Months before Sam Bankman-Fried and the FTX fraud was exposed, and years before Binance and its founder, Changpeng Zhao, would admit fault and settle with the U.S. for several billion dollars, Do Kwon was widely regarded as crypto`s top villain for nearly dismantling the entire sector with his failed U.S. dollar-pegged stablecoin. It was May 2022, and Kwon was riding high. His company, Terraform Labs, was behind one of the most popular U.S.-pegged stablecoins on the planet, the venture funding was rolling in, his coins (dubbed terra and luna) were collectively worth tens of billions of dollars, and like Bankman-Fried, Kwon had landed a spot on the prestigious Forbes 30 under 30 list. Perhaps in his greatest show of confidence in the empire he had built, just one month before it all collapsed, Kwon posted that he named his newborn daughter Luna. "My dearest creation named after my greatest invention," he wrote. And then it all came crashing down. Whereas most stablecoins are backed up by a mix of cash and other assets to match the value of tokens in circulation, Kwon`s invention was instead backed by a complex set of code. When the algorithm failed in May 2022, it cost investors $40 billion in market value overnight, led to devastating losses to multiple investors, and contributed to the collapse of hedge fund Three Arrows Capital in June 2022, followed by crypto lenders Voyager Digital, then BlockFi, then Genesis — and, in a roundabout way, FTX too. The stablecoin`s implosion also rocked confidence in the sector and accelerated the slide in cryptocurrencies already underway as part of a broader pullback from risk. In the years since, U.S. criminal, civil, and bankruptcy courts have been cleaning up the wreckage, in part, by prosecuting bad actors and fining fallen firms. This week, a judge signed off on Do Kwon and his bankrupt Terraform Labs settling with the U.S. Securities and Exchange Commission for $4.5 billion. This comes after a jury unanimously found Kwon and his company liable for securities fraud following less than two hours of deliberation. How Kwon, who is currently in the Balkans — or Terraform Labs, which remains in bankruptcy and, according to court testimony, only has around $150 million in assets — will be able to pay the fine remains unclear. But it does serve as the latest example of crypto`s bad actors atoning for past sins. In April, Binance`s founder and ex-CEO was sentenced to four months in prison after settling with the U.S. Justice Department, Commodity Futures Trading Commission and the Treasury Department for $4.3 billion in November. A few weeks before that, in March, the FTX founder and ex-CEO was sentenced to 25 years in prison. Celsius CEO Alex Mashinsky starts his jury trial later this year, in September. The washout of crypto`s previous class of tycoons comes as the digital asset market matures and gains the backing of Wall Street`s top brass. Token prices are in the midst of a bull run, with bitcoin reaching a new all-time-high above $73,000 in March. Meanwhile, some of the biggest names in traditional finance have jumped into crypto in the last year, as firms including BlackRock and Fidelity issue billions of dollars worth of spot bitcoin exchange-traded funds in the U.S. Here`s a rundown of where the culprits who nearly blew up crypto are today, including those who remain on the lam. Kwon is currently living in a sort of legal and social purgatory in the Balkans. The 32-year-old fugitive is holed up in Montenegro after months on the run that involved leaving Singapore for a mix of destinations, including Dubai, Serbia, and Montenegro. He`s been there since March of last year, following a failed attempt to flee from Podgorica to Dubai on a jet with a fake passport. Do Kwon is out on bail but bound to the Balkan state, until the country`s Supreme Court decides whether to ship him back home to South Korea to face trial, or to the United States, where the former crypto tycoon has been tried in absentia and found guilty on civil charges. As for criminal repercussions for Kwon, it all depends on what the Montenegrins decide. U.S. judges have been coming down hard on the crypto criminals who cost retail investors tens of billions of dollars, but South Korea doesn`t plan to go easy either, with one prosecutor reportedly saying that he expected Kwon to face the longest jail term for a financial crime in the country`s history, which could top 40 years.
Теги: Cryptocurrency, U.S. Securities and Exchange Commission