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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 -
Media Coverage
Do Kwon at the crossroads of extradition to South Korea or the U.S.; what about compensation for domestic victims?
With the arrest of Do Kwon (32), CEO of Terraform Labs and the main culprit behind the collapse of the Luna and Terra cryptocurrencies, both South Korea and the United States are competing for his extradition. The decision by Montenegrin judicial authorities is drawing attention, as the possibility of compensation for South Korean victims depends on which country Do Kwon is extradited to. (omitted) Attorney Pureun “Ian” Hong of Decent Law Firm, who specializes in cryptocurrency fraud, stated, "If the investigation or trial is led by South Korea, hidden funds could be uncovered, and the court may allocate them to domestic victims. If Do Kwon is brought to South Korea, the prosecution will likely take measures to preserve any criminal proceeds he has hidden. Once a final judgment is issued, the funds will be distributed to the victims, providing relief." Hong added, "There is a possibility that Do Kwon could stand trial in the U.S. and then be extradited back to South Korea. However, the fact that the U.S. has also requested his extradition shows their intent to punish him. If he is prosecuted in the U.S. and then sent to South Korea, it may be too late. On the other hand, if he is extradited to South Korea first, it would make it more difficult to provide relief for U.S. victims."
2023-03-30 biz.chosun -
Media Coverage
Attention focused on the 'securities nature' of Terra-Luna coins.
With the arrest of Do Kwon, CEO of Terraform Labs and the main culprit behind the 'Terra-Luna' crisis, which wiped out 52 trillion won in market capitalization, attention is now focused on whether he will be extradited to South Korea and what punishment he may face. While the timing and possibility of his extradition to South Korea are being closely watched, the assessment of whether Terra-Luna coins qualify as securities is expected to be a key factor. (omitted) Hyeonsu “Elliot” Jin, managing partner at Decent Law Firm, stated, "If both countries request extradition, the Montenegrin government will decide based on their judgment where he will be sent. Since Do Kwon holds South Korean nationality, it is more likely that he will be extradited to South Korea rather than the United States." Jin also added, "If Do Kwon is extradited to South Korea and stands trial, regardless of the punishment he faces, it could mark the starting point for determining whether virtual assets qualify as securities."
2023-03-24 etoday -
Media Coverage
Financial Supervisory Service: 'Trip to the U.S. SEC, related to disclosure review.'
The Financial Supervisory Service (FSS) clarified that reports suggesting they are planning a trip to the U.S. Securities and Exchange Commission (SEC) to assess the security nature of virtual assets (cryptocurrencies) are partially inaccurate. (omitted) Hyeonsu “Elliot” Jin, managing partner at Decent Law Firm, commented, "Since much of South Korea's legal framework has already been adopted from the U.S., introducing independent policies on virtual assets carries significant risks. The SEC's assessment and regulation of virtual assets as securities are likely to be similarly applied in South Korea as well."
2023-03-20 hankyung -
Media Coverage
Is the 'illegal listing' time bomb at cryptocurrency exchanges about to explode?
Following Coinone, it has been confirmed that employees of the domestic cryptocurrency exchange Bithumb are also under investigation by prosecutors for allegedly listing cryptocurrencies in exchange for bribes. Experts point out that in order to break the unfair listing practices in the cryptocurrency industry for monetary gain, institutional reforms and stricter penalties must be implemented. (omitted) Pureun “Ian” Hong, managing partner of Decent Law Firm, specializing in virtual assets, stated, "If an exchange lists coins not based on its own criteria but rather through illegal payments received by employees in charge of listings, charges such as breach of trust could apply. However, since the current punishment is lenient, if the Digital Asset Basic Act, which is currently being discussed in the National Assembly, is passed, stronger regulations will likely be necessary to address such issues."
2023-03-17 biz.chosun -
Media Coverage
The recipient of the bribe was not detained, but the giver was arrested, sparking controversy over fairness in the court's decision.
Coinone is currently under investigation by the prosecution for allegations of receiving kickbacks through a broker during the listing of PICA Coin on October 22, 2020. However, while the broker (charged with bribery) has been detained, it was revealed later that the former employee (charged with receiving bribes) was not detained, sparking controversy over fairness in the Southern District Court. (omitted) Pureun “Ian” Hong, a virtual asset specialist and managing partner at Decent Law Firm, stated, "The fact that the prosecution requested an arrest warrant shows their strong suspicion of the suspect’s involvement.' He further explained, 'It is unusual for the broker (bribery) to be detained while the former employee (receiving bribes), who faces a potentially higher sentence, is not." He added, "An arrest warrant must be issued by the court for the prosecution to conduct an arrest investigation, and with the warrant denied, the prosecution has no choice but to conduct a non-detention investigation. If the prosecution finds it absolutely necessary, they could reapply for the arrest warrant, but it's unclear whether they will do so at this point." Furthermore, he explained, "The decision to detain someone is not based solely on the charge. If the broker committed bribery in multiple places, indicating more severe wrongdoing, or if there is evidence of tampering or flight risk, then it's entirely possible that a different outcome could occur compared to the former employee, Jeon."
2023-03-09 NBN NEWS -
Media Coverage
Attorney Pureun “Ian” Hong from Decent Law Firm: The existence of DAXA itself is contradictory.
During the 'NBNTV WEMIX Coinone Relisting Debate' held on the 24th, Pureun “Ian” Hong, managing partner of Decent Law Firm, stated, "DAXA was created due to a legal gap, but since there is no way to sanction member companies that do not follow decisions due to this legal void, the existence of DAXA itself can be seen as contradictory." When asked about his views on the notion that DAXA's self-regulation could be viewed as collusion, Hong explained, 'DAXA's defense regarding collusion is, “We are not a compulsory body. Even if we make decisions, each individual member exchange is not obligated to follow them. They make their own decisions by agreement, so it is not collusion.”' He further added, "Coinone's unilateral decision to relist essentially proves that point. Since DAXA’s member exchanges are not required to follow decisions, they really didn’t follow it. This contradiction arises because DAXA is a self-regulatory body, and unless a legal foundation is established, issues of communication breakdown and lack of consensus will continue to occur." Additionally, he commented, "If a new exchange enters the won market by obtaining a real-name account, it will become a competitor to the five major exchanges. While they may unite to oppose it, apart from Upbit, most of the exchanges are struggling due to the crypto winter. So, each exchange may make decisions based on its own interests." He concluded by saying, "I hope the government swiftly establishes relevant laws to help protect investors and promote a healthy market order."
2023-02-24 NBN NEWS
