Do Kwon, a crypto entrepreneur from South Korea, once boasted of building a stablecoin “ecosystem” – free from the tentacles of Wall Street and government regulators. Appearing in a Manhattan courtroom, wrists and ankles chained, in a bright yellow prison jumpsuit, was not part of the plan.
Nonetheless, Kwon might consider he got off lightly. Having pleaded guilty to two criminal counts of fraud related to the $40 billion collapse of digital coins Luna and TerraUSD in 2022, he may get just 12 years in jail as part of his plea deal, notes the BBC. That sound you hear in the background is Sam Bankman-Fried – the former FTX supremo, locked up for 25 years for a much smaller fraud, rattling the bars of his cage.
It’s hard to overstate the impact of the sudden implosion of Kwon’s Terraform Labs empire, which was described by one analyst at the time as “the largest destruction of wealth… in a single project in crypto’s history”. The size of the crash helped trigger the descent of the whole sector into the so-called “crypto winter” of 2022, which the World Economic Forum later estimated wiped out some $2 trillion of assets.
MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The shock was all the more profound because TerraUSD, which was pegged to the greenback, was considered one of the most established stablecoins, says The Verge – supposedly much less “volatile” than many of its peers. It attracted some 280,000 investors, including leading US crypto venture-capital firms and an army of small investors in Korea. Prosecutors later claimed that Kwon, 33, constructed a “financial world” that was “built on lies and manipulative and deceptive techniques”, says the FT. The human cost of the heavy losses was very real. “Media reports of multiple suicides associated with the collapse” made him “a villain in his home country”.
Do Kwon, king of the "Lunatics"
Kwon’s court appearance last week caps “a spectacular fall from grace” for the once brash Stanford graduate who, at his boastful peak, derided critics as “cockroaches” and seemed to relish stirring up trouble, says The New York Times. He claimed his “invention” of an “algorithmic stablecoin” – pegged to the dollar, but backed by the fluctuations of a sister currency, Luna – would transform finance. Fans called him king of the “Lunatics”. Kwon himself dreamed big aloud about the Terra universe he would create. Born into a well-heeled Seoul family, and educated at the elite Daewon Foreign Language High School, he studied computer engineering at Stanford.
Jobs at Microsoft and Apple followed, but Kwon was increasingly hooked by the crypto craze and in 2018 returned to Korea to co-found Terraform Labs. It took the effervescent, social media-savvy entrepreneur just a couple of years to emerge as one of crypto’s “most-watched whales”, says Bloomberg.
When his Terra empire collapsed, life changed dramatically for Kwon. After the South Korean authorities issued a warrant for his arrest in 2023, he fled, “living the life of an exiled oligarch on the run, carrying multiple devices and passports”, says Disruption Banking. “An older-looking, world-wary Do Kwon” eventually surfaced in Montenegro, from where he was eventually extradited to the US – after being caught at the airport trying to escape to the United Arab Emirates using a forged Costa Rican passport.
As part of his plea deal, Kwon must forfeit more than $19 million in proceeds from his crypto dealings. In time, he may also have to face the music back home: he still faces charges in South Korea. “I’ve never thought about what could happen to me if this fails,” he told Coinage in 2022. Plenty of time for that now.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
Will Rachel Reeves hike taxes in Autumn Budget?Chancellor Rachel Reeves is set to unveil her second Autumn Budget on Wednesday, 26 November. Follow live updates and analysis ahead of the fiscal event
-
Steve Webb: The triple lock is there to do a job. I’m not embarrassed or ashamed of itThe triple lock means 13 million pensioners will now get an above-inflation state pension boost in April. While the rising cost of the policy has stirred controversy, Steve Webb, who served as pensions minister when it was introduced, argues the triple lock is vital and should stay. Webb speaks to Kalpana Fitzpatrick on the new episode of MoneyWeek Talks – out now.
-
Chen Zhi: the kingpin of a global conspiracyChen Zhi appeared to be a business prodigy investing in everything from real estate to airlines. Prosecutors allege he is the head of something more sinister
-
Canada will be a winner in this new era of deglobalisation and populismGreg Eckel, portfolio manager at Canadian General Investments, selects three Canadian stocks
-
Jim O’Neill on nearly 25 years of the BRICSJim O’Neill, who coined the acronym BRICS in 2001, tells MoneyWeek how the group is progressing
-
Circle sets a new gold standard for cryptocurrenciesCryptocurrencies have existed in a kind of financial Wild West. No longer – they are entering the mainstream, and US-listed Circle is ideally placed to benefit
-
8 of the best converted industrial properties for saleThe best converted industrial properties for sale – from a Victorian railway station in Norfolk to a Grade II-listed former water tower with views of the River Alde
-
More clouds gather over renewable energy trusts – is there any hope for the sector?The outlook for renewable energy trusts has gone from bad to worse this year, with the industry being caught in a 'perfect storm'
-
Should ISA investors be forced to hold UK shares?The UK government would like ISA investors to hold more UK stocks – but many of us are already overexposed
-
Why Scotland's proposed government bonds are a terrible investmentOpinion Politicians in Scotland pushing for “kilts” think it will strengthen the case for independence and boost financial credibility. It's more likely to backfire
