Tracking Do Kwon Funds: Terra's Crash Has Early Signs in 2019

Cryptocurrency fugitive Do Kwon has been evading Interpol for months. A South Korean professor followed, tracking the Terraform Labs CEO's every move. "I'm really fascinated by his address and on-chain data," Jaewoo Cho, a blockchain expert and assistant professor at Seoul National University, told DL News. It's kind of like "drawing a portrait. You're getting to know him."

Why track down the Korean co-founder of Terraform Labs in Singapore for almost a year? "I just like it... Tracking information (Doxxing) is my hobby." Jaewoo Cho is not the only one who wants to know Kwon's whereabouts. Terraform was at the center of a $60 billion crash when its algorithmic stablecoin, TerraUSD, crashed in May. 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. Both South Korean and U.S. authorities have indicted him for his role in an alleged multibillion-dollar fraud, and Interpol is also looking for him. South Korean officials said Kwon was hiding in Serbia. Do Kwon denied he was evading law enforcement.

Cho said he predicted Terraform Labs would fail when he first heard about the company in April 2019. At the time he was investigating the company on behalf of venture capitalists. Not only was he struck by the scale of the project, but several structural weaknesses were also identified at the time. Cho claims he pointed out some risks to Terraform Labs, such as black swan events, which are extremely rare but could be catastrophic if they occur. "They just let it happen. They ignore the issues."

The algorithm in the "algorithmic stablecoin" was supposed to maintain TerraUSD's peg to the U.S. dollar by allowing people to exchange it for Terra's native cryptocurrency, LUNA, for a profit. The system relies on arbitrage traders to keep it going. But when trust evaporated, both coins went into a death spiral.

When TerraUSD crashed in May 2022, a South Korean journalist approached Cho, hoping to use his blockchain expertise to verify some information. The reporter wanted Cho to look into Terraform Labs' on-chain activity, particularly around its Project Dawn funding plan, which began in September 2021 and concluded in April 2022. Cho agreed, but was taken aback when he turned on his computer to look at the blockchain. "I'm very surprised by the scale of the scam. It's not a million dollars — it's about billions of dollars," he said.

The SEC charged Kwon and his Terraform Labs in February, saying they orchestrated a "crypto-asset securities fraud" involving $40 billion from April 2018 to May 2022. Cho has since continued to identify Terraform and Kwon's wallet addresses and track their transactions, which has not gone unnoticed by Kwon himself.

In a Twitter interaction the same month as Luna's debacle, Cho posted criticism of Terra's comeback attempt, known as Terra 2.0. “Cheers, keep spreading the scare,” Kwon replied, using the cryptographic acronym for “fear, uncertainty, and doubt” (FUD).

"Do Kwon is very arrogant," Cho said. "He was like, 'Okay, I'm doing that, grab 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-chain. “This is really the end of the road, and this is an opportunity for government authorities and exchanges,” Cho said. His findings were posted on Twitter by FatManTerra, an account known for sharing insider information tracking Terra's death in September, with a spreadsheet of data collected by Cho. DL News did not independently verify the findings.

In February, Kwon wrote on Twitter, "I did not steal money, and never had a 'secret withdrawal' - welcome to discuss specific allegations."

Cho said he has noticed a change in Kwon's trading habits over the past few months. Prior to this, the fugitive was still using the same old address, transferring money to and from different addresses and exchanges. Now Kwon may have started using other addresses to transfer his money, seemingly over-the-counter or through brokers. "I suspect there are some friends or brokers who are helping Kwon withdraw his money," Cho said.

The SEC said Do Kwon transferred more than 10,000 bitcoins from the accounts of Terraform and Luna Foundation Guard (another entity from the Terra ecosystem) to a non-custodial wallet, a so-called cold wallet, before the funds were transferred to a Swiss bank and Convert to cash. From June 2022 to February 2023, more than $100 million in fiat currency has been withdrawn from Swiss banks, the complaint said.

Kwon is now planning a comeback. Over the past few months, Terraform Labs has hired more engineers to launch new projects, including a new blockchain that retains the old Terra name. Cho isn't optimistic about Kwon's return, and cast doubt on the success of the Terra 2.0 project, calling it "completely ridiculous."

After spending a lot of time tracking and analyzing the moves of the elusive Terraform CEO, Cho said he feels he understands Kwon. He smiled, "If I see him, I'll hug him."

Original link:

DoKwon case update

On June 16, a Montenegrin court ordered Do Kwon and Han Chang-Joon to remain in prison for another six months as the judge considered extradition requests from South Korean and US authorities. Do Kwon was arrested in Montenegro on March 24 on suspicion of forgery while planning to board a flight to Dubai.

Yonhap previously reported that Do Kwon had denied U.S. jurisdiction while on the run. There is a view that Do Kwon's refusal of the jurisdiction of the US authorities may be out of consideration for reducing the severity of future punishment. At present, the United States adopts a criminal law system in which the sentencing of a single crime is added, and the maximum sentence can reach more than 100 years, and the SEC and local procuratorial agencies have made a judgment in advance that virtual assets are securities; while the maximum sentence in South Korea is only about 40 years, and because there is no The criteria and laws for judging whether virtual currencies are securities, so the situation is different from the United States.