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The connection of the newly elected Prime Minister of Montenegro with the most famous Crypto fugitive

2023-10-31 11:16:57Kosova&Bota SHKRUAR NGA REDAKSIA VOX
The connection of the newly elected Prime Minister of Montenegro with the most
"Hunting" for the most famous Crypto fugitive, movements in the Balkans, "involvement" with the Montenegrin Prime Minister 

Toppled crypto tycoon Do Kwon was about to get out of Montenegro. He and his colleague arrived at the small Balkan country's main airport, where a Bombardier business jet was waiting to take them to Dubai.

Inside the VIP terminal, Kwon handed his passport to an immigration officer, who swiped it. An alert flashed on the officer's screen. Keon, he said, was the target of an Interpol red notice – a request for police around the world to arrest him.

Kwon had been moving to the Balkans for months, but his luck was running out. About two hours earlier that day, on March 23, an informant had separately warned Montenegro's police chief, Interior Minister Filip Adzic, that Kwon was likely in the country, he told The Wall Street Journal. . When Adzic called the border police chief, the officers had just detained Kwon at the airport.

"Do you know who that person is?" the interior minister said he told the boss.

"He is famous and has a lot of money."

The connection of the newly elected Prime Minister of Montenegro with the most
Do Kwon at the Terraform Labs office in Seoul in April 2022, before the crash of TerraUSD and Luna

US and South Korean authorities had been investigating Kwon over his role in one of the biggest disasters in cryptocurrency history. In May 2022, the two cryptos he created, TerraUSD and Luna, crashed in value. The explosion wiped $40 billion from cryptocurrency markets and set off a chain reaction that pushed other digital asset firms into bankruptcy. Investors around the world lost their savings.

Investigators concluded that he lied to investors and suspected that he had secretly embezzled a crypto fortune. He now faces charges in both the US and South Korea, including fraud and violating capital markets laws. Prosecutors in South Korea have said that if convicted there, Kwon would likely face the longest prison sentence for a financial crime in the country's history.

Kwon denied committing fraud. But just before he faced possible arrest, he disappeared from his home in a luxury high-rise in Singapore. He taunted the authorities by tweeting and giving interviews from his undisclosed location. Even after his capture, he continued to fuel the mystery, a letter he sent from prison to the prime minister of Montenegro caused a major political scandal in the small US ally.

32-year-old Kwon is now in a Montenegrin prison, where he is being held in isolation. Officials discovered that the Costa Rican passport he showed at the airport was fake. The US and South Korea are fighting over his extradition.

If sent to the US, he would likely end up in the same New York prison where Sam Bankman-Fried is now – another disgraced crypto tycoon whose companies were fatally weakened by the fallout from the TerraUSD-Luna crash.

This account of Kwon's life is based on interviews with officials in South Korea and Montenegro, current and former employees of his company, Terraform Labs, and people close to Kwon. He did not respond to requests for comment to his Montenegrin lawyer.

The connection of the newly elected Prime Minister of Montenegro with the most
Kwon has been held in Montenegro's Spuz prison since his arrest

"Sustainable"

TerraUSD was a stablecoin, designed to maintain a price of $1. Crypto investors often use stablecoins as a hedge to save profits from successful trades. TerraUSD differed from many other stablecoins because it was not backed by dollars in a bank. A so-called algorithmic stablecoin, it relied on complex financial engineering and the collective efforts of traders to maintain its $1 peg.

Kwon hailed TerraUSD as the central element of a new monetary system, not controlled by banks and governments. Some crypto watchers warned that it was a ticking time bomb.

On May 7, 2022, its price began to slide, spooking investors. The cause of the decline was several large withdrawals from Anchor Protocol, a pseudo-bank of sorts that offered investors annual returns of nearly 20% on TerraUSD deposits.

"Injecting more capital," Kwon tweeted as TerraUSD fell. His team tapped into a $3 billion reserve fund to shore up the stablecoin. He tried to organize a bailout. Nothing worked. Within days, TerraUSD was worth pennies.

Investors were furious. They had poured billions into TerraUSD, putting most of it into Anchor, which many treated as a savings account. Others had gambled on Luna, a related coin that fell more than 99%.

While Terraform Labs was based in Singapore, Seoul was perhaps the epicenter of the crash. Keon, a South Korean national who graduated from an elite foreign language high school in Seoul and studied computer science at Stanford University in California, had been a figure of national pride. About 100,000 South Koreans lost money on TerraUSD and Luna, officials there say. Complaints flooded the prosecutor's office.

It was Dan Sung-han's job to lead the investigation. A boyish-looking 49-year-old, Dan heads the Financial Crime Investigation Bureau of the Seoul Southern District Prosecutor's Office. Local media have dubbed the unit the 'Grim Reaper of Yeouido', referring to Seoul's financial district, for its fight against fraud and stock market manipulation.

“It took us a good while to build a solid understanding of the crypto market,” Dan said.

The connection of the newly elected Prime Minister of Montenegro with the most
Dan Sung-han of the Seoul Southern District Prosecutor's Office, investigators holding boxes of evidence from a cryptocurrency exchange in July 2022

South Korean investigators raided Terraform's local office. They questioned current and former employees. They seized evidence from seven South Korean crypto exchanges, seizing blue boxes filled with documents, laptops, smartphones and external drives.

Kwon at the time lived with his wife and infant daughter in Sculptura Ardmore, a skyscraper in Singapore. His duplex apartment included a 46-foot long cantilevered outdoor pool. He kept Japanese whiskey and Cuban cigars on hand for guests.

The baby had been born just weeks before the crash. Kwon named it Luna, after his cryptocurrency. "My dearest creation named after my greatest invention," he tweeted shortly after her birth, posting a photo of the newborn.

That summer, Kwon met friends at French and Japanese restaurants, including the three-Michelin-starred Les Amis. He considered visiting Everope with his family and some associates on an extended trip so he could be relatively anonymous in a new city.

At a party he attended in Singapore not long after the crash, many of the attendees were crypto entrepreneurs who came to show their support for Keo. Expensive champagne and Martell XO cognac flowed freely, according to a person familiar with the matter.

Meanwhile, Kwon's investors were suffering.

The connection of the newly elected Prime Minister of Montenegro with the most
"Ardmore Sculpture in Singapore"

In war-torn Ukraine, web designer Yuri Popovich said he lost $9,000 he had saved in TerraUSD because he didn't trust his country's banks. In Britain, a 36-year-old IT consultant lost more than $30,000. He said it took him two months to work up the courage to tell his wife. He got a job as a window cleaner to pay the bills.

In Taiwan, local media reported that a man fell to his death from his 13th-floor apartment in an apparent suicide after telling friends and relatives he had lost about $2 million on Luna.

Kwon told the WSJ through a spokesperson in June 2022: "I am devastated by the recent events and hope that all the families who have been affected take care of themselves and their loved ones."

A Singapore law firm, Dreë & Napier, prepared to sue Kwon on behalf of a group of TerraUSD investors who said they collectively lost more than $50 million.

On September 6, 2022, Kwon celebrated his 31st birthday at home. His wife shared photos with his friends enjoying a Korean meal with him and playing with their baby.

The next day, a representative of Dreë & Napier arrived at Sculptura Ardmore to serve him with the lawsuit documents, but he had already left.

"Red Alert"

On September 7, Kwon flew to Dubai and then to Serbia, South Korean prosecutors say. He settled in the capital, Belgrade, known for its nightlife and tech sector.

Days later, South Korean prosecutors obtained an arrest warrant for Kwon on charges that he had violated the country's capital market law. They had worked long hours, feeling great public pressure to bring Kwon to justice. Dan, their leader, sometimes dozed on the workbench.

Among other alleged irregularities, Dan's investigators noted the relationship between Terraform Labs and Chai, a South Korean payments app that at one point boasted two million users.

Before the crash, Kwon had repeatedly claimed that Chai used his firm's Terra blockchain to move funds between users and merchants. The claim was a key selling point to investors, who saw Chai's use of Terra as a rare real-world use of blockchain technology. Proponents see blockchain, the underlying technology behind bitcoin and other cryptocurrencies, as a way to empower individuals by cutting out banks and other traditional intermediaries.

But Kwon's claim was false, South Korean prosecutors claimed. In reality, they said, Chai used traditional payment systems to settle transactions and his use of blockchain was a fraud.

Lawyers for Chai's founder, Daniel Shin, said Chai initially used the Terra blockchain to process payments but stopped in 2020. Shin, a former business partner of Keon's, has denied wrongdoing. Kwon's lawyers have defended his statements about Chai.

The connection of the newly elected Prime Minister of Montenegro with the most
Chai founder Daniel Shin arrives at the Seoul Southern District Court

“I'm not 'on the run' or anything like that,” Kwon tweeted on Sept. 17 after news of the arrest warrant. He still refused to reveal his whereabouts, citing threats to his safety.

South Korean prosecutors filed a red notice through Interpol, the global police body, effectively asking cops around the world to capture Kyo.

From Serbia, Kwon told a crypto industry associate that he had an agreement with the local government. He told another that the Serbian authorities allowed him to stay even after learning of the Interpol red notice.

Serbia's Ministry of the Interior, Ministry of Justice, Ministry of Foreign Affairs and the main public prosecutor's office did not respond to requests for an interview.

Kwon continued to manage Terraform Labs from hiding and pushed a long-term plan to revive its Terra blockchain. He joked with fellow members of the Terra Rebirth League, a group on the messaging app Telegram with more than 300 members, according to messages seen by ÚSJ.

At the beginning of his stay in Belgrade, Kwon lived in an apartment near 'Knez Mihailova,' a pedestrian street in central Belgrade known for shops, sidewalk cafes and 19th-century architecture, said Milojko 'Mickey' Spajic, a politician from Montenegro who met Kwon there.

The connection of the newly elected Prime Minister of Montenegro with the most
"Knez Mihailova Street of Belgrade"

Spajić told the WSJ that Kwon invited him for a visit, and the two spent about an hour chatting over coffee, including Kwon's ambitions to revive Terra.

The two had known each other since 2018, when Spajic, then a Singapore-based partner with venture capital firm DAS Capital, agreed to invest $75,000 in Luna. He later returned to his homeland and entered politics, and hoped to turn Montenegro into a center of blockchain development.

Spajic said he did not know at the time that Kwon was a fugitive.

On Oct. 12, Kwon registered a company called Codokoj22 doo Belgrade, listing himself and Chang-joon Han as directors, according to Serbia's corporate registry.

Han was a former Terraform Labs executive and Chai who joined Kwon in the Balkans. Serbian real estate records from December 2022 show that Han owned a 4,300-square-meter apartment in an affluent neighborhood of Belgrade.

On November 8, Kwon appeared on UpOnly, a live crypto podcast. He poked fun at another guest: Martin Shkreli, the former hedge fund manager who was jailed on securities fraud charges.

"Prison is not that bad," Shkreli told him. "It's a bad thing, but it's not the worst thing that could happen."

"Good for telling us," Kwon replied.

The connection of the newly elected Prime Minister of Montenegro with the most
Kwon, above right, appeared on UpOnly in November 2022, along with former hedge fund manager Martin Shkreli

"The pressure rises"

Within days of Kwon's departure from Singapore, investigators in South Korea learned through Interpol offices that he was in Serbia, said Dan, the chief prosecutor. On December 12, prosecutors in Seoul publicly confirmed his whereabouts. Kwon's Twitter activity dropped significantly. Later that month, South Korea formally asked Serbia to arrest Kwon and extradite him.

In late January, Dan and an official from the South Korean Ministry of Justice flew to Belgrade. Over the course of several days, they met with Serbian law enforcement officials. The Serbs shared details of the company Kwon had incorporated and his Internet address, Dan recalled. They promised to hand Kwon over if he was caught.

On February 16, the US Securities and Exchange Commission sued Kwon for fraud, accusing him of misrepresenting the stability of TerraUSD and Chai's use of the blockchain. The agency also said Kwon and Terraform Labs converted thousands of bitcoins into cash through a Swiss bank and withdrew more than $100 million after the crash.

Lawyers for Kwon and Terraform Labs criticized the SEC's lawsuit as government overreach. They denied the Swiss bank's allegations, saying the money transfers were for business expenses, and disputed the SEC's allegations against Chai.

On March 11, Kwon posted his last message to the Terra Rebirth League. Responding to a message from an admirer in the private Telegram group, Kwon posted a photo of North Korean leader Kim Jong Un raising his hand in a triumphant salute.

Two days later, the WSJ reported that the US Department of Justice was also investigating the TerraUSD crash.

arrest

Kwon crossed the Montenegrin border in mid-March and went to Petrovac, a resort town on the Adriatic Sea, police say.

On March 23, he and Han took a taxi to the airport in the country's capital, Podgorica, a trip that usually takes about an hour. They pay their driver 4,000 euros ($4,230), a large sum for ordinary Montenegrins.

After Keon's passport triggered the alarm, officers stopped him and Han, who was also found to be in possession of a fake Costa Rican passport. Border police searched the men's luggage and found three laptops, five phones and a bunch more fake passports from Belgium.

"Everyone is looking for me," a desperate Kheon told the officers, according to Adzic, the interior minister.

Han objected to their ban, according to Adzic, saying: "We are VIPs everywhere we go."

Han did not respond to requests for comment through his lawyers.

The connection of the newly elected Prime Minister of Montenegro with the most
Podgorica Airport in Montenegro

Hours later, federal prosecutors in New York filed fraud charges against Keon. A South Korean ambassador soon appeared at Adzic's office to discuss extradition proceedings.

A Montenegrin court convicted Kwon and Han of using forged passports. He sentenced them to four months in prison, but they can be held longer as they await extradition. Kwon said he did not realize the passports were fake and that he had been misled by the agency in Singapore that obtained them.

Since his arrest, Kwon has been held in Spuz prison, a cluster of brick buildings in a valley near Podgorica. He is allowed outside for an hour a day in a yard surrounded by a barbed wire fence, overgrown fields and a rocky mountainside.

After being jailed, Kwon had a tearful reunion with his wife in which he expressed regret for the trouble he had caused her and their young daughter, a person familiar with the matter said.

The connection of the newly elected Prime Minister of Montenegro with the most
Kwon is brought to court in Podgorica on March 24

Kwon tried to post bail of 400,000 euros, but prosecutors objected to his request, arguing that he was a flight risk.

On June 5, a letter from Kwon arrived at the office of Montenegrin Prime Minister Dritan Abazovic. The letter, in Keon's regular handwriting, described his friendly ties with Spajic, the politician who had met with Keon in Belgrade – and a rival of the current prime minister. Spajic's party was expected to win days after the election.

The letter said Spajic tried to raise funds from Kwon and "other friends in the crypto industry," according to a copy seen by ÚSJ.

Spajić denied asking Këon for money. He said the letter was a hoax concocted by his political enemies and the Serbian secret police. He suggested that Kwon had been duped into writing the letter with a promise that the Montenegrin authorities would release him on bail and let him flee the country. The Serbian intelligence agency did not respond to a request for comment.

The letter caused quite a stir. Rival politicians attacked Spajić, who had built an image as a corruption fighter, saying he had reached out to a fugitive. Spajic's party narrowly won the June 11 election, putting him on track to become Montenegro's next prime minister.

The connection of the newly elected Prime Minister of Montenegro with the most
Milojko 'Mickey' Spajić spoke at a polling station during the elections in Podgorica on 11 June

Kwon did not dispute that he wrote the letter. The lawyer declined to share more details, citing ongoing investigations.

European officials who visited Spuz's prison last year said his cells were poorly ventilated and very hot in the summer. They also noted poor sanitation and overcrowding.

To pass the time, Kwon watches television with a limited number of English-language channels in his cell, his lawyer said on a hot day this summer.

"Considering the current weather conditions and considering the general nature of being in prison, I think he's still fine," Rodiq said.

*Marko Vesovic, Bojan Stojkovski, Ivan Cadjenovic and Paul Kiernan contributed to this article.

NOTE: This material is the intellectual property of the WSJ

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