Fallen cryptocurrency tycoon Do Kwon is preparing to leave Montenegro. He and his colleagues arrived at the airport in the small Balkan country, where a Bombardier business jet was waiting to take them to Dubai.
Inside the VIP terminal, Kwon handed his passport to an immigration officer. The officer swiped it, and an alert flashed on the screen: Kwon was the subject of an Interpol Red Notice — a request for police around the world to arrest him.
Kwon had been hiding in the Balkans for months, but his luck seemed to be running out. It was March 23, and about two hours earlier, an informant had told Montenegro’s top police officer, Interior Minister Filip Adžić, that Kwon might be in the country.
Adžić, who recounted the arrest to the Wall Street Journal, said the informant sent Kwon’s passport details to the interior minister’s phone. When Adžić called the border police chief, police had just detained Kwon at the airport.
“Do you know who that guy is?” the interior secretary said he told the director. “He’s famous and he has a lot of money.”
Do Kwon at Terraform Labs’ Seoul office before the TerraUSD and Luna collapse in April 2022.
U.S. and South Korean authorities have been investigating Kwon for his role in one of the biggest disasters in cryptocurrency history. In May 2022, the value of two tokens he created, TerraUSD and Luna, plummeted, wiping out $40 billion from the cryptocurrency market and setting off a chain reaction that bankrupted a string of other crypto companies. Investors around the world suffered losses.
Investigators concluded that Kwon lied to investors and suspected he secretly had a vast cryptocurrency fortune. He now faces charges in the United States and South Korea, including fraud and violations of capital markets laws. South Korean prosecutors have said that if convicted in South Korea, Kwon could face the longest prison sentence in the country's history for financial crimes.
Kwon denied fraud. But just before he faced possible arrest, he vanished from his home in a luxury high-rise 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 Montenegro’s prime minister sparked a major political scandal.
Kwon, 32, is now being held in solitary confinement in a Montenegrin prison. Officials discovered that the Costa Rican passport he presented at the airport was a fake. The United States and South Korea are fighting over his extradition. If sent to the United States, he could end up in a New York prison that now houses another disgraced crypto tycoon, Sam Bankman-Fried, whose company was fatally affected by the TerraUSD-Luna debacle.
This account of Kwon’s life on the run is based on interviews with South Korean and Montenegrin officials, current and former Terraform Labs employees, and people close to Kwon. Kwon did not respond to a request for comment from his Montenegrin lawyer.
Kwon has been held at Spuzzi Prison in Montenegro since his arrest.
"Hold on, boys."
TerraUSD is a stablecoin designed to maintain a peg to $1. Crypto investors often use stablecoins as a safe haven to save profits from successful trades. TerraUSD is different from many other stablecoins because it is not backed by USD deposits. It is a so-called algorithmic stablecoin that relies on complex financial engineering and the collective efforts of traders to maintain its peg to $1.
Kwon praised TerraUSD as the centerpiece of a new monetary system free from the control of banks and governments. Some cryptocurrency observers warn it is a ticking time bomb.
To join the quality community, please add 3172309138 or xycxh1003, and follow the public account: An Zhiyu's Joy
On May 7, 2022, the TerraUSD price began to slide and investors panicked. The trigger for the drop was several large withdrawals from the Anchor Protocol, a pseudo-bank that offered investors nearly 20% annual returns on their TerraUSD deposits.
As TerraUSD plummeted, Kwon tweeted: “Will deploy more capital — hold on guys.” His team had used $3 billion in reserve funds to back the stablecoin. He scrambled to arrange a bailout, but to no avail. Within days, TerraUSD was down to nearly zero.
Investors are furious. They poured billions of dollars into TerraUSD, much of it in Anchor, which many treat as a savings account. Some others bet on a related token, Luna, which is down more than 99%.
While Terraform Labs is headquartered in Singapore, Seoul may be the epicenter of the shakeup. Kwon 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. South Korean officials say about 100,000 South Koreans have lost money on TerraUSD and Luna. Complaints are pouring into prosecutors’ offices.
Leading the investigation is Dan Sung-han. The boyish-looking 49-year-old Dan is the head of the Financial Crimes Investigation Bureau at the Seoul Southern District Prosecutors’ Office. Local media have dubbed him the “Yeouido Grim Reaper” (a reference to Seoul’s financial district) for his crackdown on stock market fraud and manipulation. “It took us a long time to gain a deep understanding of the crypto market,” Dan said.
(Left) Dan Sung-han of the Seoul Southern District Prosecutors' Office; (Right) Investigators take away evidence from a cryptocurrency exchange in July 2022.
South Korean investigators raided Terraform’s local offices and questioned current and former employees. They seized evidence from seven South Korean cryptocurrency exchanges and took away blue boxes filled with documents, laptops, smartphones and external hard drives.
Crypto Tycoon
At the time, Kwon was living in Singapore’s Sculptura Ardmore high-rise with his wife and young daughter. His duplex had a 46-foot cantilevered outdoor pool. He kept Japanese whiskey and Cuban cigars ready for guests.
His daughter was born just a few weeks ago, and Kwon named her Luna after his cryptocurrency. “My dearest creation is named after my greatest invention,” he tweeted after her birth, along with a photo of the newborn.
That summer, Kwon met friends at French and Japanese restaurants, including the three-Michelin-starred Les Amis. He proposed to some colleagues that he take a long trip to Europe with his family, where he could live in relative anonymity in a new city.
Shortly after the financial crisis, he attended a party in Singapore where many of the attendees were cryptocurrency entrepreneurs who had come to show their support for Kwon. It was a feast where Cristal champagne and Martell XO cognac flowed freely, according to a person familiar with the matter.
Meanwhile, Kwon’s investors have suffered.
Ardmore Sculpture Gallery, Singapore.
In war-torn Ukraine, web designer Yuri Popovich said he lost $9, 000 stored in TerraUSD because he didn’t trust the country’s banks. In the UK, 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.
In Taiwan, local media reported that a man committed suicide by jumping from his 13th-floor apartment after telling friends and relatives that he had lost about $2 million on Luna.
In June 2022, Kwon told The Wall Street Journal through a spokesperson, "I am devastated by recent events and hope that all families affected are taking care of themselves and their loved ones."
A Singaporean law firm, Drew & Napier, is preparing to sue Kwon on behalf of a group of TerraUSD investors who say they lost more than $50 million in total.
Kwon celebrated his 31st birthday at home on September 6, 2022. His wife shared photos with friends of him enjoying a Korean meal with her and playing with his children.
The next day, a representative from Drew & Napier arrived at Sculptura Ardmore to serve him with the lawsuit papers, but by then he had already left.
Red Notice
South Korean prosecutors said Kwon flew to Dubai on Sept. 7 and then to Serbia. He settled in the capital, Belgrade, known for its nightlife and tech industry.
A few days later, South Korean prosecutors obtained an arrest warrant for Kwon on charges of violating South Korea's capital markets law. After a long time, they felt enormous public pressure to bring Kwon to justice. Their leader, Dan, sometimes napped in a black recliner in his office.
Among other alleged violations, Dan’s investigators focused on the relationship between Terraform Labs and Chai, a South Korean payment app that at one point had 2 million users.
Before the crash, Kwon had repeatedly claimed that Chai used his company’s Terra blockchain to move money between users and merchants. The claim 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 see blockchain, the underlying technology behind Bitcoin and other cryptocurrencies, as a way to empower individuals while eliminating banks and other traditional middlemen.
But South Korean prosecutors claim Kwon's claims are false. In reality, they say, Chai uses traditional payment systems to settle transactions and its use of blockchain is a scam. Lawyers for Chai founder Daniel Shin said Chai initially used the Terra blockchain to process payments but stopped in 2020. Shin is Kwon's former business partner who denies wrongdoing. Kwon's lawyers defended his comments about Chai.
Chai founder Daniel Shin arrives at the Seoul Southern District Court.
“I am not ‘at large,’ ” Kwon wrote on Twitter after the arrest warrant was issued on Sept. 17. He still refuses to reveal his location, citing threats to his safety.
South Korean prosecutors issued a red notice through global police agency Interpol, asking police around the world to arrest Kwon.
Kwon, who lives in Serbia, told a crypto colleague that he had reached an agreement with local authorities. He told another that Serbian law enforcement allowed him to stay even after learning of the Interpol red notice. Serbia’s interior, justice, foreign and main prosecutor’s offices did not respond to interview requests.
Kwon continues to run Terraform Labs behind the scenes and has driven a long-term plan to revive the Terra blockchain. He joked with colleagues in the Terra Rebirth League, a group on the Telegram messaging app with more than 300 members, according to information obtained by The Wall Street Journal.
Early in his stay in Belgrade, Kwon lived in an apartment near the Mihajlova Cemetery, a pedestrian street in central Belgrade known for its shops, sidewalk cafes and 19th-century buildings, said Milojko Mickey Spajić, a politician from Montenegro, who met Kwon there.
Knez Mihaylova Street in Belgrade.
Spajić told the Journal that Kwon invited him to visit, and the two chatted over coffee for about an hour about Kwon’s ambitions to revive Terra.
The two have known each other since 2018, when Spajić, then a partner at venture capital firm DAS Capital in Singapore, agreed to invest $75,000 in Luna. He later returned to his home country and entered politics, hoping to make Montenegro a hub for blockchain development.
Spajić said he was unaware that Kwon was a fugitive at the time.
According to information from Serbia’s corporate registry, on Oct. 12, Kwon registered a company called Codokoj 22 doo Beograd, listing himself and Chang-joon Han as directors.
Han, a former executive at Terraform Labs and Chai who joined Kwon in the Balkans, owns a 4,300-square-foot apartment in a wealthy neighborhood of Belgrade, according to Serbian real estate records from December 2022.
On November 8, Kwon appeared on the podcast UpOnly. He joked with another guest, Martin Shkreli, a former hedge fund manager who is in prison on securities fraud charges. “Prison isn’t that bad,” Shkreli told him. “It’s bad, but it’s not the worst thing.”
"Good to know," Kwon replied.
Kwon (top right) appears on UpOnly in November 2022 with former hedge fund manager Martin Shkreli (top center).
Pressure is mounting
Chief prosecutor Dan said South Korean investigators learned through Interpol that Kwon was in Serbia a few days after he left Singapore. Seoul prosecutors publicly confirmed his whereabouts on Dec. 12. Kwon’s activity on Twitter dropped sharply.
Later that month, South Korea formally requested Serbia to arrest Kwon and extradite him.
By late January, Dan and a South Korean Justice Ministry official flew to Belgrade. For days, they met with Serbian law enforcement officials. The Serbs gave him details of Kwon’s registered companies and his internet addresses, Dan recalled. They promised to hand him over if Kwon was caught.
On Feb. 16, the SEC sued Kwon for fraud, accusing him of lying about the stability of TerraUSD and Chai’s use of the blockchain. The SEC 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 transfers were for business expenses, and disputed the SEC’s allegations against Chai.
Kwon posted his last message in Terra Rebirth League on March 11. In a private reply to a message from an admirer in a Telegram group, Kwon posted a photo of North Korean leader Kim Jong-un raising his hand in greeting.
Two days later, The Wall Street Journal reported that the U.S. Department of Justice was also investigating the TerraUSD debacle.
Goran Rodić, Kwon’s lawyer in Montenegro.
Arrest
Police said Kwon crossed the border into Montenegro in mid-March and lay in wait in the Adriatic resort of Petrovac.
On March 23, he and Han took a taxi to the capital's Podgorica airport, a journey that usually takes about an hour. They paid the driver 4,000 euros ($4,230), a huge sum for ordinary Montenegrins.
After Kwon’s passport set off an alarm, police detained him and Han, who was also 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.
According to Interior Minister Adžić, Kwon told police in frustration that "everyone is looking for me".
According to Adžić, Han protested their detention: “Wherever we go, we are VIPs.” Han did not respond to a request for comment made through his lawyer.
Podgorica Airport in Montenegro.
Hours later, federal prosecutors in New York filed fraud charges against Kwon. A South Korean ambassador soon showed up at Adžić’s office to discuss extradition proceedings.
A Montenegrin court found Adžić and Han guilty of using forged passports. The court sentenced them to four months in prison, but they can be held longer while awaiting extradition. Kwon said he did not realize the passports were fake and that he was deceived by the agency in Singapore that gave him the passports.
Since his arrest, Kwon has been held in Spruce Prison, a cluster of brick buildings in a valley near Podgorica. He is allowed one hour a day in a courtyard surrounded by barbed wire, weedy fields and rocky hillsides.
After being imprisoned, Kwon reunited with his wife and broke down in tears, expressing regret for the trouble he had caused her and their young daughter, a person familiar with the matter said.
On March 24, Kwon was brought to court in Podgorica.
Kwon attempted to post 400,000 euros ($423,000) bail, but prosecutors opposed his request, saying he was a flight risk.
On June 5, a one-page letter from Kwon arrived at the office of Montenegrin Prime Minister Dritan Abazovic. The letter, written in neat handwriting, described his friendly relationship with Spajić, a politician who had met Kwon in Belgrade and a rival of the incumbent prime minister. Spajić’s party was expected to win an election a few days later.
The letter said Spajić was trying to raise funds from Kwon and other “friends in the crypto industry,” according to a copy of the document seen by The Wall Street Journal.
Spajić denied asking Kwon for money. He said the letter was a hoax orchestrated by his political enemies and the Serbian secret police. He said Spajić was tricked into writing the letter and promised that Montenegrin authorities would bail him out and allow him to flee the country. Serbia’s intelligence agency did not respond to requests for comment.
The letter caused an uproar. Rival politicians attacked Spajić, saying he had colluded with a cryptocurrency fugitive, while Spajić cultivated an image as an anti-corruption fighter. Spajić’s party won a narrow victory in the June 11 election, putting him in position to become Montenegro’s next prime minister.
Milojko Mickey Spajić speaks at a polling station during the June 11 elections in Podgorica.
Kwon did not deny that he wrote the letter. His Montenegrin lawyer, Goran Rodić, said Kwon did not donate to Spajić. The lawyer declined to provide further details, citing the open investigation.
European officials who visited Spuz prison last year said the cells were poorly ventilated and hot in the summer. They also noted poor hygiene and overcrowding.
On a sweltering day this summer, Kwon said that to pass the time he would watch television in his cell, which had only a few English-language channels, his lawyer said.
“Given the current weather conditions, and given the general nature of the prison, I think he’s doing a good job,” Rodić said.