WEBVTT 00:00:00.000 --> 00:00:01.899 OK, I want you to picture a number and it's a 00:00:01.899 --> 00:00:04.339 it's a really, really big number. Forty five 00:00:04.339 --> 00:00:07.240 billion dollars. That is just it's a staggering 00:00:07.240 --> 00:00:09.119 amount of money. Yeah. It's almost impossible 00:00:09.119 --> 00:00:11.199 to even visualize what that looks like. It is. 00:00:11.259 --> 00:00:13.560 I mean, you're talking about the GDP of, you 00:00:13.560 --> 00:00:16.559 know, a small country or the market cap of a 00:00:16.559 --> 00:00:18.539 company that's been around for a century. Huge 00:00:18.539 --> 00:00:21.500 industrial giant. Yeah, exactly. And now imagine 00:00:21.500 --> 00:00:24.679 that number. Forty five billion dollars just 00:00:24.679 --> 00:00:28.530 disappearing. gone and i'm not talking about 00:00:28.530 --> 00:00:31.629 over a year you know like a slow motion recession 00:00:31.629 --> 00:00:34.890 not a decade of bad business like a a blockbuster 00:00:34.890 --> 00:00:38.369 video situation no this was a cliff one single 00:00:38.369 --> 00:00:42.090 week may 2022. it was a financial bloodbath yeah 00:00:42.090 --> 00:00:45.009 and i think it's it's really hard to overstate 00:00:45.009 --> 00:00:47.090 the scale of the destruction it wasn't a market 00:00:47.090 --> 00:00:49.170 dip it was an extinction level event for that 00:00:49.170 --> 00:00:51.609 entire ecosystem and right in the middle of this 00:00:51.609 --> 00:00:54.270 yeah this hurricane of money one guy a guy who 00:00:54.270 --> 00:00:57.390 um Called himself the king of the lunatics. And 00:00:57.390 --> 00:01:00.030 maybe more tellingly, a guy who named his own 00:01:00.030 --> 00:01:03.729 daughter after his invention. We are, of course, 00:01:03.729 --> 00:01:06.769 talking about Do Kwon, the South Korean crypto 00:01:06.769 --> 00:01:10.030 king behind Terraform Labs. This is one of those 00:01:10.030 --> 00:01:14.310 stories that it really feels like it should be 00:01:14.310 --> 00:01:16.769 a movie script. You know, like a sequel to The 00:01:16.769 --> 00:01:19.090 Big Short, but you mix in some Catch Me If You 00:01:19.090 --> 00:01:22.640 Can. Right. But it's just... It's painfully real 00:01:22.640 --> 00:01:25.239 for thousands and thousands of people who lost 00:01:25.239 --> 00:01:28.379 everything. So today we're going to be unpacking 00:01:28.379 --> 00:01:31.379 the rise and fall of Kwon Do -hyun, or as we 00:01:31.379 --> 00:01:34.540 all know him. And what a ride it is because we're 00:01:34.540 --> 00:01:36.579 not just looking at a stock chart going down. 00:01:36.640 --> 00:01:39.219 That's the boring part almost. The real story 00:01:39.219 --> 00:01:41.659 here involves, I mean, just listen to this list. 00:01:42.120 --> 00:01:44.959 Algorithmic hubris, a global manhunt with Interpol, 00:01:45.079 --> 00:01:47.540 fake passports, high stakes political intrigue 00:01:47.540 --> 00:01:49.780 in Montenegro. Of all places. And it all ends 00:01:49.780 --> 00:01:51.959 with the 15 year prison sentence that was handed 00:01:51.959 --> 00:01:54.620 down in late 2025. Exactly. The headline is the 00:01:54.620 --> 00:01:56.400 crash, right? That's what everyone remembers. 00:01:56.560 --> 00:01:59.140 But the real story is the man, the code, and 00:01:59.140 --> 00:02:02.000 this pattern of behavior that led us all there. 00:02:02.280 --> 00:02:04.799 So here's our mission for this deep dive. We 00:02:04.799 --> 00:02:07.799 really want to get past the headlines, past the 00:02:07.799 --> 00:02:10.300 panic of the crash itself, and try to understand 00:02:10.300 --> 00:02:12.699 the psychology here. The why. Yeah, the why. 00:02:12.919 --> 00:02:15.479 And we're going to trace the red flags because, 00:02:15.599 --> 00:02:18.259 and this is a bit of a spoiler alert, they started 00:02:18.259 --> 00:02:21.419 way, way before Terra ever launched. That's such 00:02:21.419 --> 00:02:24.439 a key point. Most people start this story in 00:02:24.439 --> 00:02:27.800 2018 with Terraform Labs. But you have to go 00:02:27.800 --> 00:02:29.379 back further. You have to look at the pattern. 00:02:29.539 --> 00:02:31.960 And we also want to untangle that, that crazy 00:02:31.960 --> 00:02:35.020 legal mess that kept him in limbo in the Balkans 00:02:35.020 --> 00:02:38.300 for nearly two years. It's a fascinating side 00:02:38.300 --> 00:02:40.520 story in itself. It really is. So for this, we're 00:02:40.520 --> 00:02:42.560 pulling from a pretty massive dossier. We've 00:02:42.560 --> 00:02:45.000 got legal filings. We have government investigation 00:02:45.000 --> 00:02:47.539 reports from both South Korea and the U .S. And 00:02:47.539 --> 00:02:50.199 we have these really detailed chronicles of his 00:02:50.199 --> 00:02:53.520 movements, Singapore, Serbia, Montenegro. It's 00:02:53.520 --> 00:02:56.189 all in here. So buckle up. All right. Let's get 00:02:56.189 --> 00:02:58.009 into it. Before we can even touch the billions, 00:02:58.129 --> 00:02:59.969 we have to go back to the beginning. Because 00:02:59.969 --> 00:03:02.169 when you look at him on paper, Duisquan had the 00:03:02.169 --> 00:03:05.129 kind of resume that, well, it makes venture capitalists 00:03:05.129 --> 00:03:08.289 just drool. It's the golden resume. Oh, absolutely. 00:03:08.530 --> 00:03:11.330 It was perfect. He was born in Seoul in 1991, 00:03:11.610 --> 00:03:15.689 and his path just seems paved with prestige right 00:03:15.689 --> 00:03:18.289 from day one. He attended day one foreign language 00:03:18.289 --> 00:03:20.569 high school. And for anyone who doesn't know 00:03:20.569 --> 00:03:22.750 the Korean education system, that's not just 00:03:22.750 --> 00:03:26.300 like... A good school. No, it's the school. It's 00:03:26.300 --> 00:03:29.020 incredibly competitive. It produces just a huge 00:03:29.020 --> 00:03:31.460 chunk of the country's elite. Getting in there 00:03:31.460 --> 00:03:33.409 is half the battle. It's the kind of place that 00:03:33.409 --> 00:03:36.710 basically guarantees you a spot at a top tier 00:03:36.710 --> 00:03:38.770 university, right? If you can make it through. 00:03:38.909 --> 00:03:40.569 Exactly. And that's what he did. He took that 00:03:40.569 --> 00:03:42.430 ticket and he went straight to the United States. 00:03:42.569 --> 00:03:44.969 He graduates from Stanford University with a 00:03:44.969 --> 00:03:48.069 degree in computer science in 2015. Stanford 00:03:48.069 --> 00:03:50.870 CS degree. I mean, come on. That's the golden 00:03:50.870 --> 00:03:53.370 ticket in Silicon Valley. It is. You walk into 00:03:53.370 --> 00:03:55.330 a room with that on your CV and people just. 00:03:55.840 --> 00:03:57.520 They assume you're a genius before you've even 00:03:57.520 --> 00:03:59.800 said a word. It just signals everything. It signals 00:03:59.800 --> 00:04:02.060 competence. It signals network. It signals potential. 00:04:02.400 --> 00:04:05.180 And he didn't stop there. He did these brief 00:04:05.180 --> 00:04:08.659 stints as a software engineer at Microsoft and 00:04:08.659 --> 00:04:11.840 at Apple. Now, you say brief. We're talking pretty 00:04:11.840 --> 00:04:13.659 short periods, right? He wasn't like leading 00:04:13.659 --> 00:04:16.379 the next iPhone design team. No, no, not at all. 00:04:16.439 --> 00:04:18.680 But it doesn't matter. When you put Stanford, 00:04:18.920 --> 00:04:22.660 Microsoft, and Apple on a slide deck for investors. 00:04:23.730 --> 00:04:25.670 you're projecting a certain kind of legitimacy. 00:04:25.910 --> 00:04:27.790 A stamp of approval. It says, I know what I'm 00:04:27.790 --> 00:04:29.750 doing. The best companies in the world already 00:04:29.750 --> 00:04:32.910 vetted me, so you don't have to. Precisely. It 00:04:32.910 --> 00:04:35.370 builds this shield against any real scrutiny. 00:04:35.649 --> 00:04:38.209 Yeah. But, and here's where it gets really interesting, 00:04:38.329 --> 00:04:40.329 and it's part of the story that often just gets 00:04:40.329 --> 00:04:43.750 glazed over. In 2016, right after this, this 00:04:43.750 --> 00:04:47.550 shiny start, he goes back to Korea. And he founds 00:04:47.550 --> 00:04:50.649 a startup called Enify. Anify. Okay. And digging 00:04:50.649 --> 00:04:52.529 into the research, this is where we see the first, 00:04:52.629 --> 00:04:54.470 I don't know, the first real cracks in that perfect 00:04:54.470 --> 00:04:56.689 armor. This isn't just my first startup failed 00:04:56.689 --> 00:04:58.910 kind of story. There was something sketchier 00:04:58.910 --> 00:05:01.230 going on. This is the first major red flag. And 00:05:01.230 --> 00:05:03.610 frankly, it's one that a lot of people just missed 00:05:03.610 --> 00:05:05.810 or ignored until it was way too late. So what 00:05:05.810 --> 00:05:08.329 was Anify? It was a startup focused on peer -to 00:05:08.329 --> 00:05:12.730 -peer Wi -Fi solutions. Kwan was the CEO. And 00:05:12.730 --> 00:05:15.750 it turns out this company got about $600 ,000 00:05:15.750 --> 00:05:18.069 worth of government funding in its early stages. 00:05:18.310 --> 00:05:20.550 Okay, $600 ,000. That's not a small chunk of 00:05:20.550 --> 00:05:22.870 change for a new startup in 2016. No, it's a 00:05:22.870 --> 00:05:24.790 serious amount, especially for a first -time 00:05:24.790 --> 00:05:27.170 founder. But the problem wasn't just the money. 00:05:27.310 --> 00:05:30.610 It was how they got the money. It involved a 00:05:30.610 --> 00:05:33.889 massive conflict of interest. The funding was 00:05:33.889 --> 00:05:36.490 approved through a Korean incubator company. 00:05:37.089 --> 00:05:40.149 And you'll never guess who was running that incubator. 00:05:40.329 --> 00:05:43.040 Let me guess. Based on the theme of the story, 00:05:43.279 --> 00:05:46.199 one of the co -founder's parents. You got it. 00:05:46.240 --> 00:05:48.040 One of the co -founder's parents. Oh, wow. Okay. 00:05:48.100 --> 00:05:49.980 So we have nepotism right out of the gate. It's 00:05:49.980 --> 00:05:52.120 basically my dad's company approved the grant. 00:05:52.360 --> 00:05:55.500 It gets worse. Later on, investigations by the 00:05:55.500 --> 00:05:58.939 Korean Ministry of SMEs and Startups, they dug 00:05:58.939 --> 00:06:01.540 into this. And they revealed that Enify had actually 00:06:01.540 --> 00:06:04.120 received failing grades in its initial evaluation 00:06:04.120 --> 00:06:08.139 reports. No way. Yes. So on merit, objectively, 00:06:08.439 --> 00:06:10.040 the people looking at the business plan said, 00:06:10.120 --> 00:06:12.389 nope. This does not deserve government funding. 00:06:12.529 --> 00:06:15.129 So they flunked the test, but because they knew 00:06:15.129 --> 00:06:17.009 the principle, they got the scholarship anyway. 00:06:17.310 --> 00:06:19.529 That's a perfect analogy. Yeah. That's essentially 00:06:19.529 --> 00:06:21.629 what happened. And it wasn't just about getting 00:06:21.629 --> 00:06:24.269 the money. It was what they did with it. The 00:06:24.269 --> 00:06:27.410 investigation exposed five separate counts of 00:06:27.410 --> 00:06:30.370 inappropriate use of that funding, specifically 00:06:30.370 --> 00:06:33.189 for personnel expenses. Meaning what? They were 00:06:33.189 --> 00:06:35.290 paying themselves salaries that the grant didn't 00:06:35.290 --> 00:06:38.069 allow for. Or hiring people they shouldn't have. 00:06:38.250 --> 00:06:41.170 Correct. The details are a bit murky, but it 00:06:41.170 --> 00:06:44.129 was clear financial irregularity. Now, to be 00:06:44.129 --> 00:06:46.230 fair, the ministry reportedly did retrieve the 00:06:46.230 --> 00:06:48.089 money later on, so there was some accountability, 00:06:48.430 --> 00:06:51.889 but the pattern was set. This is the aha moment 00:06:51.889 --> 00:06:54.209 for me, because long before crypto, long before 00:06:54.209 --> 00:06:56.290 stable coins and billions of dollars, we have 00:06:56.290 --> 00:06:58.949 a documented history here. Yes. A history of 00:06:58.949 --> 00:07:00.949 financial irregularity, of leveraging personal 00:07:00.949 --> 00:07:03.649 connections to bypass merit, and of misusing 00:07:03.649 --> 00:07:06.339 funds. And yet he just pivoted. He moved from 00:07:06.339 --> 00:07:08.639 that failure, from that scandal, really straight 00:07:08.639 --> 00:07:11.019 into the crypto world. And it seems like nobody 00:07:11.019 --> 00:07:13.579 looked back at Enify. Well, why would you? You 00:07:13.579 --> 00:07:16.220 see Stanford, you see Apple. You don't dig into 00:07:16.220 --> 00:07:18.459 the failed startup from two years ago. Exactly. 00:07:18.519 --> 00:07:21.540 The golden resume worked. The Enify chapter was 00:07:21.540 --> 00:07:23.180 just a little footnote that investors probably 00:07:23.180 --> 00:07:26.379 never even saw. Which brings us to 2018, the 00:07:26.379 --> 00:07:29.540 birth of Terraform Labs. He teams up with a guy 00:07:29.540 --> 00:07:32.220 named Daniel Shin, who was, I mean, he was a 00:07:32.220 --> 00:07:34.339 legitimate heavyweight in Korean e -commerce, 00:07:34.519 --> 00:07:37.139 a real success story. Right. And together they 00:07:37.139 --> 00:07:40.519 have this big idea. The holy grail of cryptocurrency. 00:07:40.779 --> 00:07:43.120 The algorithmic stablecoin. Let's try to untack 00:07:43.120 --> 00:07:46.279 this because algorithmic stablecoin sounds, you 00:07:46.279 --> 00:07:48.939 know, terrifyingly complicated. But the core 00:07:48.939 --> 00:07:51.120 concept, if you strip away the jargon, is actually 00:07:51.120 --> 00:07:54.079 pretty simple, right? The goal is simple. The 00:07:54.079 --> 00:07:57.040 execution is. Well, we saw how that went. But 00:07:57.040 --> 00:07:59.939 the goal is this. In crypto, prices are just 00:07:59.939 --> 00:08:02.699 too volatile. Bitcoin is a roller coaster. You 00:08:02.699 --> 00:08:04.980 can't buy a cup of coffee with it. Right. Because 00:08:04.980 --> 00:08:06.920 that coffee might be worth half as much tomorrow 00:08:06.920 --> 00:08:09.720 or twice as much. No merchant wants that risk. 00:08:09.819 --> 00:08:11.540 And you don't want to be the person who spent, 00:08:11.720 --> 00:08:14.699 you know, what later becomes $10 ,000 on a pizza. 00:08:14.939 --> 00:08:17.399 So you need a stable coin, a coin that's always 00:08:17.399 --> 00:08:20.060 worth one U .S. dollar. Exactly. And the normal, 00:08:20.100 --> 00:08:22.579 boring way to do that is you have a bank account 00:08:22.579 --> 00:08:25.839 with real dollars in it. For every one digital 00:08:25.839 --> 00:08:29.040 dollar you issue, you have one real dollar sitting 00:08:29.040 --> 00:08:30.980 in a vault somewhere. That's centralized. It's 00:08:30.980 --> 00:08:33.600 backed by actual assets. Correct. That's how 00:08:33.600 --> 00:08:36.720 coins like USDC or, in theory, Tether are supposed 00:08:36.720 --> 00:08:38.399 to work. You have to trust a company, trust a 00:08:38.399 --> 00:08:40.419 bank, trust an audit. But Coyote didn't want 00:08:40.419 --> 00:08:42.379 to do that. That's too centralized. That's Web2 00:08:42.379 --> 00:08:45.179 thinking. He wanted to do it with JustCode. JustCode, 00:08:45.220 --> 00:08:48.379 a robot central bank. So he created two coins, 00:08:48.600 --> 00:08:52.659 TerraUSD. which was known as UST. And Luna. And 00:08:52.659 --> 00:08:54.899 Luna. Think of them as being on opposite ends 00:08:54.899 --> 00:08:57.820 of a seesaw. Okay, I like that analogy. UST is 00:08:57.820 --> 00:09:00.279 the stable coin. Its job is to always be worth 00:09:00.279 --> 00:09:04.259 exactly $1. Luna is the volatile coin. It's the 00:09:04.259 --> 00:09:06.620 counterweight. The algorithm links them. So if 00:09:06.620 --> 00:09:08.659 UST starts trading a little bit high, say at 00:09:08.659 --> 00:09:11.600 $1 .01, because demand is high. The seesaw is 00:09:11.600 --> 00:09:14.019 unbalanced. Right. So the system encourages people 00:09:14.019 --> 00:09:17.940 to burn Luna to create more UST. And burning... 00:09:18.269 --> 00:09:20.769 Just means destroying the coin, taking it out 00:09:20.769 --> 00:09:22.789 of circulation. Exactly. So you destroy some 00:09:22.789 --> 00:09:26.190 Luna. You meant new UST. That increases the supply 00:09:26.190 --> 00:09:29.210 of UST, which basic economics brings the price 00:09:29.210 --> 00:09:31.850 back down to a dollar. Simple enough. And what 00:09:31.850 --> 00:09:34.389 if the price of UST drops? If it's trading at, 00:09:34.470 --> 00:09:37.750 say, 99 cents? Then you do the exact opposite. 00:09:38.129 --> 00:09:42.120 The algorithm encourages you. to burn UST to 00:09:42.120 --> 00:09:44.940 create new Luna. You reduce the supply of UST, 00:09:44.980 --> 00:09:47.059 which drives the price back up to a dollar. So 00:09:47.059 --> 00:09:49.899 Luna's job is to absorb all the volatility to 00:09:49.899 --> 00:09:52.779 keep UST stable. That was the grand design. An 00:09:52.779 --> 00:09:56.240 elastic monetary policy run by a robot. No banks, 00:09:56.340 --> 00:09:59.919 no humans. Just pure, elegant code. It sounds 00:09:59.919 --> 00:10:02.360 like a perpetual motion machine. It sounds beautiful 00:10:02.360 --> 00:10:04.710 on a whiteboard. But as we know from physics, 00:10:04.870 --> 00:10:06.929 perpetual motion machines usually have some hidden 00:10:06.929 --> 00:10:08.769 friction point that brings them to a halt. The 00:10:08.769 --> 00:10:11.090 friction point here is confidence. The entire 00:10:11.090 --> 00:10:13.690 system, that whole beautiful seesaw, relies on 00:10:13.690 --> 00:10:16.350 Luna having value. Right. If people start believing 00:10:16.350 --> 00:10:18.549 Luna is worth anything, the machine can print 00:10:18.549 --> 00:10:20.789 all the Luna it wants, but it won't be able to 00:10:20.789 --> 00:10:23.549 buy back the UST to prop up the price. The seesaw 00:10:23.549 --> 00:10:26.450 just crashes to the ground. But for a while... 00:10:27.240 --> 00:10:30.080 Man, did it work. Or at least it really looked 00:10:30.080 --> 00:10:31.899 like it worked. It worked incredibly well. It 00:10:31.899 --> 00:10:36.159 boomed. By April 2022, Luna's value had just 00:10:36.159 --> 00:10:41.460 skyrocketed to over $116 per coin. From fractions 00:10:41.460 --> 00:10:43.639 of a cent just a couple of years earlier. It 00:10:43.639 --> 00:10:46.799 was an unbelievable run. And Cain wasn't just 00:10:46.799 --> 00:10:49.580 a founder anymore. He was a deity in the crypto 00:10:49.580 --> 00:10:52.259 space. They built a whole ecosystem around this. 00:10:52.360 --> 00:10:55.080 You had the mirror protocol, which let you trade 00:10:55.080 --> 00:10:57.950 like... synthetic versions of stocks like Tesla 00:10:57.950 --> 00:11:00.470 or Apple on the blockchain. Which we'll get back 00:11:00.470 --> 00:11:02.230 to because the SEC had some thoughts on that. 00:11:02.370 --> 00:11:04.110 They certainly did. But then there was Anchor. 00:11:04.190 --> 00:11:06.009 We have to talk about Anchor because this was 00:11:06.009 --> 00:11:07.789 really the engine of the whole thing. This was 00:11:07.789 --> 00:11:09.490 the magnet. Anchor protocol. This was the savings 00:11:09.490 --> 00:11:11.149 account, right? It was a savings protocol that 00:11:11.149 --> 00:11:14.909 offered a, get this, a 20 % annual yield on your 00:11:14.909 --> 00:11:18.490 USD deposit. 20. I mean, at the time, your bank 00:11:18.490 --> 00:11:21.250 was giving you, what, 0 .01 %? If you were lucky, 00:11:21.370 --> 00:11:23.909 it was just irresistible. But you have to ask, 00:11:23.990 --> 00:11:26.370 where does that 20 % come from? It has to come 00:11:26.370 --> 00:11:28.509 from somewhere. It was completely artificial. 00:11:28.870 --> 00:11:31.669 There was no real economic activity generating 00:11:31.669 --> 00:11:34.389 that kind of profit. It was being subsidized 00:11:34.389 --> 00:11:37.409 by Terraform Labs' own treasury to get users 00:11:37.409 --> 00:11:39.990 in the door. It was a marketing expense, basically. 00:11:40.429 --> 00:11:43.370 But it worked. billions and billions of dollars 00:11:43.370 --> 00:11:45.929 flowed in. And as the money flowed in, K -1's 00:11:45.929 --> 00:11:49.799 confidence was... Well, let's call it stratospheric. 00:11:50.179 --> 00:11:52.820 That's putting it mildly. People who knew him, 00:11:52.840 --> 00:11:54.860 who interacted with him, described him as having 00:11:54.860 --> 00:11:57.980 a God complex. He was so combative on Twitter, 00:11:58.059 --> 00:12:00.220 he'd mock famous economists who were pointing 00:12:00.220 --> 00:12:03.659 out the obvious flaws in his system. He had that 00:12:03.659 --> 00:12:06.000 famous line, I don't debate the poor. I don't 00:12:06.000 --> 00:12:08.500 debate the poor. That line just, it tells you 00:12:08.500 --> 00:12:10.080 everything you need to know about the mindset. 00:12:10.220 --> 00:12:12.139 It's so dismissive, so arrogant. And there's 00:12:12.139 --> 00:12:14.679 this one personal detail that... I think it just 00:12:14.679 --> 00:12:16.700 perfectly illustrates how deep this all went 00:12:16.700 --> 00:12:19.840 for him. In April 2022, this is right at the 00:12:19.840 --> 00:12:21.720 absolute peak when he must have felt totally 00:12:21.720 --> 00:12:24.700 untouchable. He announces the birth of his daughter. 00:12:24.840 --> 00:12:27.480 And he named her Luna. He named her Luna. He 00:12:27.480 --> 00:12:30.440 tweeted, and this is a direct quote, my dearest 00:12:30.440 --> 00:12:33.159 creation named after my greatest invention. Wow. 00:12:33.440 --> 00:12:37.440 That's putting a lot of weight on a child's name. 00:12:37.620 --> 00:12:40.299 It's unbelievable. It really shows that he didn't 00:12:40.299 --> 00:12:42.519 see a separation between himself and the project. 00:12:43.159 --> 00:12:46.759 He was Tara. Tara was him. It wasn't just the 00:12:46.759 --> 00:12:49.679 business for him. It was his identity, his legacy, 00:12:49.799 --> 00:12:54.220 and now literally his family. It was total enmeshment. 00:12:54.500 --> 00:12:57.019 But while he was celebrating on Twitter and calling 00:12:57.019 --> 00:13:00.220 his critics poor, the wolves were definitely 00:13:00.220 --> 00:13:02.519 circling. The regulatory shadows were getting 00:13:02.519 --> 00:13:04.919 very, very long. Yeah, let's talk about the SEC 00:13:04.919 --> 00:13:06.860 because they were not exactly sending him baby 00:13:06.860 --> 00:13:09.659 gifts. No. Back in 2021, the U .S. Securities 00:13:09.659 --> 00:13:12.259 and Exchange Commission had issued a subpoena. 00:13:12.570 --> 00:13:14.429 They were looking specifically at that mirror 00:13:14.429 --> 00:13:16.509 protocol we mentioned. The synthetic stocks thing? 00:13:16.649 --> 00:13:18.669 Yeah. They want to know if these synthetic stocks 00:13:18.669 --> 00:13:21.090 were actually unregistered securities. Because, 00:13:21.190 --> 00:13:22.690 you know, if it looks like a stock and trades 00:13:22.690 --> 00:13:25.190 like a stock. The SEC usually thinks it's a stock. 00:13:25.549 --> 00:13:27.870 So what was Kaywan's reaction? Did he cooperate? 00:13:28.149 --> 00:13:30.629 Did he hire a big compliance team? He sued the 00:13:30.629 --> 00:13:33.269 SEC. Of course he did. That tracks. He refused 00:13:33.269 --> 00:13:35.799 to comply? And he filed a lawsuit against the 00:13:35.799 --> 00:13:38.539 regulator. It was just pure defiance. He basically 00:13:38.539 --> 00:13:40.200 argued they didn't have jurisdiction over him 00:13:40.200 --> 00:13:42.320 because his company was in Singapore, even though 00:13:42.320 --> 00:13:44.320 he was clearly marketing to U .S. investors. 00:13:44.539 --> 00:13:46.259 And it wasn't just the U .S. Things were heating 00:13:46.259 --> 00:13:49.360 up back in Korea, too. Right. In late 2021, the 00:13:49.360 --> 00:13:52.080 Korean National Tax Service came knocking. They 00:13:52.080 --> 00:13:54.340 told Cohen and his co -founder, Daniel Shin, 00:13:54.639 --> 00:13:57.120 that they needed to pay about $100 million in 00:13:57.120 --> 00:14:00.720 taxes. $100 million. Wow. And let me guess his 00:14:00.720 --> 00:14:05.850 defense. We aren't a Korean company. Bingo. They 00:14:05.850 --> 00:14:07.750 claim their entities were registered in Singapore 00:14:07.750 --> 00:14:09.730 and the British Virgin Islands, so they didn't 00:14:09.730 --> 00:14:12.309 owe Korean taxes. But the tax authority said, 00:14:12.450 --> 00:14:14.450 look, you made all the key management decisions 00:14:14.450 --> 00:14:16.210 while you were sitting in an office in Seoul. 00:14:16.330 --> 00:14:18.870 You lived here. You worked here. Pay up. And 00:14:18.870 --> 00:14:20.970 then there's this little detail, this piece of 00:14:20.970 --> 00:14:23.710 paperwork that looks incredibly suspicious in 00:14:23.710 --> 00:14:25.870 hindsight, just days before the crash. We're 00:14:25.870 --> 00:14:30.029 talking late April 2022. Kawan files something 00:14:30.029 --> 00:14:32.370 in Korea. This is one of those potential smoking 00:14:32.370 --> 00:14:35.429 guns. He filed to dissolve the company's main 00:14:35.429 --> 00:14:38.190 Korean entity. The dissolution was officially 00:14:38.190 --> 00:14:41.450 approved on May 4th. The crash started on May 00:14:41.450 --> 00:14:44.269 7th. That timing is just too perfect to be a 00:14:44.269 --> 00:14:46.450 coincidence. It's far too coincidental. It raises 00:14:46.450 --> 00:14:49.750 this massive question. Was it foresight? Did 00:14:49.750 --> 00:14:51.649 he see the writing on the wall? Did he look at 00:14:51.649 --> 00:14:53.529 the numbers, see the liquidity in the anchor 00:14:53.529 --> 00:14:57.389 protocol drying up, and decide to pull the plug 00:14:57.389 --> 00:14:59.690 on the legal entity before the market pulled 00:14:59.690 --> 00:15:02.509 the plug on his currency? So we're in early May 00:15:02.509 --> 00:15:05.850 2022. He's dissolved the Korean company. He's 00:15:05.850 --> 00:15:08.289 actively fighting the SEC. He's got a new baby 00:15:08.289 --> 00:15:10.950 named after his greatest invention. And then 00:15:10.950 --> 00:15:13.809 the week of horror begins. It all started on 00:15:13.809 --> 00:15:16.629 May 7th. It began with some... Some very large 00:15:16.629 --> 00:15:19.250 trades on crypto exchanges, particularly Binance 00:15:19.250 --> 00:15:21.789 and Curve. A few prominent investors, or whales, 00:15:22.049 --> 00:15:26.450 sold over $285 million worth of UST in a really 00:15:26.450 --> 00:15:28.289 short window of time. That's a huge amount of 00:15:28.289 --> 00:15:29.889 sell pressure. That's not just regular market 00:15:29.889 --> 00:15:31.490 activity. That's somebody with a lot of money 00:15:31.490 --> 00:15:34.710 sprinting for the exit. It was. And the algorithm, 00:15:34.870 --> 00:15:38.490 that little robot on the seesaw, it just couldn't 00:15:38.490 --> 00:15:42.289 handle the weight. The peg broke. UST dipped 00:15:42.289 --> 00:15:46.360 to 98 .5 cents on May 8th. Now, to a normal person, 00:15:46.620 --> 00:15:48.879 90 and a half cents doesn't sound like a disaster. 00:15:49.200 --> 00:15:51.679 But for a stable coin? It's a death knell. It's 00:15:51.679 --> 00:15:53.460 the whole point. It's supposed to be a dollar. 00:15:53.580 --> 00:15:56.240 The promise is broken. Because if it can be 98 00:15:56.240 --> 00:15:58.820 cents, it can be 90 cents. And if it can be 90 00:15:58.820 --> 00:16:00.840 cents, then why would you hold it at all? Exactly. 00:16:01.120 --> 00:16:03.360 And that's when the panic, the real bank run 00:16:03.360 --> 00:16:06.840 starts. The Luna Foundation Guard, or LFG, which 00:16:06.840 --> 00:16:09.539 is this reserve fund they'd set up mostly with 00:16:09.539 --> 00:16:12.590 Bitcoin. Yeah. They tried to sate it. They stepped 00:16:12.590 --> 00:16:14.870 in. They loaned out one and a half billion dollars 00:16:14.870 --> 00:16:17.690 of their reserves to try and buy up UST and defend 00:16:17.690 --> 00:16:20.129 the peg. They were literally burning through 00:16:20.129 --> 00:16:22.490 billions of dollars in Bitcoin to fight the market 00:16:22.490 --> 00:16:25.429 tide. But the market won. The market almost always 00:16:25.429 --> 00:16:28.309 wins in these scenarios, especially when the 00:16:28.309 --> 00:16:31.009 fundamentals are broken. UST just plunged. It 00:16:31.009 --> 00:16:33.830 went to 50 cents, then 30, then 10 cents. And 00:16:33.830 --> 00:16:36.269 Luna, the coin that was supposed to absorb all 00:16:36.269 --> 00:16:38.860 this volatility. It did its job, I guess. It 00:16:38.860 --> 00:16:40.700 did exactly what it was programmed to do. It 00:16:40.700 --> 00:16:43.620 started printing more and more of itself to try 00:16:43.620 --> 00:16:46.440 and buy back the failing UST. This is the death 00:16:46.440 --> 00:16:49.919 spiral, the hyperinflation loop. Yes. The supply 00:16:49.919 --> 00:16:52.179 of Luna went from something like 350 million 00:16:52.179 --> 00:16:55.200 tokens to literally trillions of tokens in a 00:16:55.200 --> 00:16:58.000 matter of days. It just diluted its own value 00:16:58.000 --> 00:17:01.320 into oblivion. It went from a peak of $119 down 00:17:01.320 --> 00:17:05.140 to... Well, virtually zero. Virtually zero. I 00:17:05.140 --> 00:17:06.920 mean, we're talking about decimal points with 00:17:06.920 --> 00:17:09.000 a whole lot of zeros after them. The impact was 00:17:09.000 --> 00:17:11.359 just catastrophic. It had hundreds of billions 00:17:11.359 --> 00:17:14.400 of dollars in value wiped out across the entire 00:17:14.400 --> 00:17:17.099 crypto market because of the contagion. And in 00:17:17.099 --> 00:17:20.339 South Korea alone, an estimated 200 ,000 investors 00:17:20.339 --> 00:17:23.000 were harmed. People lost their retirement funds, 00:17:23.279 --> 00:17:26.099 their down payments for homes, their kids' college 00:17:26.099 --> 00:17:28.799 tuition. Everything. And it was just numbers 00:17:28.799 --> 00:17:31.380 on a screen. I read this absolutely wild story 00:17:31.380 --> 00:17:33.460 about a guy who actually went to Kwon's apartment 00:17:33.460 --> 00:17:35.380 building. Yes, this happened right in the middle 00:17:35.380 --> 00:17:39.220 of the chaos. Investor who claimed he'd lost 00:17:39.220 --> 00:17:43.500 about $2 million. He actually trespassed into 00:17:43.500 --> 00:17:46.579 Kwon's high -rise condominium in Seoul. He got 00:17:46.579 --> 00:17:48.859 into the building. He got in, went to the apartment, 00:17:48.980 --> 00:17:52.099 and rang the doorbell. Kwon wasn't there at the 00:17:52.099 --> 00:17:54.500 time, but his wife was. Can you even imagine 00:17:54.500 --> 00:17:57.400 opening the door to that? He just wanted to talk 00:17:57.400 --> 00:18:00.980 to him. He demanded an apology. Kwan's wife had 00:18:00.980 --> 00:18:03.099 to call the police and request emergency protection. 00:18:03.539 --> 00:18:06.819 It just shows how personal this was. People felt 00:18:06.819 --> 00:18:09.740 betrayed, not just by a market, but by a person 00:18:09.740 --> 00:18:11.740 who had promised them safety and financial freedom. 00:18:12.059 --> 00:18:15.480 And what was K1 doing? I mean, in June, just 00:18:15.480 --> 00:18:18.039 a month later, he tries to pivot again. He actually 00:18:18.039 --> 00:18:21.299 launches Luna 2 .0. It's unbelievable. He rebrands 00:18:21.299 --> 00:18:24.740 the old crash coins as Terra Classic USD and 00:18:24.740 --> 00:18:28.630 LUNC. And then. Just tries to start fresh with 00:18:28.630 --> 00:18:30.730 a whole new blockchain. It's like the captain 00:18:30.730 --> 00:18:33.269 of the Titanic surfacing in a lifeboat and immediately 00:18:33.269 --> 00:18:35.069 trying to sell tickets for the Titanic, too. 00:18:35.230 --> 00:18:37.029 While the first one is still visibly sinking 00:18:37.029 --> 00:18:39.470 right behind him. He was so audacious. And the 00:18:39.470 --> 00:18:41.589 market reaction was, you know, about what you'd 00:18:41.589 --> 00:18:43.569 expect. Just immediate pushback. People were 00:18:43.569 --> 00:18:45.730 basically telling him to read the room. But by 00:18:45.730 --> 00:18:48.230 then, honestly, Kaywan had much bigger problems 00:18:48.230 --> 00:18:51.069 than a failed product launch. The law was coming 00:18:51.069 --> 00:18:53.609 for him. And that kicks off the next part of 00:18:53.609 --> 00:18:57.720 our story. The global manhunt. Because Do Kwon 00:18:57.720 --> 00:19:00.119 did not stick around in Seoul to face the music. 00:19:00.200 --> 00:19:03.920 Not a chance. By June of 2022, prosecutors in 00:19:03.920 --> 00:19:06.079 South Korea were already looking to invalidate 00:19:06.079 --> 00:19:08.880 his passport. In September, they issued a formal 00:19:08.880 --> 00:19:13.059 arrest warrant. Interpol then issued a red notice. 00:19:13.319 --> 00:19:15.519 And a red notice is, for all intents and purposes, 00:19:15.819 --> 00:19:18.460 an international arrest warrant. It's the closest 00:19:18.460 --> 00:19:20.640 thing we have. It basically tells police forces 00:19:20.640 --> 00:19:23.460 in every member country around the world, if 00:19:23.460 --> 00:19:27.089 you see this man, detain him. He's a global fugitive. 00:19:27.130 --> 00:19:29.650 Was he hiding in a bunker somewhere, keeping 00:19:29.650 --> 00:19:32.490 a super low profile? He went on a podcast. You're 00:19:32.490 --> 00:19:35.490 kidding me. Unbelievable. In October 2022, while 00:19:35.490 --> 00:19:37.150 he's one of the most wanted men in the world, 00:19:37.210 --> 00:19:39.329 he does this audio interview. Yeah. And the host 00:19:39.329 --> 00:19:42.250 asks him about his passport being invalidated. 00:19:42.730 --> 00:19:45.609 And K1 says, and this is almost a direct quote, 00:19:45.789 --> 00:19:48.009 I'm not using it anyway. I can't see how that 00:19:48.009 --> 00:19:49.910 makes a difference. The arrogance is just it's 00:19:49.910 --> 00:19:51.769 off the charts. Oh, that official government 00:19:51.769 --> 00:19:53.829 document that lets me travel. Don't need it. 00:19:54.029 --> 00:19:56.369 He refused to say where he was, of course. He 00:19:56.369 --> 00:19:58.390 claimed it was for his own safety because of 00:19:58.390 --> 00:20:00.470 threats, like that guy who showed up at his apartment. 00:20:01.089 --> 00:20:03.470 But in reality, he was treating an Interpol red 00:20:03.470 --> 00:20:05.769 notice like it was a parking ticket he could 00:20:05.769 --> 00:20:07.829 just ignore. But the authorities weren't just 00:20:07.829 --> 00:20:10.349 listening to podcasts. They were following the 00:20:10.349 --> 00:20:12.769 breadcrumbs, the digital footprints. They were. 00:20:12.829 --> 00:20:15.049 They tracked his movements. He had been based 00:20:15.049 --> 00:20:17.630 in Singapore. He left there, apparently tried 00:20:17.630 --> 00:20:20.029 to go to Dubai, but ultimately ended up in Serbia. 00:20:20.150 --> 00:20:22.569 Where's Serbia? Why Serbia? So South Korean authorities 00:20:22.569 --> 00:20:26.789 pinpointed him there in December 2022. And the 00:20:26.789 --> 00:20:29.789 reason is strategic. Serbia has no extradition 00:20:29.789 --> 00:20:32.809 treaty with South Korea. Ah, safe haven. He was 00:20:32.809 --> 00:20:35.190 a calculated move. He wasn't just hiding there. 00:20:35.309 --> 00:20:38.190 He was trying to establish a life. He even set 00:20:38.190 --> 00:20:40.069 up a company in Serbia to try and get residency. 00:20:40.390 --> 00:20:42.769 He was digging in for the long haul. So he's 00:20:42.769 --> 00:20:45.690 in Serbia thinking he's safe. But I guess he 00:20:45.690 --> 00:20:47.849 couldn't stay put forever. Maybe he got restless 00:20:47.849 --> 00:20:50.450 or maybe he felt the walls closing in even there. 00:20:50.730 --> 00:20:54.089 And this is where the story pivots again to Montenegro. 00:20:54.329 --> 00:20:59.630 It's March 23, 2023. Podgorica Airport. Kwan 00:20:59.630 --> 00:21:01.789 is with his CFO and they're attempting to fly 00:21:01.789 --> 00:21:04.690 to Dubai on a private jet. This is the big escape. 00:21:04.990 --> 00:21:07.809 The final getaway. He gets to passport control. 00:21:08.549 --> 00:21:11.599 And he hands the officer. A Costa Rican passport. 00:21:11.900 --> 00:21:14.559 A fake one. A very well falsified one, apparently, 00:21:14.640 --> 00:21:16.779 but still fake. And it just wasn't his lucky 00:21:16.779 --> 00:21:19.220 day. The authorities in Montenegro had been tipped 00:21:19.220 --> 00:21:21.500 off and they flagged it. They searched his luggage 00:21:21.500 --> 00:21:24.019 and found another set of fake documents, this 00:21:24.019 --> 00:21:26.440 time Belgian travel documents. So let's just 00:21:26.440 --> 00:21:28.599 pause for a second and appreciate the irony here. 00:21:28.740 --> 00:21:32.359 The man who built a $40 billion digital empire 00:21:32.359 --> 00:21:34.779 on a decentralized blockchain. Who wanted to 00:21:34.779 --> 00:21:37.299 reinvent money itself. Gets taken down by a fake 00:21:37.299 --> 00:21:39.930 piece of paper. A physical passport. It really 00:21:39.930 --> 00:21:42.089 is the Al Capone tax evasion moment, isn't it? 00:21:42.109 --> 00:21:43.789 You couldn't catch him on the blockchain, but 00:21:43.789 --> 00:21:45.569 they caught him at the customs desk. He was arrested 00:21:45.569 --> 00:21:47.990 right there on the spot. And the dominoes started 00:21:47.990 --> 00:21:50.869 to fall immediately. The very same day he was 00:21:50.869 --> 00:21:53.210 arrested in Montenegro, he was indicted by a 00:21:53.210 --> 00:21:55.789 federal grand jury in the U .S. So now he's in 00:21:55.789 --> 00:21:58.950 custody. He's in a cell in Montenegro. And you'd 00:21:58.950 --> 00:22:02.549 think, OK, the game is over. But this next part 00:22:02.549 --> 00:22:04.789 of the story shows that even from behind bars, 00:22:05.069 --> 00:22:08.609 Duquan was. Yeah. Let's just say he was still 00:22:08.609 --> 00:22:11.549 active. This part really blew my mind. This part 00:22:11.549 --> 00:22:14.490 is just mind boggling. Reports came out from 00:22:14.490 --> 00:22:16.690 prosecutors that even after being arrested and 00:22:16.690 --> 00:22:19.529 put in a detention center in Montenegro, Kwan 00:22:19.529 --> 00:22:22.490 had managed to withdraw approximately $35 million 00:22:22.490 --> 00:22:26.170 worth of crypto assets. Wait, how is that even 00:22:26.170 --> 00:22:28.309 possible? He's in jail. They take your phone. 00:22:28.349 --> 00:22:30.390 They take your laptop. How are you moving $35 00:22:30.390 --> 00:22:32.650 million? It just speaks to the nature of crypto, 00:22:32.750 --> 00:22:35.509 right? If you have your... Private keys, that 00:22:35.509 --> 00:22:37.809 long string of numbers and letters, if you have 00:22:37.809 --> 00:22:40.130 it memorized or written on a scrap of paper, 00:22:40.250 --> 00:22:42.069 or if you have an accomplice on the outside with 00:22:42.069 --> 00:22:44.410 the keys. Physical prison walls don't matter 00:22:44.410 --> 00:22:46.869 to the blockchain. It also suggests he had prepared 00:22:46.869 --> 00:22:48.670 for this. I remember reading that before the 00:22:48.670 --> 00:22:52.009 collapse, he'd sent $7 million to a top Korean 00:22:52.009 --> 00:22:54.730 law firm, Kim and Chang. Right. It's like he 00:22:54.730 --> 00:22:57.210 was prepaying for his legal defense. A legal 00:22:57.210 --> 00:22:59.750 defense fund set up before the crime had even 00:22:59.750 --> 00:23:02.220 been fully prosecuted. He was building a war 00:23:02.220 --> 00:23:04.180 chest. He had to have known this day was coming 00:23:04.180 --> 00:23:06.519 and he wanted to make sure he had the best lawyers 00:23:06.519 --> 00:23:09.039 that money could possibly buy. And then just 00:23:09.039 --> 00:23:11.339 to make this whole situation even more complicated 00:23:11.339 --> 00:23:14.220 and bizarre, we get the Spodich letter scandal. 00:23:14.559 --> 00:23:16.720 This is where the story turns from a financial 00:23:16.720 --> 00:23:20.259 crime into like a political thriller. Right. 00:23:20.339 --> 00:23:24.220 So in June 2023, a laptop is confiscated from 00:23:24.220 --> 00:23:27.980 K -1 while he's in detention. And on it, authorities 00:23:27.980 --> 00:23:30.900 find a letter. The contents of this letter suggested, 00:23:31.240 --> 00:23:34.000 allegedly, that Cohen had financially backed 00:23:34.000 --> 00:23:36.380 a man named Miloshko Spadjic. And Spadjic is 00:23:36.380 --> 00:23:38.680 not just some random guy. He's a very big deal 00:23:38.680 --> 00:23:40.640 in Montenegro. He was a prominent politician, 00:23:40.900 --> 00:23:43.119 a candidate for prime minister at the time. The 00:23:43.119 --> 00:23:45.779 explosive allegation was that Duke Kwan had secretly 00:23:45.779 --> 00:23:48.480 funded Spadjic's election campaign. So now you 00:23:48.480 --> 00:23:50.299 have this international fugitive, the crypto 00:23:50.299 --> 00:23:52.839 king, potentially interfering in the national 00:23:52.839 --> 00:23:55.599 elections of a Balkan nation. That was the fear. 00:23:56.119 --> 00:23:58.019 I mean, was he trying to buy protection? Was 00:23:58.019 --> 00:24:00.400 he trying to buy a new passport, a real one this 00:24:00.400 --> 00:24:04.099 time? Now, for the record, both Kaywan and Spajic 00:24:04.099 --> 00:24:07.200 vehemently denied all of this. But it turned 00:24:07.200 --> 00:24:10.180 his detention into a political hot potato. It 00:24:10.180 --> 00:24:12.200 wasn't just about a fraudster anymore. It was 00:24:12.200 --> 00:24:14.259 about the integrity of the Montenegrin government. 00:24:14.480 --> 00:24:16.880 And all the while, he's still got to deal with 00:24:16.880 --> 00:24:19.720 the original charge that got him caught, the 00:24:19.720 --> 00:24:22.319 fake passport. Right. He actually pleaded not 00:24:22.319 --> 00:24:25.910 guilty to forgery, which is... A bold move, considering 00:24:25.910 --> 00:24:28.210 he was caught with the documents in his hand 00:24:28.210 --> 00:24:30.049 at the airport. A little hard to argue that one. 00:24:30.190 --> 00:24:32.450 Yeah, the Montenegrin court didn't buy it. He 00:24:32.450 --> 00:24:34.410 was sentenced to four months in prison just for 00:24:34.410 --> 00:24:37.890 the fake passports. He appealed, he lost, and 00:24:37.890 --> 00:24:39.950 he had to serve that time. But everyone knew 00:24:39.950 --> 00:24:42.049 those four months were just the appetizer. The 00:24:42.049 --> 00:24:45.069 real main course was extradition. Which brings 00:24:45.069 --> 00:24:47.690 us to the great tug of war. And this was a legal 00:24:47.690 --> 00:24:49.650 roller coaster that went on for more than a year. 00:24:49.920 --> 00:24:53.180 From 2023 all the way to the end of 2024. You 00:24:53.180 --> 00:24:55.279 had two heavyweights in the ring, both wanting 00:24:55.279 --> 00:24:57.859 a piece of him. You had South Korea and you had 00:24:57.859 --> 00:25:00.500 the United States. South Korea wanted him for 00:25:00.500 --> 00:25:03.279 violations of their capital markets law. And 00:25:03.279 --> 00:25:05.319 their argument was strong. You know, he's our 00:25:05.319 --> 00:25:07.500 citizen. The company was effectively run from 00:25:07.500 --> 00:25:09.559 here. And the vast majority of the victims were 00:25:09.559 --> 00:25:12.359 our people. Let us try him. Makes sense. But 00:25:12.359 --> 00:25:15.059 the USA wanted him too. The US wanted him on 00:25:15.059 --> 00:25:18.900 eight counts. Securities fraud. Wire fraud. Commodities 00:25:18.900 --> 00:25:22.359 fraud. A whole menu of charges. And let's be 00:25:22.359 --> 00:25:24.359 honest, when it comes to major financial crimes, 00:25:24.460 --> 00:25:26.440 especially crypto crimes that touch U .S. investors, 00:25:27.059 --> 00:25:28.859 the U .S. Department of Justice is extremely 00:25:28.859 --> 00:25:31.799 aggressive. And usually the U .S. gets what it 00:25:31.799 --> 00:25:33.640 wants in these situations, but this was not a 00:25:33.640 --> 00:25:35.960 straight line. No, the Montenegrin courts just 00:25:35.960 --> 00:25:38.519 played ping pong with him. It was dizzying. In 00:25:38.519 --> 00:25:40.859 November 2023, his extradition was approved, 00:25:41.119 --> 00:25:43.859 but they didn't say where he was going. So cliffhanger. 00:25:44.019 --> 00:25:47.259 Then in March 2024, an appeals court overturns 00:25:47.259 --> 00:25:49.420 the decision to send him to the U .S. Then in 00:25:49.420 --> 00:25:51.900 August, the Supreme Court postpones his extradition 00:25:51.900 --> 00:25:53.940 to Korea. It just sounds like a bureaucratic 00:25:53.940 --> 00:25:56.259 nightmare. It feels like a delay tactic. It absolutely 00:25:56.259 --> 00:25:59.819 was. Then in October 2024, the Constitutional 00:25:59.819 --> 00:26:02.339 Court suspends the extradition again. It really 00:26:02.339 --> 00:26:04.220 seemed like he might get stuck in the Balkans 00:26:04.220 --> 00:26:06.680 forever, just filing appeals and living in this 00:26:06.680 --> 00:26:09.980 legal limbo. But then December 2024, the final 00:26:09.980 --> 00:26:12.920 act. The justice minister of Montenegro, a man 00:26:12.920 --> 00:26:15.819 named Bojan Bozovic, finally stepped in to make 00:26:15.819 --> 00:26:18.819 the call. In these cases, when the courts basically 00:26:18.819 --> 00:26:21.599 say both extradition requests are legally valid, 00:26:21.779 --> 00:26:24.380 the final decision falls to the political branch. 00:26:24.519 --> 00:26:26.740 And he had to choose. He had to choose. He said 00:26:26.740 --> 00:26:28.960 he looked at the preponderance of legal criteria, 00:26:29.240 --> 00:26:31.420 basically weighing the severity of the alleged 00:26:31.420 --> 00:26:34.079 crimes and the international treaties. And he 00:26:34.079 --> 00:26:35.960 pointed to the United States. Fame over for the 00:26:35.960 --> 00:26:38.819 delay tactics. That was it. On December 31st, 00:26:38.819 --> 00:26:42.380 2024, New Year's Eve, of all days to Audi, Kwan 00:26:42.380 --> 00:26:44.599 was put on a plane and extradited to the U .S. 00:26:44.619 --> 00:26:46.940 He got to ring in the new year in federal custody. 00:26:47.140 --> 00:26:49.980 Which brings us to the finale, the verdict. The 00:26:49.980 --> 00:26:53.440 year is 2025. Kwan is on U .S. soil. The end 00:26:53.440 --> 00:26:55.920 is near. Now, we have to remember, while all 00:26:55.920 --> 00:26:57.720 of this extradition drama was playing out in 00:26:57.720 --> 00:27:00.259 Europe, the civil courts in the U .S. hadn't 00:27:00.259 --> 00:27:02.549 been sleeping. They were moving forward. And 00:27:02.549 --> 00:27:05.849 in April 2024, a U .S. jury had already found 00:27:05.849 --> 00:27:09.009 Kwan and Terraform Labs liable for civil fraud. 00:27:09.190 --> 00:27:11.569 And there was a key finding in that civil trial 00:27:11.569 --> 00:27:14.009 that just it completely destroys the defense 00:27:14.009 --> 00:27:15.990 that, oh, it was just a failed algorithm, an 00:27:15.990 --> 00:27:19.309 honest mistake. This is the Chai story. The Chai 00:27:19.309 --> 00:27:21.490 app. This is so crucial to understanding the 00:27:21.490 --> 00:27:24.140 deception. Right. So tell us about Chai. Because 00:27:24.140 --> 00:27:25.960 this is what really shifts the whole narrative 00:27:25.960 --> 00:27:29.980 from incompetence to outright malice. So Chai 00:27:29.980 --> 00:27:32.519 was a very popular mobile payment app in Korea. 00:27:33.240 --> 00:27:36.420 And Kwan's big claim, his big selling point for 00:27:36.420 --> 00:27:39.059 Terra, was that the Chai app was using the Terra 00:27:39.059 --> 00:27:41.359 blockchain to settle its transactions in the 00:27:41.359 --> 00:27:43.640 background. He used this to prove that Terra 00:27:43.640 --> 00:27:46.420 had real world utility, that it wasn't just for 00:27:46.420 --> 00:27:48.839 speculation. People were buying coffee and groceries 00:27:48.839 --> 00:27:51.140 on his blockchain right now. He would even show 00:27:51.140 --> 00:27:53.299 charts of the transaction volume. But were they? 00:27:53.460 --> 00:27:55.619 They were not. The jury found that this was a 00:27:55.619 --> 00:27:59.339 complete fabrication, a lie. Chai was using traditional 00:27:59.339 --> 00:28:02.259 banking rails, you know, standard payment processing, 00:28:02.500 --> 00:28:05.539 just like any other app. So what were the transactions 00:28:05.539 --> 00:28:07.519 on the blockchain? Where did that data come from? 00:28:08.059 --> 00:28:11.259 This is the genius and the deception of it. Quan 00:28:11.259 --> 00:28:15.160 had his engineers create a mirror server. It 00:28:15.160 --> 00:28:17.779 would essentially watch the real world purchases 00:28:17.779 --> 00:28:20.700 happening on Chai, and then it would create fake. 00:28:21.119 --> 00:28:23.220 corresponding transactions on the Terra blockchain 00:28:23.220 --> 00:28:26.059 to match them. So if I bought a coffee for $3 00:28:26.059 --> 00:28:28.819 using the Chai app. The app would process it 00:28:28.819 --> 00:28:30.940 normally through a bank, but then Khan's secret 00:28:30.940 --> 00:28:33.380 server would ping the blockchain and create a 00:28:33.380 --> 00:28:36.079 record that says, look, a $3 coffee transaction 00:28:36.079 --> 00:28:38.319 just happened. It was digital theater. It was 00:28:38.319 --> 00:28:41.079 a prop. He was manufacturing transaction volume 00:28:41.079 --> 00:28:43.180 to pump up the value of Luna and to sell this 00:28:43.180 --> 00:28:46.099 story of mass adoption to investors. That's not 00:28:46.099 --> 00:28:48.319 a failed experiment. That's just lying. So when 00:28:48.319 --> 00:28:50.099 he finally lands in the U .S. for his criminal 00:28:50.099 --> 00:28:53.259 trial in 2025, the writing is on the wall. He 00:28:53.259 --> 00:28:55.019 can't just claim he was a dreamer whose math 00:28:55.019 --> 00:28:57.720 was a little off. He now has to explain the fake 00:28:57.720 --> 00:29:01.089 server. It was completely indefensible. And I 00:29:01.089 --> 00:29:03.490 think his lawyers knew that. In August of 2025, 00:29:03.990 --> 00:29:07.309 Do Kwon pleaded guilty to two counts of fraud. 00:29:07.490 --> 00:29:09.970 He cut a deal. He did. He agreed to forfeit $19 00:29:09.970 --> 00:29:13.289 million. And the sentencing hearing was set for 00:29:13.289 --> 00:29:17.390 December 11th, 2025. The moment of truth. The 00:29:17.390 --> 00:29:19.529 U .S. government, as part of the deal, had argued 00:29:19.529 --> 00:29:22.210 for a sentence of no more than 12 years. Which 00:29:22.210 --> 00:29:23.950 is still a very substantial amount of time in 00:29:23.950 --> 00:29:26.420 federal prison. But the judge, the judge went 00:29:26.420 --> 00:29:29.740 further. The final sentence was 15 years in prison. 00:29:29.940 --> 00:29:32.779 15 years. He'll be nearly 50 years old when he 00:29:32.779 --> 00:29:35.359 gets out. It's a heavy sentence. Now, you compare 00:29:35.359 --> 00:29:38.519 that to, say, Sam Bankman Freed's 25 years for 00:29:38.519 --> 00:29:41.400 the FTX collapse. Kwan got less, and that's partly 00:29:41.400 --> 00:29:43.240 because he pleaded guilty and perhaps because 00:29:43.240 --> 00:29:45.339 the mechanics of the fraud were seen as slightly 00:29:45.339 --> 00:29:48.579 different. But it sends an incredibly clear message. 00:29:48.779 --> 00:29:52.119 The message is. You cannot engineer this kind 00:29:52.119 --> 00:29:54.539 of financial destruction from a laptop. Go on 00:29:54.539 --> 00:29:57.140 the run, hide out in Serbia, and expect to just 00:29:57.140 --> 00:29:59.500 walk away from it. The arm of the law is long. 00:29:59.799 --> 00:30:02.539 So here we are. The dust has finally settled. 00:30:03.279 --> 00:30:07.099 Cohen is in a cell. The $45 billion is gone forever. 00:30:07.480 --> 00:30:09.940 When you step back and look at this whole saga, 00:30:10.160 --> 00:30:12.839 what does it all mean? You know, when I look 00:30:12.839 --> 00:30:15.279 at this story, I really see a tragedy of intellect. 00:30:15.799 --> 00:30:19.140 Cohen was clearly brilliant. Stanford, Apple. 00:30:19.789 --> 00:30:22.029 Microsoft. He could have broke anything. He could 00:30:22.029 --> 00:30:24.589 have built a legitimate, world -changing fintech 00:30:24.589 --> 00:30:27.880 unicorn. But he had that complex. God complex. 00:30:27.960 --> 00:30:29.819 He didn't want to build a company. He wanted 00:30:29.819 --> 00:30:31.839 to be the central banker of the entire Internet. 00:30:32.059 --> 00:30:34.839 And he forgot, or maybe he never believed, that 00:30:34.839 --> 00:30:37.099 stability isn't something you can just code into 00:30:37.099 --> 00:30:39.319 existence if the underlying economics were based 00:30:39.319 --> 00:30:42.420 on, well, on nothing but belief. It relied on 00:30:42.420 --> 00:30:44.500 belief and it relied on his cult of personality. 00:30:44.799 --> 00:30:47.079 And the second that belief shattered, the math 00:30:47.079 --> 00:30:48.740 shattered with it. And it wasn't just numbers 00:30:48.740 --> 00:30:51.819 on a screen. It was real savings, real retirements, 00:30:51.819 --> 00:30:53.619 real panic. And here's a thought I want to leave 00:30:53.619 --> 00:30:55.740 everyone with, our final provocative thought. 00:30:56.319 --> 00:30:58.559 Co -1 created a system that was supposed to be 00:30:58.559 --> 00:31:00.700 the epitome of decentralized. That was the big 00:31:00.700 --> 00:31:03.559 promise of crypto, right? No kings, no masters, 00:31:03.680 --> 00:31:07.000 no central points of failure. And yet this entire 00:31:07.000 --> 00:31:11.460 $45 billion ecosystem collapsed almost entirely 00:31:11.460 --> 00:31:14.079 because of the hubris and the lies of one single 00:31:14.079 --> 00:31:17.299 man. Even after that man was arrested, he was 00:31:17.299 --> 00:31:19.359 still moving millions of dollars from a jail 00:31:19.359 --> 00:31:22.119 cell. He was still potentially influencing national 00:31:22.119 --> 00:31:24.900 elections. The market was still hanging on his 00:31:24.900 --> 00:31:27.799 every word. It really makes you wonder. In this 00:31:27.799 --> 00:31:30.440 new decentralized world we keep hearing about, 00:31:30.619 --> 00:31:34.079 how much power does one charismatic, brilliant 00:31:34.079 --> 00:31:37.380 and deeply flawed individual actually hold? It 00:31:37.380 --> 00:31:39.299 seems like even when the handcuffs are on, the 00:31:39.299 --> 00:31:42.119 answer is still way too much. Maybe we haven't 00:31:42.119 --> 00:31:43.779 gotten rid of the kings. We've just replaced 00:31:43.779 --> 00:31:46.019 the regulated ones with much more volatile ones. 00:31:46.220 --> 00:31:49.019 Exactly. So the next time you see a genius founder 00:31:49.019 --> 00:31:51.339 with a golden resume and a sure thing investment, 00:31:51.619 --> 00:31:53.759 that seems too good to be true. Maybe check to 00:31:53.759 --> 00:31:55.559 see if they failed their first government evaluation. 00:31:56.019 --> 00:31:58.839 Remember any... Thanks for listening to The Deep 00:31:58.839 --> 00:32:00.160 Dive. We'll see you next time.