declined to disclose his whereabouts, saying he was worried about his security amid threats from disgruntled investors. Officials from South Korean law enforcement visited Serbia earlier this year to seek the Balkan country’s cooperation. The SEC’s lawsuit accused Mr. Kwon and his company of misleading investors about the risks of TerraUSD and wronglyclaiming that Terraform Labs’ blockchain technology was used to process transactions on Chai, when in fact the South Korean payments app used more traditional payment technology. The SEC also said Mr. Kwon and Terraform Labs had transferred a huge amount of bitcoin to an unnamed Swiss bank and converted it to cash. Over $100 million in fiat currency was withdrawn from that Swiss bank since June 2022, the SEC said. Mr. Kwon has yet to respond to the SEC’s lawsuit in detail. In a Feb. 1 tweet, before the SEC lawsuit, he wrote: “I’ve stolen no money and never had ‘secret cashouts.’” Financial regulators, which have the power to impose monetary penalties, have sought to curb the activities of crypto companies, with the U.S. moving more aggressively than many other countries. On Wednesday, the biggest U.S. crypto exchange, Coinbase Global Inc., said it had received a notice from the SEC that the agency is planning to bring an enforcement action against it. Coinbase expressed disappointment that it failed to reach an agreement with the SEC over legally registering its business. Also on Wednesday, the SEC agreed to a settlement with actress Lindsay Lohan and boxer Jake Paul over accusations that they had promoted cryptocurrencies without disclosing that they were paid to do so. Ms. Lohan and Mr. Paul didn’t admit or deny wrongdoing. —Jiyoung Sohn in Seoul contributed to this article. Write to Alexander Osipovich at alexo@wsj.com, Bojan Pancevski at bojan.pancevski@wsj.com and James Fanelli at james.fanelli@wsj.com
Another? Also, while he was arrogant and kind of a prick, he didn't set out to scam like many others. Evading the authorities is really bad optics though.
Well now. Mr. Hwang was a devoted member of the Christian faith. He even went to church! So what if he has been charged with insider trading and other shenanigans MULTIPLE TIMES! Surely, he is a member of God's chosen people. This was above the law because he was all doing it... somehow... for a higher purpose. Hwang is really just a nice person if you get to know him well... I'm sure Cathie Wood will back this claim up.
Well said. Some of the most delusional, dishonest people I've met have been ones talking about God and Jesus.