South Korean Professor tracking Do Kwon’s funds: Signs of Terra’s collapse were evident in early 2019

South Korean Professor tracks Do Kwon's funds, revealing signs of Terra's collapse in early 2019.

Original article | DL News

Translation | Wu Shuo Blockchain

Crypto fugitive Do Kwon has been on the run from Interpol for months. A Korean professor has been following the Terraform Labs CEO’s every move. “I’m really fascinated by his addresses and on-chain data,” said Jaewoo Cho, a blockchain expert and assistant professor at Seoul Hannam University, in an interview with DL News. “It’s like drawing a portrait. You get to know him.”

Why has this co-founder of Terraform Labs in Singapore been tracked for nearly a year by Cho? “Just for fun… Doxxing is my hobby.” And Cho isn’t the only one who wants to know where Kwon is. Terraform was at the center of a $60 billion crash in May when its algorithmic stablecoin, TerraUSD, collapsed. The crash also led to the downfall of hedge fund Three Arrows Capital, lending firm Voyager, and exchange giant FTX.

Do Kwon is a fugitive. He’s been indicted by Korean and U.S. authorities for his role in a so-called billion-dollar fraud, and Interpol is also after him. Korean officials say Kwon is hiding in Serbia. Kwon denies he’s on the run from the law.

Cho said he predicted Terraform Labs would go bust when he first heard of the company in April 2019. He was investigating the company on behalf of venture capitalists. Not only was he shocked by the scale of the project, but he also identified several structural weaknesses at the time. Cho claimed he raised some concerns with Terraform Labs, such as black swan events, which are very rare but can be catastrophic if they occur. “They just let it happen. They ignored these problems.”

The algorithm in “algorithmic stablecoins” was supposed to maintain the peg of TerraUSD to the dollar by incentivizing people to profit by exchanging it for Terra’s native cryptocurrency, LUNA. The system relied on arbitrage traders to keep it running. But when trust disappeared, both tokens spiraled to their death.

When TerraUSD crashed in May 2022, a Korean journalist approached Cho, hoping to use his blockchain expertise to verify some information. The journalist wanted Cho to investigate Terraform Labs’ on-chain activity, particularly around its Project Dawn fundraising program, which ran from September 2021 to April 2022. Cho agreed, but when he opened his computer to look at the blockchain, he was stunned. “I was very surprised by the scale of the scam. It wasn’t a million—it was billions of dollars,” he said.

The SEC in February charged Kwon and his Terraform Labs with orchestrating a “cryptocurrency securities fraud” scheme that involved $40 billion in assets from April 2018 to May 2022. Cho subsequently identified Terraform and Kwon’s wallet addresses and tracked their transactions, which Kwon himself did not ignore.

In a Twitter interaction in the same month that Luna collapsed, Cho expressed criticism of Terra’s attempt at a comeback (Terra 2.0). “Cheers, keep spreading the FUD,” Kwon replied, using the crypto acronym for “fear, uncertainty, and doubt.”

“Do Kwon is very arrogant,” Cho said. “He’s like, ‘Well, I’m doing that, catch me if you can.’ ” Terraform Labs and Kwon did not respond to requests for comment.

Once a cryptocurrency is sent to a crypto exchange, it is no longer on the chain. “That’s really the end of the road, that’s where the government and the exchanges come in,” Cho said. His findings were published on Twitter by FatManTerra, an account known for sharing insider information on Terra’s September death, along with a spreadsheet of data collected by Cho. DL News did not independently verify the investigation’s findings.

In February, Kwon wrote on Twitter, “I’ve never stolen money or had ‘secret withdrawals’ – welcome to discuss specific charges.”

Cho said he noticed changes in Kwon’s trading habits in the past few months. Prior to that, the fugitive was still using the same old addresses to transfer money to and from different addresses and exchanges. Now Kwon may have started using other addresses to move his money, which appears to be over-the-counter trades or through brokers. “I suspect some friends or brokers are helping Kwon withdraw his money,” Cho said.

The SEC alleges that Do Kwon transferred more than 10,000 bitcoins from Terraform and Luna Foundation Guard (another entity from the Terra ecosystem) accounts to an unhosted wallet, or cold wallet, and then transferred the funds to a Swiss bank and exchanged them for cash. The complaint alleges that over $100 million in fiat currency has been withdrawn from the Swiss bank from June 2022 to February 2023.

Kwon is now planning a comeback. Terraform Labs has hired more engineers over the past few months to launch new projects, including a new blockchain that retains the old Terra name. Cho is not optimistic about Kwon’s return and is skeptical of the success of the Terra 2.0 project, calling it “completely absurd.”

After spending a lot of time tracking and analyzing the elusive Terraform CEO’s movements, Cho says he feels like he knows Kwon. He laughs, “If I saw him, I would hug him.”

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Latest developments in the Do Kwon Case

On June 16th, a Montenegrin court ordered Do Kwon and Han Chang-Joon to remain in custody for a further six months as the judge considers extradition requests from South Korea and the United States. Do Kwon was previously arrested on March 24th in Montenegro on suspicion of forging documents as he attempted to board a flight to Dubai.

Earlier, the South Korean news agency reported that Do Kwon had rejected US jurisdiction during his flight. Some believe that Do Kwon’s rejection of US authorities’ jurisdiction may be due to a consideration of reducing future punishment. Currently, the US adopts a criminal sentencing system that adds up individual crimes, with a maximum sentence of over 100 years, and the SEC and local prosecutors have made a preliminary judgement that virtual assets are securities; while the maximum sentence in South Korea is only about 40 years, and the situation is different from the US because there are no standards or laws to judge whether virtual currencies are securities.

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