Hunting down the crypto fugitive Do Kwon Everyone is after me

Pursuing the Elusive Crypto Criminal The Manhunt for Do Kwon

Author: Alexander Osipovich, Jiyoung Sohn, Weilun Soon, Drew Hinshaw, The Wall Street Journal; Translation: LianGuai0xjs

Failed cryptocurrency mogul Do Kwon is preparing to leave Montenegro. He and his colleagues arrived at the main airport of this Balkan country, where a Bombardier jet was waiting to take them to Dubai.

Inside the VIP terminal, Kwon handed his passport to an immigration officer, who scanned it. A warning flashed on the officer’s screen. Allegedly, Kwon is a target of Interpol’s Red Notice—a global alert requesting law enforcement agencies around the world to arrest him.

Kwon had been hiding in the Balkans for several months, but his luck was running out. Approximately two hours earlier on March 23, a informant tipped off the highest-ranking police officer and Minister of Interior of Montenegro, Filip Adžić, that Kwon might be in the country.

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Adžić recounted the arrest process to The Wall Street Journal, stating that the informant sent Kwon’s passport details to the Minister of Interior’s phone. When Filip Adžić called the head of the border police, the police had just detained Kwon at the airport.

“Do you know who that person is?” the Minister of Interior said he told the head of the police station. “He is famous and has a lot of money.”

In April 2022, before the collapse of TerraUSD and Luna, Do Kwon at the Terraform Labs office in Seoul. Photo: WOOHAE CHO/Bloomberg

US and South Korean authorities have been investigating Kwon’s role in one of the biggest disasters in cryptocurrency history. In May 2022, two tokens he created, TerraUSD and Luna, plummeted. This implosion caused the cryptocurrency market to lose $40 billion and triggered a chain reaction that led to the bankruptcy of other digital asset companies. Investors from around the world lost their savings.

The investigators’ conclusion is that he lied to investors and they suspect he secretly amassed a fortune in cryptocurrencies. He is currently facing charges in the US and South Korea, including fraud and violating capital market laws. South Korean prosecutors said that if convicted in Korea, Kwon could face the longest-ever imprisonment for financial crimes in the country’s history.

Kwon denies any wrongdoing. But just before he faced possible arrest, he disappeared from his luxury high-rise residence in Singapore. He taunted authorities by tweeting and giving interviews from undisclosed locations. Even after his arrest, he continued to stir up drama: a letter he sent from prison to the Prime Minister of Montenegro sparked a major political scandal in this small American ally.

32-year-old Know is now detained in Black Mountain Prison, in isolation. Officials discovered that the Costa Rican passport he presented at the airport was fake. The United States and South Korea are battling for his extradition. If Know is sent to the United States, he may end up being locked up in a prison in New York, which currently houses another disgraced cryptocurrency tycoon, Sam Bankman-Fried, whose company was fatally weakened by the collapse of TerraUSD-Luna.

The description of Kwon’s life on the run is based on interviews with officials from South Korea and Montenegro, current and former employees of his company Terraform Labs, and individuals closely associated with Kwon. He did not respond to requests for comment made to his lawyer in Montenegro.

Kwon has been held in Spuž Prison in Montenegro since his arrest. Photo: MILOS VUJOVIC, The Wall Street Journal

Steady lads

TerraUSD is a stablecoin designed to maintain a price of $1. Cryptocurrency investors often use stablecoins as a safe haven to preserve the profits of successful trades. TerraUSD stands out from many other stablecoins because it does not have backing from bank dollars. It is a so-called algorithmic stablecoin, relying on complex financial engineering and the collective effort of traders to maintain its peg with the US dollar.

Kwon praised TerraUSD as the core of a new currency system that is not under the control of banks and governments. Some cryptocurrency observers warn that it is a ticking time bomb.

On May 7, 2022, its price began to plummet, causing panic among investors. The triggering factor for the drop was several large withdrawals from Anchor Protocol, a pseudo-bank that offered nearly 20% annual return for investors’ TerraUSD deposits.

When TerraUSD crashed, Kwon wrote on Twitter, “Deploy more capital – stabilize them.” His team used $3 billion from a reserve fund to support the stablecoin. He was busy arranging a bailout. Nothing worked. Within days, TerraUSD was only worth a few cents.

Investors were furious. They had invested billions of dollars into TerraUSD, with a large portion deposited in Anchor, which many saw as a savings account. Others bet on the related coin Luna, which has plummeted over 99%.

While Terraform Labs is headquartered in Singapore, Seoul may be the epicenter of this incident. Know is a South Korean citizen, who graduated from an elite foreign language high school in Seoul and studied computer science at Stanford University in California, becoming a source of national pride. South Korean officials estimate that around 100,000 Koreans have lost money on TerraUSD and Luna. Complaints are pouring into the prosecutor’s office.

Dan Sung-han’s job is to lead investigations. 49-year-old Dan is the head of the Financial Crimes Investigation Bureau in the Seoul Southern District Prosecutor’s Office, and he looks a bit childish. The local media refers to this bureau as the “Yoi Island Reaper” because it cracks down on stock market fraud and manipulation. Yoi Island refers to the financial district in Seoul.

“We spent a lot of time to deeply understand the cryptocurrency market,” Dan said.

Seoul Southern District Prosecutor Dan Sung-han’s office; investigators carrying boxes of evidence from a cryptocurrency exchange in July 2022.

Korean investigators raided Terraform’s local office. They questioned current and former employees. They obtained evidence from seven Korean cryptocurrency exchanges and took away a blue box filled with documents, notebooks, smartphones, and external hard drives.

Crypto Connoisseur

At the time, Know was living in a luxurious Sculptura Ardmore high-rise in Singapore with his wife and young daughter. His duplex apartment featured a 46-foot cantilevered outdoor swimming pool. He prepared Japanese whiskey and Cuban cigars for his guests.

His daughter was born just a few weeks before the accident. Kwon named her Luna after his cryptocurrency. “My dearest creation named after my greatest invention,” he tweeted a photo of the newborn after she was born.

That summer, Know met friends at French and Japanese restaurants, including the Michelin three-star Les Amis. He proposed to some colleagues to take a long trip to Europe with his family, so he could stay relatively anonymous in a new city.

Shortly after the crisis, he attended a party in Singapore where many attendees were cryptocurrency entrepreneurs who came to show support for Kwon. According to an insider, there was free-flowing crystal champagne and Martell XO Cognac.

Meanwhile, Kwon’s investors also suffered.

Sculptura Ardmore gallery in Singapore. Photo: WEILUN SOON/The Wall Street Journal

In war-torn Ukraine, web designer Yuri Popovich said he lost $9,000 stored in TerraUSD because he didn’t trust the banks in his country. In the UK, a 36-year-old IT consultant lost over $30,000. He said it took him two months to gather the courage to tell his wife. He found a job as a window cleaner to pay the bills.

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

In June 2022, Kwon told The Wall Street Journal through a spokesperson, “I am shocked by the recent events and hope that all affected families take care of themselves and their loved ones.”

A Singapore law firm, Drew & Napier, is preparing to represent a group of TerraUSD investors in a lawsuit against Kwon, claiming they collectively lost over $50 million.

On September 6, 2022, Know celebrated his 31st birthday at home. His wife shared photos of him enjoying Korean food and playing with their children.

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

Red Notice

On September 7, Know flew to Dubai and then to Serbia, according to South Korean prosecutors. He settled in the capital city of Belgrade, known for its nightlife and tech industry.

A few days later, South Korean prosecutors obtained an arrest warrant for Mr. Know, charging him with violating the country’s capital market laws. They had been working for a long time and felt tremendous public pressure to bring Know to justice. Their leader, Dan, sometimes took naps on the black recliner in the office.

In addition to other alleged misconduct, Dan’s investigators focused on the relationship between Terraform Labs and Chai. Chai is a South Korean payment app that once had 2 million users.

Prior to the collapse, Kwon had repeatedly claimed that Chai used his company’s Terra blockchain to transfer funds between users and merchants. This assertion was a key selling point for investors, who saw Chai’s use of Terra as a rare real-world use case for blockchain technology. Supporters viewed blockchain (the underlying technology behind Bitcoin and other cryptocurrencies) as a way to empower individuals while eliminating banks and other traditional intermediaries.

However, South Korean prosecutors claimed that Kwon’s claims were false. They said that, in reality, Chai used traditional payment systems for settlement, and the assertion of Chai’s use of blockchain was a deception. Daniel Shin, the founder of Chai, stated through his lawyer that Chai initially used the Terra blockchain for processing payments but stopped in 2020. Shin, a former business partner of Kwon, denied any wrongdoing. Know’s lawyer defended his statements about Chai.

Chai founder Daniel Shin arrives at the Seoul Southern District Court. Photo: SEONGJOON CHO/Bloomberg News

“I am not ‘on the run’ or in a similar situation,” Know wrote on Twitter on September 17th, after the arrest warrant was issued. He still refuses to disclose his location, citing threats to his safety.

A red notice was issued by South Korean prosecutors through the International Criminal Police Organization (Interpol), effectively requesting police worldwide to arrest Know.

Kwon told a colleague in the cryptocurrency industry in Serbia that he reached an agreement with the local government. He told another person that even after learning about the Interpol red notice, the Serbian law enforcement still allowed him to stay.

The Ministry of Interior, Ministry of Justice, Ministry of Foreign Affairs, and the offices of the major prosecutor in Serbia did not respond to interview requests.

Kwon continues to manage Terraform Labs in hiding and is pushing for a long-term plan to revive the Terra blockchain. According to The Wall Street Journal, he jokingly mentioned this to colleagues in the Terra Rebirth League, a group on the Telegram messaging app with over 300 members.

During his stay in Belgrade, Know lived in an apartment near Knez Mihailova Street, which is an iconic pedestrian street in the city center known for its shops, roadside cafes, and 19th-century buildings. Political figure Milojko “Mickey” SLianGuaijić from Montenegro said he met Know there.

Knez Mihailova Street in Belgrade. Photo: Getty Images

SLianGuaijić told The Wall Street Journal that Know invited him for a visit, and they spent about an hour talking over coffee about Know’s ambitions to revive Terra.

They have known each other since 2018 when SLianGuaijić (a partner in the Singapore office of venture capital firm DAS Capital at the time) agreed to invest $75,000 in Luna. He later returned to his homeland and entered politics, hoping to make Montenegro a blockchain hub.

SLianGuaijić said he did not know at the time that Know was a fugitive.

According to information from the Serbian company registry, on October 12th, Kwon registered a company named Codokoj22 doo Beograd, listing himself and Chang-joon Han as directors.

Han is a former executive of Terraform Labs and Chai who later joined Kwon’s work in the Balkans. Serbian real estate records from December 2022 show that Han owns a 4,300-square-foot apartment in an affluent community in Belgrade.

On November 8th, Kwon appeared on the cryptocurrency podcast UpOnly. He joked with another guest, Martin Shkreli, a former hedge fund manager who was imprisoned for securities fraud.

“Prison isn’t that bad,” Shkreli told him. “It’s bad, but it’s not the worst thing.”

“Good to know,” Know replied.

Kwon (top right) appeared on UpOnly with former hedge fund manager Martin Shkreli (top center) in November 2022.

Pressure is mounting

Chief Prosecutor Dan said that a few days after Know left Singapore, Korean investigators learned about his whereabouts in Serbia through Interpol. On December 12th, Seoul prosecutors publicly confirmed his location. Kwon’s activity on Twitter sharply declined.

Later that month, Korea formally requested Serbia to arrest and extradite Kwon.

In late January, Dan and a Korean Ministry of Justice official flew to Belgrade. Over the course of a few days, they met with Serbian law enforcement officials. Dan recalled that the Serbians shared detailed information about the company Know registered and his internet addresses. They promised to hand him over if he was caught.

On February 16th, the U.S. Securities and Exchange Commission (SEC) sued Kwon for fraud, accusing him of lying about the stability of TerraUSD and Chai’s use of blockchain. The agency also stated that Kwon and Terraform Labs exchanged thousands of bitcoins for cash through a Swiss bank and withdrew over $100 million after the collapse.

Kwon and Terraform Labs’ lawyers criticized the SEC’s lawsuit as government overreach. They denied the allegations involving the Swiss bank, claiming the transfers were for business expenses, and disputed the SEC’s accusations regarding Chai.

On March 11th, Kwon posted his final message in the Terra Rebirth League. In response to a message from an admirer in a private Telegram group, Kwon posted a photo of North Korean leader Kim Jong-un raising his hand in salute.

Two days later, The Wall Street Journal reported that the U.S. Department of Justice was also investigating the TerraUSD collapse.

Goran Rodić, Kwon’s lawyer in Montenegro. Photo: MILOS VUJOVIC The Wall Street Journal.

Arrested

The police said that Kwon crossed the border into Montenegro in mid-March and hid in the seaside resort of Petrovac in the Adriatic Sea.

On March 23, he and Han took a taxi to Podgorica Airport, the capital, a journey that usually takes about an hour. They paid the driver 4,000 euros ($4,230), which is a huge sum for the average Montenegrin.

After Kwon’s passport triggered an alert, the police detained him and Han, who was found to be in possession of a fake Costa Rican passport. Border police searched their luggage and found three laptops, five cell phones, and another set of fake passports from Belgium.

“Everyone’s looking for me,” Kwon told the police dejectedly, according to Interior Minister Adžić.

According to Adžić, Han protested their detention, saying, “Wherever we go, we are VIP7.” Han did not respond to a request for comment submitted through his lawyer.

Podgorica Airport in Montenegro. Photo: MILOS VUJOVIC The Wall Street Journal

A few hours later, a New York federal prosecutor charged Kwon with fraud. A South Korean ambassador quickly appeared in Adžić’s office to discuss extradition proceedings.

A Montenegrin court found Kwon and Han guilty of using forged passports. The court sentenced them to four months in prison but said they could be held longer while awaiting extradition. Kwon said he was unaware that the passports were fake and claimed he had been deceived by the Singapore agency that arranged the passports for him.

Since his arrest, Kwon has been held in Spuž Prison, a group of brick buildings nestled in a valley near Podgorica. He is allowed one hour in a courtyard every day, which consists of wire fences, overgrown fields, and rocky hills.

An insider said that after being imprisoned, Kwon was reunited with his wife and was in tears, expressing regret for the trouble he had caused his wife and young daughter.

On March 24, Kwon appeared in court in Podgorica. Photo: STEVO VASILJEVIC/REUTERS

Kwon attempted to post a bail of 400,000 euros ($423,000), but the prosecutor opposed his request, citing a risk of flight.

On June 5th, a letter from Kwon arrived at the office of Prime Minister Dritan Abazović in Montenegro. The letter, neatly written, described his friendly relationship with SlianGuaijić, a politician whom Kwon had met in Belgrade and who is currently the Prime Minister’s competitor. SlianGuaijić’s party is expected to win in the upcoming elections.

According to a copy seen by The Wall Street Journal, the letter stated that SlianGuaijić was attempting to raise funds from Kwon and other “friends in the crypto industry.”

SlianGuaijić denied asking Kwon for money. He claimed that the letter was a hoax orchestrated by his political enemies and the Serbian secret police. He said that Kwon was deceived into writing the letter because the Montenegrin authorities promised to release him and let him escape the country. The Serbian intelligence agency did not respond to requests for comment.

This letter caused a stir. Rival politicians attacked SlianGuaijić, accusing him of colluding with a cryptocurrency fugitive, while SlianGuaijić portrayed himself as an anti-corruption fighter. SlianGuaijić’s party won the election on June 11th by a narrow margin, making him the likely next Prime Minister of Montenegro.

Milojko ‘Mickey’ SlianGuaijić gave a speech at a polling station during the elections in Podgorica on June 11th. Photo: STEVE VASILJEVIC/REUTERS

Kwon did not deny writing the letter. His Montenegrin lawyer, Goran Rodić, stated that Kwon did not donate to SlianGuaijić. The lawyer refused to disclose further details citing an ongoing investigation.

European officials who visited Spuz Prison last year stated that the prison cells had poor ventilation and were hot during the summer. They also noted poor hygiene conditions and overcrowding.

His lawyer stated that on a hot day this summer, Kwon mentioned that to pass the time, he would watch limited English channels on the prison’s television.

“Considering the current weather conditions and the nature of the prison, I think he is doing well,” said Rodić.

Marko Vešović, Bojan Stojkovski, Ivan Cadjenovic and LianGuaiul Kiernan contributed to this article.

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