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Media CoverageFrom cryptocurrency genius to a fugitive accused of a multi-billion dollar fraud, What is Do-hyung Kwon's final fate?
Host: Choo Hye-jung Guest: Pureun “Ian” Hong, managing partner at Decent Law Firm Q. Who is Do-hyung Kwon, the key figure in the Terra-Luna incident? CEO of Terraform Labs, Do-hyung Kwon's background: ‣ Graduated from Daewon Foreign Language High School ‣ Graduated from Stanford University with a degree in Computer Science ‣ Worked as an intern at Apple and Microsoft ‣ Founded a fintech startup Key figure in the Terra-Luna collapse CEO Do-hyung Kwon arrested after one year on the run The U.S. SEC charged him with securities fraud under the Securities Exchange Act Q. What is the Luna collapse, considered one of the largest crypto crashes? Luna, an algorithmic stablecoin Q. What is a stablecoin? A stablecoin is pegged to the value of the U.S. dollar Types of stablecoins: ① Fiat-backed ② Crypto-backed ③ Algorithm-based Q. What caused the Luna collapse? The Terra (UST) algorithmic stablecoin $51 billion evaporated in just 72 hours Q. Why did Luna and Terra crash? The promise that "Terra's price will always be $1" was broken The 1:1 peg between 1 Terra and $1 collapsed The loss of dollar-pegged stability impacted the entire crypto market Anchor Protocol allowed for DeFi with 19% annual interest on deposits Q. Was the Luna-Terra crash caused by a loss of investor trust? Terra conducted 'pre-mining' worth ₩1.5 trillion, which was not mentioned in the white paper Although not disclosed in the white paper, some institutional investors "knew about it" Terra claimed, "We explained it multiple times in chat rooms... no issues with transparency" Luna-Terra crashed, losing 99.3% of its value from its all-time high (a 150-fold drop) Q. What is the current status of Luna-Terra? Luna and Terra have lost their value, resulting in global investor losses The first case investigated by the Financial and Securities Crimes Joint Investigation Unit is the 'Luna-Terra' case Q. Is Luna-Terra a Ponzi scheme? Ponzi scheme: Using new investors' funds to pay returns to earlier investors Remaining funds are used to attract more new investors, making it a fraud Q. Was the structure of Luna-Terra a Ponzi scheme? High 19% interest paid through Anchor Protocol → suspected Ponzi scheme "No legitimate profit structure was in place" Q. Were issues with Luna-Terra raised at the time? Terra's pre-mining of ₩1.5 trillion, not mentioned in the white paper Although not disclosed in the white paper, some institutional investors "knew about it" Terra claimed, "We explained it multiple times in chat rooms... no problem" Q. Has there been an increase in cryptocurrency-related crimes? How to identify fraudulent coins? "It’s not easy to uncover crypto fraud" "Checking the coin’s white paper, operators, technical capabilities, and future profitability is essential" Q. What are the characteristics of crypto fraud victims? "Most crypto fraud victims are elderly" "They are often deceived by brokers and invest large sums, resulting in losses" Q. What are the legal standards for punishment in cases of crypto fraud in Korea? It falls under 'fraud' under the criminal law and violation of the 'Act on the Regulation of Conducting Fund-Raising Business without Permission' Korea has no precedent of punishing capital market law violations related to cryptocurrencies The first case involving cryptocurrency is being closely watched by the Financial and Securities Crimes Joint Investigation Unit Q. Are there any examples of punishment for crypto fraud? The 'V Global' case, where 50,000 victims lost ₩2 trillion, was charged with fraud They used a pyramid scheme to recruit members by promising to triple their investment In cases of pyramid schemes, it is necessary to check for approval from the Fair Trade Commission Q. Will Do-hyung Kwon be extradited to Korea? Do-hyung Kwon was captured in Montenegro Prosecutors have dispatched investigators and are on standby The first CEO of Terraform Labs, who is a co-conspirator, is more likely to be extradited than Do-hyung Kwon Q. What are the charges against Shin Hyun-seong, the 'second-in-command' of Terra-Luna? He faces multiple charges, including fraud, breach of trust, and violations of the Electronic Financial Transactions Act Q. What are the key charges? The Terra-Luna incident is a global issue "Violations of the Capital Markets Act and charges of fraud are being highlighted" Q. What will happen to Do-hyung Kwon after his arrest overseas? Do-hyung Kwon is detained in Montenegro on charges of document forgery... both South Korea and the U.S. have filed indictments Q. Which country’s court will Do-hyung Kwon face? The prosecutor from the District Prosecutor's Office in Montenegro said, "Forgery of passports is the first charge" Q. What is the investigation status in other countries regarding Do-hyung Kwon? Securing custody of Do-hyung Kwon is not easy Do-hyung Kwon may engage in legal battles locally for years, resisting extradition U.S. prosecutors have filed 8 charges against Do-hyung Kwon and reported it to the White House and Congress Q. What will the direction of the investigation be if Do-hyung Kwon is extradited to Korea? "The focus will be on violations of the Capital Markets Act" "There is a need for legal definitions concerning cryptocurrency and its operators"
2023-04-05 NBN NEWS -
Media Coverage
The majority of financial frauds these days are cryptocurrency scams, with methods becoming more decentralized and sophisticated.
With cryptocurrency fraud linked as a motive for the Gangnam kidnapping and murder case, fraud crimes involving virtual assets have once again come under scrutiny. Although statistics from last year show a decrease in virtual asset-related crimes, cryptocurrency fraud continues to be rampant. On the ground, experts believe that many crimes remain hidden as criminal tactics become more sophisticated and operate in fragmented networks. (omitted) As the complexity of cryptocurrency-related fraud increases, front-line police are struggling with investigations. The lack of highly specialized investigators with deep knowledge of blockchain and virtual assets, such as lock-ups and staking, means it can take days just to identify initial cases. As a result, while ordinary financial crimes are typically handled by the economic crimes team, cryptocurrency fraud is increasingly being transferred to the intelligent crime investigation team. Hyeonsu “Elliot” Jin, an attorney at Decent Law Firm, commented, "Recently, cryptocurrency fraud has become more complex, often combined with stock-leading room scams, making it difficult even for local police stations to manage. Cryptocurrency fraud is occurring at an alarming rate. From my experience, it would not be an exaggeration to say that about half of the financial fraud cases currently happening involve cryptocurrency."
2023-04-05 etoday -
Media Coverage
11 months into the 'Luna·Terra Coin' investigation, still shrouded in uncertainty.
While Do Kwon (32), the CEO of Terraform Labs and a key figure in the Terra-Luna coin crisis, has been arrested, the investigation into domestic accomplices has not progressed quickly. With the uncertainty surrounding Do Kwon's extradition to South Korea, arrest warrants for the accomplices requested by the prosecution have been repeatedly dismissed by the court. In the meantime, the prosecution has frozen assets related to the case, worth approximately 230 billion KRW, as part of their effort to seize criminal proceeds, and they are continuing supplementary investigations. (omitted) There has yet to be a domestic precedent that recognizes virtual assets as securities. As a result, some victims are demanding that 'Do Kwon be sent to the United States instead.' However, the prosecution argues that prosecuting Do Kwon in South Korea, where his accomplice Shin is located, would increase the likelihood of a conviction and be more favorable for victim compensation. Pureun “Ian” Hong, a lawyer at Decent Law Firm, stated, "While there is no precedent in South Korea, the difference in how the U.S. and South Korea approach the issue of securities is not that significant." A representative from the Ministry of Justice also commented, "We are comprehensively working to ensure that the Montenegrin judicial authorities decide to extradite Do Kwon to South Korea."
2023-04-04 KUKMINILBO -
Media Coverage
'Impending Ruling' in SEC vs. Ripple Case, Experts Warn of Investment Risks.
As the ruling on the ‘SEC vs. Ripple lawsuit,’ which is expected to be a crucial indicator in determining the security nature of the virtual asset market, approaches, opinions on the outcome remain divided. Investors are betting on Ripple's victory, causing Ripple's price to rise, but experts are warning of investment risks, stating that the lawsuit's outcome is difficult to predict. (omitted) Hyeonsu “Elliot” Jin, managing partner at Decent Law Firm, commented, "If we look at the written arguments submitted with reference to the Voyager bankruptcy ruling, Ripple's arguments hold merit, but that doesn't mean the SEC's stance is weak either,' adding, 'It still seems likely that the case will end in a settlement."
2023-04-01 etoday -
Media Coverage
FIU, controversy over lenient punishment for virtual asset service providers.
The Financial Intelligence Unit (FIU)'s penalties for virtual asset service providers have sparked controversy over leniency. Despite numerous issues, such as only investigating 1.4% of suspicious transaction reports due to the same person review history and failing to address 011 and 017 numbers, investors are criticizing the light penalties imposed on exchanges, including the number of violations and fines. (omitted) Pureun “Ian” Hong, managing partner at Decent Law Firm, commented, "The penalties imposed after the recent disciplinary committee review — including a fine of 492 million KRW, reprimands, and warnings — can hardly be considered a strong response. However, the Financial Services Commission seems to have focused on encouraging improvement by the businesses, while also warning of stricter penalties for similar issues in the future." He further added, "From an investor's perspective, it is difficult to know which exchange violated anti-money laundering obligations. Some serious offenses, such as exchange employees trading virtual assets under family members' names, were not disclosed, leaving investors without full access to important information. In the future, it would be more desirable for more information to be disclosed in cases of such legal violations, providing investors with better standards when choosing an exchange."
2023-03-31 NBN NEWS -
Media Coverage
CFTC vs SEC: A power struggle over whether it's a commodity or a security.
On the 27th (local time), the U.S. Commodity Futures Trading Commission (CFTC) filed a lawsuit against Binance, the world’s largest cryptocurrency exchange, and its CEO Changpeng Zhao (CZ) for violating the Commodity Exchange Act (CEA), among other charges. (omitted) Hyeonsu “Elliot” Jin, managing partner at Decent Law Firm, commented, "Regulations on securities are more complex and stringent than those on commodities. As of 2022, the SEC employed 4,807 people, compared to the CFTC’s 677, which highlights a significant difference in manpower. The industry is likely to perceive this as a difference in the intensity of oversight and regulation." He further added, "In South Korea, both commodities and securities fall under the jurisdiction of the Financial Services Commission (FSC), so the difference may not be as pronounced. However, there is a clear regulatory disparity between securities, which require the submission of a securities registration statement to the FSC, and derivatives, where basic information necessary for trading must be disclosed by the listing exchange."
2023-03-31 hankyung