{"id":58148,"date":"2025-01-02T19:49:25","date_gmt":"2025-01-03T03:49:25","guid":{"rendered":"https:\/\/cjnotebook.com\/?p=58148"},"modified":"2025-01-02T19:50:05","modified_gmt":"2025-01-03T03:50:05","slug":"korean-do-kwon-extradited-to-u-s-from-montenegro-faces-up-to-130-years-in-prison-for-alleged-fraud-resulting-in-40b-in-losses","status":"publish","type":"post","link":"https:\/\/cjnotebook.com\/?p=58148","title":{"rendered":"Korean Extradited to U.S. from Montenegro Faces up to 130 years in Prison for Alleged Fraud Resulting in $40B in Losses"},"content":{"rendered":"<div class=\"flex max-w-full flex-col flex-grow\">\n<div class=\"min-h-8 text-message flex w-full flex-col items-end gap-2 whitespace-normal break-words text-start [.text-message+&amp;]:mt-5\" dir=\"auto\" data-message-author-role=\"assistant\" data-message-id=\"ebb32ef3-2ed3-46ef-95c6-510c191d6dc1\" data-message-model-slug=\"gpt-4o\">\n<div class=\"flex w-full flex-col gap-1 empty:hidden first:pt-[3px]\">\n<div class=\"markdown prose w-full break-words dark:prose-invert light\">\n<p style=\"text-align: center;\"><span style=\"font-size: 20px;\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-57623\" src=\"https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/09\/gavel_1727379516.jpg\" alt=\"\" width=\"1\" height=\"1\" \/><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-57378\" src=\"https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/08\/FBI_1724901137.png\" alt=\"\" width=\"1\" height=\"1\" \/><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-56688\" src=\"https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/06\/department_of_1718317154.png\" alt=\"\" width=\"1\" height=\"1\" \/><\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"wp-image-56354 alignright\" src=\"https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/05\/judge-hammer-auction-hammer-stockpack-pixabay-300x160.jpg\" alt=\"judge, hammer, auction hammer\" width=\"398\" height=\"212\" srcset=\"https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/05\/judge-hammer-auction-hammer-stockpack-pixabay-300x160.jpg 300w, https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/05\/judge-hammer-auction-hammer-stockpack-pixabay-1024x547.jpg 1024w, https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/05\/judge-hammer-auction-hammer-stockpack-pixabay-768x410.jpg 768w, https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/05\/judge-hammer-auction-hammer-stockpack-pixabay-850x454.jpg 850w, https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/05\/judge-hammer-auction-hammer-stockpack-pixabay.jpg 1280w\" sizes=\"auto, (max-width: 398px) 100vw, 398px\" \/><\/p>\n<p style=\"text-align: center;\"><span style=\"font-size: 20px;\">Do Hyeong Kwon, 33, a South Korean citizen, was extradited from Montenegro Thursday face fraud charges. A newly unsealed indictment accuses Kwon, the co-founder and former CEO of Terraform Labs PTE Ltd., of orchestrating schemes to defraud investors and artificially inflate the value of Terraform\u2019s cryptocurrencies.<\/span><\/p>\n<\/div>\n<p style=\"text-align: center;\"><span style=\"font-size: 20px;\">Kwon arrived in the U.S. Tuesday.<\/span><\/p>\n<p style=\"text-align: center;\"><span style=\"font-size: 20px;\">\u201cDo Hyeong Kwon will now be held accountable in an American courtroom for, as alleged in court documents, his elaborate schemes involving Terraform\u2019s cryptocurrencies, which resulted in over $40 billion in investor losses,\u201d said Attorney General Merrick B. Garland. \u201cWe secured this extradition despite Kwon\u2019s alleged attempt to cover his tracks by laundering proceeds of his schemes and trying to use a fraudulent passport to travel to a country that did not have an extradition treaty with the United States.&#8221;<\/span><\/p>\n<p style=\"text-align: center;\"><span style=\"font-size: 20px;\"><img loading=\"lazy\" decoding=\"async\" class=\"size-medium wp-image-3918 alignleft\" src=\"https:\/\/cjnotebook.com\/wp-content\/uploads\/2014\/06\/Department-of-Justice-300x300.png\" alt=\"Two Men Arrested for Allegedly Operating One of the Largest Synthetic Drug Smuggling Rings\" width=\"300\" height=\"300\" srcset=\"https:\/\/cjnotebook.com\/wp-content\/uploads\/2014\/06\/Department-of-Justice-300x300.png 300w, https:\/\/cjnotebook.com\/wp-content\/uploads\/2014\/06\/Department-of-Justice-150x150.png 150w, https:\/\/cjnotebook.com\/wp-content\/uploads\/2014\/06\/Department-of-Justice.png 350w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/>\u201cDo Kwon, co-founder and former CEO of Terraform, allegedly defrauded investors by falsely advertising the company\u2019s blockchain products as decentralized, reliable, and effective, and by engaging in market manipulation, ultimately resulting in more than $40 billion in investor losses,\u201d said Assistant Director in Charge James E. Dennehy of the FBI New York Field Office. \u201cFor at least four years, Kwon allegedly played puppet master to maintain this crafted illusion and ensnare investors.&#8221;<\/span><\/p>\n<div class=\"flex max-w-full flex-col flex-grow\" style=\"text-align: center;\">\n<div class=\"min-h-8 text-message flex w-full flex-col items-end gap-2 whitespace-normal break-words text-start [.text-message+&amp;]:mt-5\" dir=\"auto\" data-message-author-role=\"assistant\" data-message-id=\"cf6a4be9-3abd-44a1-b88f-4d13c53c5bce\" data-message-model-slug=\"gpt-4o\">\n<div class=\"flex w-full flex-col gap-1 empty:hidden first:pt-[3px]\">\n<div class=\"markdown prose w-full break-words dark:prose-invert light\">\n<p><span style=\"font-size: 20px;\">From 2018 to 2022, Do Hyeong Kwon allegedly orchestrated schemes to defraud investors in Terraform\u2019s cryptocurrencies, according to the indictment.<\/span><\/p>\n<p><span style=\"font-size: 20px;\">Kwon is accused of making false claims about the stability of Terraform\u2019s stablecoin protocol, the capabilities of its blockchain technology, and the reliability of its financial systems.<\/span><\/p>\n<p><span style=\"font-size: 20px;\">Despite these claims, Kwon allegedly knew that key Terraform products did not function as advertised. Instead, he manipulated them to create a false appearance of a stable and decentralized financial system.<\/span><\/p>\n<p><span style=\"font-size: 20px;\">This deception inflated the value of Terraform\u2019s cryptocurrencies, which Kwon and his controlled entities held in large amounts and sold to investors for billions of dollars in other assets.<\/span><\/p>\n<p><span style=\"font-size: 20px;\">If convicted of all charges, Kwon faces a maximum penalty of 130 years in prison.<\/span><\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<p style=\"text-align: center;\"><span style=\"font-size: 20px;\">Kwon\u2019s misrepresentations included the following:<\/span><\/p>\n<ul>\n<li style=\"text-align: left;\"><span style=\"font-size: 20px;\"><strong>The Stablecoin Misrepresentations<\/strong>: Kwon made misrepresentations about the effectiveness of the system that lay at the heart of Terraform\u2019s cryptocurrency empire, the \u201cTerra Protocol,\u201d which purportedly used a computer algorithm to maintain the value of Terraform\u2019s so-called \u201cstablecoin\u201d pegged to the U.S. dollar, TerraUSD (UST), at a value of $1 for one UST. But as Kwon knew, after the Terra Protocol failed to cause the restoration of UST\u2019s $1 peg in May 2021, Kwon reached an agreement with executives at a high-frequency trading firm (the Trading Firm) so that the Trading Firm would purchase large amounts of UST in order to artificially support UST\u2019s $1 peg.<\/span><\/li>\n<li><span style=\"font-size: 20px;\"><strong>The LFG Misrepresentations<\/strong>: Kwon made misrepresentations about the governance of the Luna Foundation Guard Ltd. (LFG), which Kwon claimed was managed by an independent governing body and was tasked with deploying billions of dollars\u2019 worth of financial reserves to defend UST\u2019s peg. But as Kwon knew, he controlled both the LFG and Terraform. In addition, Kwon misappropriated hundreds of millions of dollars in assets from the LFG. Kwon and others acting at his direction sought to launder those misappropriated funds through transactions designed to conceal and disguise the nature, location, source, ownership, and control of the funds.<\/span><\/li>\n<li><span style=\"font-size: 20px;\"><strong>The Mirror Misrepresentations<\/strong>: Kwon made misrepresentations about the success and operation of an investing platform on Terraform\u2019s blockchain (the Terra blockchain) called Mirror Protocol (Mirror), that purportedly allowed users to create, buy, and sell synthetic versions of stocks listed on U.S. securities exchanges. Kwon claimed that Mirror operated in a decentralized manner and that he and Terraform played no role in Mirror\u2019s governance. But as Kwon knew, he and Terraform secretly maintained control over Mirror, and used automated trading bots to manipulate the prices of synthetic assets that Mirror issued. Kwon also caused Terraform to inflate key user metrics to deceive investors.<\/span><\/li>\n<li><span style=\"font-size: 20px;\"><strong>The Chai Misrepresentations<\/strong>: Kwon falsely claimed that the Terra blockchain was being used to process billions of dollars in financial transactions for the Korean payment-processing application Chai. In doing so, Kwon claimed that the Terra blockchain had \u201creal world\u201d applications or uses, as distinct from competing cryptocurrency platforms. But as Kwon knew, Chai processed transactions through traditional financial processing networks, not the Terra blockchain.<\/span><\/li>\n<li><span style=\"font-size: 20px;\"><strong>The Genesis Coin Misrepresentations<\/strong>: Kwon made misrepresentations about the use of a supply of one billion stablecoins programmed into the Terra blockchain at its creation (the Genesis Stablecoins), which were purportedly held in reserve for Terraform for certain specified uses. But Kwon used at least $145 million worth of Genesis Stablecoins, among other things, to fund fake Chai blockchain transactions and trading bots to manipulate the prices of synthetic assets that Mirror issued.<\/span><\/li>\n<\/ul>\n<div class=\"flex-1 overflow-hidden @container\/thread\">\n<div class=\"h-full\">\n<div class=\"react-scroll-to-bottom--css-xrmxw-79elbk h-full\">\n<div class=\"react-scroll-to-bottom--css-xrmxw-1n7m0yu\">\n<div class=\"flex flex-col text-sm md:pb-9\">\n<article class=\"w-full scroll-mb-[var(--thread-trailing-height,150px)] text-token-text-primary focus-visible:outline-2 focus-visible:outline-offset-[-4px]\" dir=\"auto\" data-testid=\"conversation-turn-9\" data-scroll-anchor=\"true\">\n<div class=\"m-auto text-base py-[18px] px-3 md:px-4 w-full md:px-5 lg:px-4 xl:px-5\">\n<div class=\"mx-auto flex flex-1 gap-4 text-base md:gap-5 lg:gap-6 md:max-w-3xl lg:max-w-[40rem] xl:max-w-[48rem]\">\n<div class=\"group\/conversation-turn relative flex w-full min-w-0 flex-col agent-turn\">\n<div class=\"flex-col gap-1 md:gap-3\">\n<div class=\"flex max-w-full flex-col flex-grow\">\n<div class=\"min-h-8 text-message flex w-full flex-col items-end gap-2 whitespace-normal break-words text-start [.text-message+&amp;]:mt-5\" dir=\"auto\" data-message-author-role=\"assistant\" data-message-id=\"cfa84d9b-6b7f-4710-b56b-252139257c5c\" data-message-model-slug=\"gpt-4o\">\n<div class=\"flex w-full flex-col gap-1 empty:hidden first:pt-[3px]\">\n<div class=\"markdown prose w-full break-words dark:prose-invert light\">\n<p style=\"text-align: center;\"><span style=\"font-size: 20px;\"><strong>Kwon\u2019s alleged misrepresentations include the following:<\/strong><\/span><\/p>\n<ol>\n<li><span style=\"font-size: 20px;\"><strong>Stablecoin Misrepresentations<\/strong>: Kwon claimed the Terra Protocol maintained the value of Terraform\u2019s stablecoin, TerraUSD (UST), at $1 using a computer algorithm. However, after the protocol failed in May 2021, Kwon arranged for a high-frequency trading firm to artificially support UST\u2019s $1 peg by purchasing large amounts of UST.<\/span><\/li>\n<li><span style=\"font-size: 20px;\"><strong>LFG Misrepresentations<\/strong>: Kwon falsely stated that the Luna Foundation Guard (LFG) was managed by an independent body to defend UST\u2019s peg with billions in reserves. In reality, Kwon controlled both LFG and Terraform, misappropriating hundreds of millions of LFG\u2019s assets and laundering them through concealed transactions.<\/span><\/li>\n<li><span style=\"font-size: 20px;\"><strong>Mirror Misrepresentations<\/strong>: Kwon claimed that Mirror Protocol, an investment platform on the Terra blockchain, operated in a decentralized manner without Terraform\u2019s involvement. However, he and Terraform secretly controlled Mirror, manipulated synthetic asset prices using trading bots, and inflated user metrics to mislead investors.<\/span><\/li>\n<li><span style=\"font-size: 20px;\"><strong>Chai Misrepresentations<\/strong>: Kwon falsely claimed the Terra blockchain processed billions of dollars in transactions for the Korean payment app Chai, demonstrating &#8220;real-world&#8221; utility. In truth, Chai used traditional financial networks, not the Terra blockchain.<\/span><\/li>\n<li><span style=\"font-size: 20px;\"><strong>Genesis Coin Misrepresentations<\/strong>: Kwon misused $145 million of Genesis Stablecoins, originally reserved for specific purposes, to fund fake Chai blockchain transactions and manipulate synthetic asset prices on Mirror using trading bots<\/span><\/li>\n<\/ol>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<div class=\"mb-2 flex gap-3 empty:hidden -ml-2\">\n<div class=\"items-center justify-start rounded-xl p-1 flex\"><\/div>\n<\/div>\n<div class=\"mt-3 w-full empty:hidden\">\n<div class=\"text-center\">\n<p style=\"text-align: center;\"><span style=\"font-size: 20px;\"><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-58093\" src=\"https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/12\/gavel_1734742736.png\" alt=\"\" width=\"1\" height=\"1\" \/>At its peak in spring 2022, the combined market value of Terraform\u2019s cryptocurrencies, UST and LUNA, exceeded $50 billion. <\/span><\/p>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignleft wp-image-56948 size-medium\" src=\"https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/07\/100-stockpack-unsplash-300x188.jpg\" alt=\"100$\" width=\"300\" height=\"188\" srcset=\"https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/07\/100-stockpack-unsplash-300x188.jpg 300w, https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/07\/100-stockpack-unsplash-1024x640.jpg 1024w, https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/07\/100-stockpack-unsplash-768x480.jpg 768w, https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/07\/100-stockpack-unsplash-1536x960.jpg 1536w, https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/07\/100-stockpack-unsplash-2048x1280.jpg 2048w, https:\/\/cjnotebook.com\/wp-content\/uploads\/2024\/07\/100-stockpack-unsplash-850x531.jpg 850w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/p>\n<p style=\"text-align: center;\"><span style=\"font-size: 20px;\">This growth was largely driven by Kwon\u2019s false claims about Terraform and its technology, including secret efforts to manipulate the UST market in May 2021. <\/span><\/p>\n<p style=\"text-align: center;\"><span style=\"font-size: 20px;\">By May 2022, UST\u2019s market capitalization was nine times larger, and its daily trading volume was more than eight times higher than in May 2021.<\/span><\/p>\n<p style=\"text-align: center;\"><span style=\"font-size: 20px;\">However, in May 2022, UST\u2019s peg began to fail again, as it had the year before. <\/span><\/p>\n<p style=\"text-align: center;\"><span style=\"font-size: 20px;\">While Kwon managed to conceal the Terra Protocol\u2019s flaws in 2021, he could not do so in 2022. This led to the collapse of UST and LUNA, resulting in over $40 billion in investor losses. <\/span><\/p>\n<p style=\"text-align: center;\"><span style=\"font-size: 20px;\">Following the crash, Kwon distributed a misleading \u201cthird-party audit\u201d to cover up his actions and attempted to launder the proceeds of his fraud through various blockchains, cryptocurrency exchanges, and a Swiss bank account.<\/span><\/p>\n<p style=\"text-align: center;\"><span style=\"font-size: 20px;\">On March 23, 2023, Kwon was arrested in Europe for attempting to use a fraudulent passport to travel to a country without a U.S. extradition treaty. He was initially indicted in the Southern District of New York that same day.<\/span><\/p>\n<p>&nbsp;<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/article>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Do Hyeong Kwon, 33, a South Korean citizen, was extradited from Montenegro Thursday face fraud charges. A newly unsealed indictment accuses Kwon, the co-founder and former CEO of Terraform Labs PTE Ltd.,&#8230;<\/p>\n","protected":false},"author":1,"featured_media":56048,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-58148","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Korean Extradited to U.S. from Montenegro Faces up to 130 years in Prison for Alleged Fraud Resulting in $40B in Losses<\/title>\n<meta name=\"description\" content=\"Do Hyeong Kwon, 33, a South Korean citizen, was extradited from Montenegro Thursday face fraud charges. 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