OK, I want you to picture a number and it's a
it's a really, really big number. Forty five
billion dollars. That is just it's a staggering
amount of money. Yeah. It's almost impossible
to even visualize what that looks like. It is.
I mean, you're talking about the GDP of, you
know, a small country or the market cap of a
company that's been around for a century. Huge
industrial giant. Yeah, exactly. And now imagine
that number. Forty five billion dollars just
disappearing. gone and i'm not talking about
over a year you know like a slow motion recession
not a decade of bad business like a a blockbuster
video situation no this was a cliff one single
week may 2022. it was a financial bloodbath yeah
and i think it's it's really hard to overstate
the scale of the destruction it wasn't a market
dip it was an extinction level event for that
entire ecosystem and right in the middle of this
yeah this hurricane of money one guy a guy who
um Called himself the king of the lunatics. And
maybe more tellingly, a guy who named his own
daughter after his invention. We are, of course,
talking about Do Kwon, the South Korean crypto
king behind Terraform Labs. This is one of those
stories that it really feels like it should be
a movie script. You know, like a sequel to The
Big Short, but you mix in some Catch Me If You
Can. Right. But it's just... It's painfully real
for thousands and thousands of people who lost
everything. So today we're going to be unpacking
the rise and fall of Kwon Do -hyun, or as we
all know him. And what a ride it is because we're
not just looking at a stock chart going down.
That's the boring part almost. The real story
here involves, I mean, just listen to this list.
Algorithmic hubris, a global manhunt with Interpol,
fake passports, high stakes political intrigue
in Montenegro. Of all places. And it all ends
with the 15 year prison sentence that was handed
down in late 2025. Exactly. The headline is the
crash, right? That's what everyone remembers.
But the real story is the man, the code, and
this pattern of behavior that led us all there.
So here's our mission for this deep dive. We
really want to get past the headlines, past the
panic of the crash itself, and try to understand
the psychology here. The why. Yeah, the why.
And we're going to trace the red flags because,
and this is a bit of a spoiler alert, they started
way, way before Terra ever launched. That's such
a key point. Most people start this story in
2018 with Terraform Labs. But you have to go
back further. You have to look at the pattern.
And we also want to untangle that, that crazy
legal mess that kept him in limbo in the Balkans
for nearly two years. It's a fascinating side
story in itself. It really is. So for this, we're
pulling from a pretty massive dossier. We've
got legal filings. We have government investigation
reports from both South Korea and the U .S. And
we have these really detailed chronicles of his
movements, Singapore, Serbia, Montenegro. It's
all in here. So buckle up. All right. Let's get
into it. Before we can even touch the billions,
we have to go back to the beginning. Because
when you look at him on paper, Duisquan had the
kind of resume that, well, it makes venture capitalists
just drool. It's the golden resume. Oh, absolutely.
It was perfect. He was born in Seoul in 1991,
and his path just seems paved with prestige right
from day one. He attended day one foreign language
high school. And for anyone who doesn't know
the Korean education system, that's not just
like... A good school. No, it's the school. It's
incredibly competitive. It produces just a huge
chunk of the country's elite. Getting in there
is half the battle. It's the kind of place that
basically guarantees you a spot at a top tier
university, right? If you can make it through.
Exactly. And that's what he did. He took that
ticket and he went straight to the United States.
He graduates from Stanford University with a
degree in computer science in 2015. Stanford
CS degree. I mean, come on. That's the golden
ticket in Silicon Valley. It is. You walk into
a room with that on your CV and people just.
They assume you're a genius before you've even
said a word. It just signals everything. It signals
competence. It signals network. It signals potential.
And he didn't stop there. He did these brief
stints as a software engineer at Microsoft and
at Apple. Now, you say brief. We're talking pretty
short periods, right? He wasn't like leading
the next iPhone design team. No, no, not at all.
But it doesn't matter. When you put Stanford,
Microsoft, and Apple on a slide deck for investors.
you're projecting a certain kind of legitimacy.
A stamp of approval. It says, I know what I'm
doing. The best companies in the world already
vetted me, so you don't have to. Precisely. It
builds this shield against any real scrutiny.
Yeah. But, and here's where it gets really interesting,
and it's part of the story that often just gets
glazed over. In 2016, right after this, this
shiny start, he goes back to Korea. And he founds
a startup called Enify. Anify. Okay. And digging
into the research, this is where we see the first,
I don't know, the first real cracks in that perfect
armor. This isn't just my first startup failed
kind of story. There was something sketchier
going on. This is the first major red flag. And
frankly, it's one that a lot of people just missed
or ignored until it was way too late. So what
was Anify? It was a startup focused on peer -to
-peer Wi -Fi solutions. Kwan was the CEO. And
it turns out this company got about $600 ,000
worth of government funding in its early stages.
Okay, $600 ,000. That's not a small chunk of
change for a new startup in 2016. No, it's a
serious amount, especially for a first -time
founder. But the problem wasn't just the money.
It was how they got the money. It involved a
massive conflict of interest. The funding was
approved through a Korean incubator company.
And you'll never guess who was running that incubator.
Let me guess. Based on the theme of the story,
one of the co -founder's parents. You got it.
One of the co -founder's parents. Oh, wow. Okay.
So we have nepotism right out of the gate. It's
basically my dad's company approved the grant.
It gets worse. Later on, investigations by the
Korean Ministry of SMEs and Startups, they dug
into this. And they revealed that Enify had actually
received failing grades in its initial evaluation
reports. No way. Yes. So on merit, objectively,
the people looking at the business plan said,
nope. This does not deserve government funding.
So they flunked the test, but because they knew
the principle, they got the scholarship anyway.
That's a perfect analogy. Yeah. That's essentially
what happened. And it wasn't just about getting
the money. It was what they did with it. The
investigation exposed five separate counts of
inappropriate use of that funding, specifically
for personnel expenses. Meaning what? They were
paying themselves salaries that the grant didn't
allow for. Or hiring people they shouldn't have.
Correct. The details are a bit murky, but it
was clear financial irregularity. Now, to be
fair, the ministry reportedly did retrieve the
money later on, so there was some accountability,
but the pattern was set. This is the aha moment
for me, because long before crypto, long before
stable coins and billions of dollars, we have
a documented history here. Yes. A history of
financial irregularity, of leveraging personal
connections to bypass merit, and of misusing
funds. And yet he just pivoted. He moved from
that failure, from that scandal, really straight
into the crypto world. And it seems like nobody
looked back at Enify. Well, why would you? You
see Stanford, you see Apple. You don't dig into
the failed startup from two years ago. Exactly.
The golden resume worked. The Enify chapter was
just a little footnote that investors probably
never even saw. Which brings us to 2018, the
birth of Terraform Labs. He teams up with a guy
named Daniel Shin, who was, I mean, he was a
legitimate heavyweight in Korean e -commerce,
a real success story. Right. And together they
have this big idea. The holy grail of cryptocurrency.
The algorithmic stablecoin. Let's try to untack
this because algorithmic stablecoin sounds, you
know, terrifyingly complicated. But the core
concept, if you strip away the jargon, is actually
pretty simple, right? The goal is simple. The
execution is. Well, we saw how that went. But
the goal is this. In crypto, prices are just
too volatile. Bitcoin is a roller coaster. You
can't buy a cup of coffee with it. Right. Because
that coffee might be worth half as much tomorrow
or twice as much. No merchant wants that risk.
And you don't want to be the person who spent,
you know, what later becomes $10 ,000 on a pizza.
So you need a stable coin, a coin that's always
worth one U .S. dollar. Exactly. And the normal,
boring way to do that is you have a bank account
with real dollars in it. For every one digital
dollar you issue, you have one real dollar sitting
in a vault somewhere. That's centralized. It's
backed by actual assets. Correct. That's how
coins like USDC or, in theory, Tether are supposed
to work. You have to trust a company, trust a
bank, trust an audit. But Coyote didn't want
to do that. That's too centralized. That's Web2
thinking. He wanted to do it with JustCode. JustCode,
a robot central bank. So he created two coins,
TerraUSD. which was known as UST. And Luna. And
Luna. Think of them as being on opposite ends
of a seesaw. Okay, I like that analogy. UST is
the stable coin. Its job is to always be worth
exactly $1. Luna is the volatile coin. It's the
counterweight. The algorithm links them. So if
UST starts trading a little bit high, say at
$1 .01, because demand is high. The seesaw is
unbalanced. Right. So the system encourages people
to burn Luna to create more UST. And burning...
Just means destroying the coin, taking it out
of circulation. Exactly. So you destroy some
Luna. You meant new UST. That increases the supply
of UST, which basic economics brings the price
back down to a dollar. Simple enough. And what
if the price of UST drops? If it's trading at,
say, 99 cents? Then you do the exact opposite.
The algorithm encourages you. to burn UST to
create new Luna. You reduce the supply of UST,
which drives the price back up to a dollar. So
Luna's job is to absorb all the volatility to
keep UST stable. That was the grand design. An
elastic monetary policy run by a robot. No banks,
no humans. Just pure, elegant code. It sounds
like a perpetual motion machine. It sounds beautiful
on a whiteboard. But as we know from physics,
perpetual motion machines usually have some hidden
friction point that brings them to a halt. The
friction point here is confidence. The entire
system, that whole beautiful seesaw, relies on
Luna having value. Right. If people start believing
Luna is worth anything, the machine can print
all the Luna it wants, but it won't be able to
buy back the UST to prop up the price. The seesaw
just crashes to the ground. But for a while...
Man, did it work. Or at least it really looked
like it worked. It worked incredibly well. It
boomed. By April 2022, Luna's value had just
skyrocketed to over $116 per coin. From fractions
of a cent just a couple of years earlier. It
was an unbelievable run. And Cain wasn't just
a founder anymore. He was a deity in the crypto
space. They built a whole ecosystem around this.
You had the mirror protocol, which let you trade
like... synthetic versions of stocks like Tesla
or Apple on the blockchain. Which we'll get back
to because the SEC had some thoughts on that.
They certainly did. But then there was Anchor.
We have to talk about Anchor because this was
really the engine of the whole thing. This was
the magnet. Anchor protocol. This was the savings
account, right? It was a savings protocol that
offered a, get this, a 20 % annual yield on your
USD deposit. 20. I mean, at the time, your bank
was giving you, what, 0 .01 %? If you were lucky,
it was just irresistible. But you have to ask,
where does that 20 % come from? It has to come
from somewhere. It was completely artificial.
There was no real economic activity generating
that kind of profit. It was being subsidized
by Terraform Labs' own treasury to get users
in the door. It was a marketing expense, basically.
But it worked. billions and billions of dollars
flowed in. And as the money flowed in, K -1's
confidence was... Well, let's call it stratospheric.
That's putting it mildly. People who knew him,
who interacted with him, described him as having
a God complex. He was so combative on Twitter,
he'd mock famous economists who were pointing
out the obvious flaws in his system. He had that
famous line, I don't debate the poor. I don't
debate the poor. That line just, it tells you
everything you need to know about the mindset.
It's so dismissive, so arrogant. And there's
this one personal detail that... I think it just
perfectly illustrates how deep this all went
for him. In April 2022, this is right at the
absolute peak when he must have felt totally
untouchable. He announces the birth of his daughter.
And he named her Luna. He named her Luna. He
tweeted, and this is a direct quote, my dearest
creation named after my greatest invention. Wow.
That's putting a lot of weight on a child's name.
It's unbelievable. It really shows that he didn't
see a separation between himself and the project.
He was Tara. Tara was him. It wasn't just the
business for him. It was his identity, his legacy,
and now literally his family. It was total enmeshment.
But while he was celebrating on Twitter and calling
his critics poor, the wolves were definitely
circling. The regulatory shadows were getting
very, very long. Yeah, let's talk about the SEC
because they were not exactly sending him baby
gifts. No. Back in 2021, the U .S. Securities
and Exchange Commission had issued a subpoena.
They were looking specifically at that mirror
protocol we mentioned. The synthetic stocks thing?
Yeah. They want to know if these synthetic stocks
were actually unregistered securities. Because,
you know, if it looks like a stock and trades
like a stock. The SEC usually thinks it's a stock.
So what was Kaywan's reaction? Did he cooperate?
Did he hire a big compliance team? He sued the
SEC. Of course he did. That tracks. He refused
to comply? And he filed a lawsuit against the
regulator. It was just pure defiance. He basically
argued they didn't have jurisdiction over him
because his company was in Singapore, even though
he was clearly marketing to U .S. investors.
And it wasn't just the U .S. Things were heating
up back in Korea, too. Right. In late 2021, the
Korean National Tax Service came knocking. They
told Cohen and his co -founder, Daniel Shin,
that they needed to pay about $100 million in
taxes. $100 million. Wow. And let me guess his
defense. We aren't a Korean company. Bingo. They
claim their entities were registered in Singapore
and the British Virgin Islands, so they didn't
owe Korean taxes. But the tax authority said,
look, you made all the key management decisions
while you were sitting in an office in Seoul.
You lived here. You worked here. Pay up. And
then there's this little detail, this piece of
paperwork that looks incredibly suspicious in
hindsight, just days before the crash. We're
talking late April 2022. Kawan files something
in Korea. This is one of those potential smoking
guns. He filed to dissolve the company's main
Korean entity. The dissolution was officially
approved on May 4th. The crash started on May
7th. That timing is just too perfect to be a
coincidence. It's far too coincidental. It raises
this massive question. Was it foresight? Did
he see the writing on the wall? Did he look at
the numbers, see the liquidity in the anchor
protocol drying up, and decide to pull the plug
on the legal entity before the market pulled
the plug on his currency? So we're in early May
2022. He's dissolved the Korean company. He's
actively fighting the SEC. He's got a new baby
named after his greatest invention. And then
the week of horror begins. It all started on
May 7th. It began with some... Some very large
trades on crypto exchanges, particularly Binance
and Curve. A few prominent investors, or whales,
sold over $285 million worth of UST in a really
short window of time. That's a huge amount of
sell pressure. That's not just regular market
activity. That's somebody with a lot of money
sprinting for the exit. It was. And the algorithm,
that little robot on the seesaw, it just couldn't
handle the weight. The peg broke. UST dipped
to 98 .5 cents on May 8th. Now, to a normal person,
90 and a half cents doesn't sound like a disaster.
But for a stable coin? It's a death knell. It's
the whole point. It's supposed to be a dollar.
The promise is broken. Because if it can be 98
cents, it can be 90 cents. And if it can be 90
cents, then why would you hold it at all? Exactly.
And that's when the panic, the real bank run
starts. The Luna Foundation Guard, or LFG, which
is this reserve fund they'd set up mostly with
Bitcoin. Yeah. They tried to sate it. They stepped
in. They loaned out one and a half billion dollars
of their reserves to try and buy up UST and defend
the peg. They were literally burning through
billions of dollars in Bitcoin to fight the market
tide. But the market won. The market almost always
wins in these scenarios, especially when the
fundamentals are broken. UST just plunged. It
went to 50 cents, then 30, then 10 cents. And
Luna, the coin that was supposed to absorb all
this volatility. It did its job, I guess. It
did exactly what it was programmed to do. It
started printing more and more of itself to try
and buy back the failing UST. This is the death
spiral, the hyperinflation loop. Yes. The supply
of Luna went from something like 350 million
tokens to literally trillions of tokens in a
matter of days. It just diluted its own value
into oblivion. It went from a peak of $119 down
to... Well, virtually zero. Virtually zero. I
mean, we're talking about decimal points with
a whole lot of zeros after them. The impact was
just catastrophic. It had hundreds of billions
of dollars in value wiped out across the entire
crypto market because of the contagion. And in
South Korea alone, an estimated 200 ,000 investors
were harmed. People lost their retirement funds,
their down payments for homes, their kids' college
tuition. Everything. And it was just numbers
on a screen. I read this absolutely wild story
about a guy who actually went to Kwon's apartment
building. Yes, this happened right in the middle
of the chaos. Investor who claimed he'd lost
about $2 million. He actually trespassed into
Kwon's high -rise condominium in Seoul. He got
into the building. He got in, went to the apartment,
and rang the doorbell. Kwon wasn't there at the
time, but his wife was. Can you even imagine
opening the door to that? He just wanted to talk
to him. He demanded an apology. Kwan's wife had
to call the police and request emergency protection.
It just shows how personal this was. People felt
betrayed, not just by a market, but by a person
who had promised them safety and financial freedom.
And what was K1 doing? I mean, in June, just
a month later, he tries to pivot again. He actually
launches Luna 2 .0. It's unbelievable. He rebrands
the old crash coins as Terra Classic USD and
LUNC. And then. Just tries to start fresh with
a whole new blockchain. It's like the captain
of the Titanic surfacing in a lifeboat and immediately
trying to sell tickets for the Titanic, too.
While the first one is still visibly sinking
right behind him. He was so audacious. And the
market reaction was, you know, about what you'd
expect. Just immediate pushback. People were
basically telling him to read the room. But by
then, honestly, Kaywan had much bigger problems
than a failed product launch. The law was coming
for him. And that kicks off the next part of
our story. The global manhunt. Because Do Kwon
did not stick around in Seoul to face the music.
Not a chance. By June of 2022, prosecutors in
South Korea were already looking to invalidate
his passport. In September, they issued a formal
arrest warrant. Interpol then issued a red notice.
And a red notice is, for all intents and purposes,
an international arrest warrant. It's the closest
thing we have. It basically tells police forces
in every member country around the world, if
you see this man, detain him. He's a global fugitive.
Was he hiding in a bunker somewhere, keeping
a super low profile? He went on a podcast. You're
kidding me. Unbelievable. In October 2022, while
he's one of the most wanted men in the world,
he does this audio interview. Yeah. And the host
asks him about his passport being invalidated.
And K1 says, and this is almost a direct quote,
I'm not using it anyway. I can't see how that
makes a difference. The arrogance is just it's
off the charts. Oh, that official government
document that lets me travel. Don't need it.
He refused to say where he was, of course. He
claimed it was for his own safety because of
threats, like that guy who showed up at his apartment.
But in reality, he was treating an Interpol red
notice like it was a parking ticket he could
just ignore. But the authorities weren't just
listening to podcasts. They were following the
breadcrumbs, the digital footprints. They were.
They tracked his movements. He had been based
in Singapore. He left there, apparently tried
to go to Dubai, but ultimately ended up in Serbia.
Where's Serbia? Why Serbia? So South Korean authorities
pinpointed him there in December 2022. And the
reason is strategic. Serbia has no extradition
treaty with South Korea. Ah, safe haven. He was
a calculated move. He wasn't just hiding there.
He was trying to establish a life. He even set
up a company in Serbia to try and get residency.
He was digging in for the long haul. So he's
in Serbia thinking he's safe. But I guess he
couldn't stay put forever. Maybe he got restless
or maybe he felt the walls closing in even there.
And this is where the story pivots again to Montenegro.
It's March 23, 2023. Podgorica Airport. Kwan
is with his CFO and they're attempting to fly
to Dubai on a private jet. This is the big escape.
The final getaway. He gets to passport control.
And he hands the officer. A Costa Rican passport.
A fake one. A very well falsified one, apparently,
but still fake. And it just wasn't his lucky
day. The authorities in Montenegro had been tipped
off and they flagged it. They searched his luggage
and found another set of fake documents, this
time Belgian travel documents. So let's just
pause for a second and appreciate the irony here.
The man who built a $40 billion digital empire
on a decentralized blockchain. Who wanted to
reinvent money itself. Gets taken down by a fake
piece of paper. A physical passport. It really
is the Al Capone tax evasion moment, isn't it?
You couldn't catch him on the blockchain, but
they caught him at the customs desk. He was arrested
right there on the spot. And the dominoes started
to fall immediately. The very same day he was
arrested in Montenegro, he was indicted by a
federal grand jury in the U .S. So now he's in
custody. He's in a cell in Montenegro. And you'd
think, OK, the game is over. But this next part
of the story shows that even from behind bars,
Duquan was. Yeah. Let's just say he was still
active. This part really blew my mind. This part
is just mind boggling. Reports came out from
prosecutors that even after being arrested and
put in a detention center in Montenegro, Kwan
had managed to withdraw approximately $35 million
worth of crypto assets. Wait, how is that even
possible? He's in jail. They take your phone.
They take your laptop. How are you moving $35
million? It just speaks to the nature of crypto,
right? If you have your... Private keys, that
long string of numbers and letters, if you have
it memorized or written on a scrap of paper,
or if you have an accomplice on the outside with
the keys. Physical prison walls don't matter
to the blockchain. It also suggests he had prepared
for this. I remember reading that before the
collapse, he'd sent $7 million to a top Korean
law firm, Kim and Chang. Right. It's like he
was prepaying for his legal defense. A legal
defense fund set up before the crime had even
been fully prosecuted. He was building a war
chest. He had to have known this day was coming
and he wanted to make sure he had the best lawyers
that money could possibly buy. And then just
to make this whole situation even more complicated
and bizarre, we get the Spodich letter scandal.
This is where the story turns from a financial
crime into like a political thriller. Right.
So in June 2023, a laptop is confiscated from
K -1 while he's in detention. And on it, authorities
find a letter. The contents of this letter suggested,
allegedly, that Cohen had financially backed
a man named Miloshko Spadjic. And Spadjic is
not just some random guy. He's a very big deal
in Montenegro. He was a prominent politician,
a candidate for prime minister at the time. The
explosive allegation was that Duke Kwan had secretly
funded Spadjic's election campaign. So now you
have this international fugitive, the crypto
king, potentially interfering in the national
elections of a Balkan nation. That was the fear.
I mean, was he trying to buy protection? Was
he trying to buy a new passport, a real one this
time? Now, for the record, both Kaywan and Spajic
vehemently denied all of this. But it turned
his detention into a political hot potato. It
wasn't just about a fraudster anymore. It was
about the integrity of the Montenegrin government.
And all the while, he's still got to deal with
the original charge that got him caught, the
fake passport. Right. He actually pleaded not
guilty to forgery, which is... A bold move, considering
he was caught with the documents in his hand
at the airport. A little hard to argue that one.
Yeah, the Montenegrin court didn't buy it. He
was sentenced to four months in prison just for
the fake passports. He appealed, he lost, and
he had to serve that time. But everyone knew
those four months were just the appetizer. The
real main course was extradition. Which brings
us to the great tug of war. And this was a legal
roller coaster that went on for more than a year.
From 2023 all the way to the end of 2024. You
had two heavyweights in the ring, both wanting
a piece of him. You had South Korea and you had
the United States. South Korea wanted him for
violations of their capital markets law. And
their argument was strong. You know, he's our
citizen. The company was effectively run from
here. And the vast majority of the victims were
our people. Let us try him. Makes sense. But
the USA wanted him too. The US wanted him on
eight counts. Securities fraud. Wire fraud. Commodities
fraud. A whole menu of charges. And let's be
honest, when it comes to major financial crimes,
especially crypto crimes that touch U .S. investors,
the U .S. Department of Justice is extremely
aggressive. And usually the U .S. gets what it
wants in these situations, but this was not a
straight line. No, the Montenegrin courts just
played ping pong with him. It was dizzying. In
November 2023, his extradition was approved,
but they didn't say where he was going. So cliffhanger.
Then in March 2024, an appeals court overturns
the decision to send him to the U .S. Then in
August, the Supreme Court postpones his extradition
to Korea. It just sounds like a bureaucratic
nightmare. It feels like a delay tactic. It absolutely
was. Then in October 2024, the Constitutional
Court suspends the extradition again. It really
seemed like he might get stuck in the Balkans
forever, just filing appeals and living in this
legal limbo. But then December 2024, the final
act. The justice minister of Montenegro, a man
named Bojan Bozovic, finally stepped in to make
the call. In these cases, when the courts basically
say both extradition requests are legally valid,
the final decision falls to the political branch.
And he had to choose. He had to choose. He said
he looked at the preponderance of legal criteria,
basically weighing the severity of the alleged
crimes and the international treaties. And he
pointed to the United States. Fame over for the
delay tactics. That was it. On December 31st,
2024, New Year's Eve, of all days to Audi, Kwan
was put on a plane and extradited to the U .S.
He got to ring in the new year in federal custody.
Which brings us to the finale, the verdict. The
year is 2025. Kwan is on U .S. soil. The end
is near. Now, we have to remember, while all
of this extradition drama was playing out in
Europe, the civil courts in the U .S. hadn't
been sleeping. They were moving forward. And
in April 2024, a U .S. jury had already found
Kwan and Terraform Labs liable for civil fraud.
And there was a key finding in that civil trial
that just it completely destroys the defense
that, oh, it was just a failed algorithm, an
honest mistake. This is the Chai story. The Chai
app. This is so crucial to understanding the
deception. Right. So tell us about Chai. Because
this is what really shifts the whole narrative
from incompetence to outright malice. So Chai
was a very popular mobile payment app in Korea.
And Kwan's big claim, his big selling point for
Terra, was that the Chai app was using the Terra
blockchain to settle its transactions in the
background. He used this to prove that Terra
had real world utility, that it wasn't just for
speculation. People were buying coffee and groceries
on his blockchain right now. He would even show
charts of the transaction volume. But were they?
They were not. The jury found that this was a
complete fabrication, a lie. Chai was using traditional
banking rails, you know, standard payment processing,
just like any other app. So what were the transactions
on the blockchain? Where did that data come from?
This is the genius and the deception of it. Quan
had his engineers create a mirror server. It
would essentially watch the real world purchases
happening on Chai, and then it would create fake.
corresponding transactions on the Terra blockchain
to match them. So if I bought a coffee for $3
using the Chai app. The app would process it
normally through a bank, but then Khan's secret
server would ping the blockchain and create a
record that says, look, a $3 coffee transaction
just happened. It was digital theater. It was
a prop. He was manufacturing transaction volume
to pump up the value of Luna and to sell this
story of mass adoption to investors. That's not
a failed experiment. That's just lying. So when
he finally lands in the U .S. for his criminal
trial in 2025, the writing is on the wall. He
can't just claim he was a dreamer whose math
was a little off. He now has to explain the fake
server. It was completely indefensible. And I
think his lawyers knew that. In August of 2025,
Do Kwon pleaded guilty to two counts of fraud.
He cut a deal. He did. He agreed to forfeit $19
million. And the sentencing hearing was set for
December 11th, 2025. The moment of truth. The
U .S. government, as part of the deal, had argued
for a sentence of no more than 12 years. Which
is still a very substantial amount of time in
federal prison. But the judge, the judge went
further. The final sentence was 15 years in prison.
15 years. He'll be nearly 50 years old when he
gets out. It's a heavy sentence. Now, you compare
that to, say, Sam Bankman Freed's 25 years for
the FTX collapse. Kwan got less, and that's partly
because he pleaded guilty and perhaps because
the mechanics of the fraud were seen as slightly
different. But it sends an incredibly clear message.
The message is. You cannot engineer this kind
of financial destruction from a laptop. Go on
the run, hide out in Serbia, and expect to just
walk away from it. The arm of the law is long.
So here we are. The dust has finally settled.
Cohen is in a cell. The $45 billion is gone forever.
When you step back and look at this whole saga,
what does it all mean? You know, when I look
at this story, I really see a tragedy of intellect.
Cohen was clearly brilliant. Stanford, Apple.
Microsoft. He could have broke anything. He could
have built a legitimate, world -changing fintech
unicorn. But he had that complex. God complex.
He didn't want to build a company. He wanted
to be the central banker of the entire Internet.
And he forgot, or maybe he never believed, that
stability isn't something you can just code into
existence if the underlying economics were based
on, well, on nothing but belief. It relied on
belief and it relied on his cult of personality.
And the second that belief shattered, the math
shattered with it. And it wasn't just numbers
on a screen. It was real savings, real retirements,
real panic. And here's a thought I want to leave
everyone with, our final provocative thought.
Co -1 created a system that was supposed to be
the epitome of decentralized. That was the big
promise of crypto, right? No kings, no masters,
no central points of failure. And yet this entire
$45 billion ecosystem collapsed almost entirely
because of the hubris and the lies of one single
man. Even after that man was arrested, he was
still moving millions of dollars from a jail
cell. He was still potentially influencing national
elections. The market was still hanging on his
every word. It really makes you wonder. In this
new decentralized world we keep hearing about,
how much power does one charismatic, brilliant
and deeply flawed individual actually hold? It
seems like even when the handcuffs are on, the
answer is still way too much. Maybe we haven't
gotten rid of the kings. We've just replaced
the regulated ones with much more volatile ones.
Exactly. So the next time you see a genius founder
with a golden resume and a sure thing investment,
that seems too good to be true. Maybe check to
see if they failed their first government evaluation.
Remember any... Thanks for listening to The Deep
Dive. We'll see you next time.