Maybe the most important problem of writing about cryptocurrency is that every part is occurring on a regular basis and it’s all some mixture of essential, fascinating and dramatic. Working example: The previous two weeks have been so dominated by the continuing banking disaster and crypto crackdown that I haven’t had time to luxuriate in among the greatest information in current reminiscence – the arrest of Terra blockchain co-founder and alleged fraudster Do Kwon in Montenegro final week.

The collapse of Do Kwon’s Terra blockchain in Could, bear in mind, was the proximate catalyst for 2022’s crypto rout, serving to destabilize crypto lender Celsius Community and hedge fund Three Arrows Capital particularly. If you need an entertaining recap of the story thus far, try our podcast sequence “Lunacy: The Rise and Fall of Do Kwon.”

This text is excerpted from The Node, CoinDesk’s every day roundup of essentially the most pivotal tales in blockchain and crypto information. You may subscribe to get the complete e-newsletter right here.

sThose costs, excess of regular, contained main revelations about Kwon’s actions. Along with his arrest, we’re, I hope, on the way in which to studying much more.

There are nonetheless just a few questions on Do Kwon which can be badly in want of solutions.

Why was Do Kwon in Serbia?

That is at present essentially the most intriguing factor of Do Kwon’s arrest. South Korean police reported in December they believed Kwon had fled to Serbia; he was in the end arrested in next-door Montenegro. These are achingly stunning international locations, each excessive on my private wish-list of trip locations – nevertheless it’s secure to imagine Do Kwon had deeper motives.

Partly, the selection might have been pushed by easy geography. Do and Terraform Labs Chief Monetary Officer Han Chang-Joon had been reportedly arrested whereas attempting to board a non-public jet that might have taken them to Dubai. Dubai is a well-liked hideout for rich fugitives, and the Balkans are kind of on the way in which there from Singapore.

However there’s one other hypothetical issue. The SEC alleged in its February civil costs that Do Kwon was in a position to promote roughly $100 million value of bitcoin allegedly stolen from the wreckage of his undertaking by utilizing a Swiss financial institution. Do Kwon might have turned to organized crime figures for assist with that effort or for cover from regulation enforcement, and the Balkans are a hotbed for Mafia-linked crypto fraud. That might be one other clarification for his flight to Serbia.

Who will get to prosecute him?

Actually hours after Kwon was arrested in Montenegro, U.S. prosecutors filed felony costs towards him. That means these had been within the works, however officers rushed to get them on the file so they may search Do Kwon’s extradition to the U.S.

As former SEC enforcement officer Lisa Brancaga not too long ago defined on CoinDesk TV, the U.S. has a declare to jurisdiction as a result of Do Kwon focused U.S. buyers. In the meantime, he has additionally been charged with fraud in his native South Korea.

Which means the 2 nations must negotiate, or maybe compete, to see who will get first crack at him. (Although each will possible have to attend till he and his compatriot are tried in Montenegro for attempting to make use of faux passports.) Talking in strictly ethical phrases, it appears proper to let South Korea go after its (alleged) homegrown con man first. For one factor, whereas Terraform Labs focused People, plainly a far larger proportion of South Koreans had been harmed by the scheme.

There’s additionally rather more potential for an intensive prosecution there, given Do Kwon’s obvious connection to elite networks in South Korea by way of his Terra co-founder Daniel Shin, an area tech “serial entrepreneur.” Nonetheless, U.S. prosecutors would possibly use that very issue to argue for their very own declare: Do Kwon’s elite connections in South Korea would possibly imply he has buddies who can intervene along with his trial.

Why had been the cash males really easy to trick?

This query might or might not be answered by a Do Kwon trial, however it’s significantly galling: Had been the buyers who boosted Do Kwon actually so silly that they believed his shtick? Or was one thing else occurring?

As we talk about in depth in our four-episode narrative podcast “Lunacy,” the terraUSD algorithmic stablecoin didn’t make any sense on paper, even leaving apart the alleged fraud that was uncovered later. This forces us to wonder if buyers, together with buyers specializing in crypto and seemingly well-versed in finance, merely made extraordinarily dangerous bets on the Terra system or had different, less-transparent motives. That query could be most embarrassing for Mike Novogratz of Galaxy Digital, who notoriously acquired a LUNA tattoo.

However the SEC’s current costs spotlight one counterparty susceptible to extra than simply embarrassment. The company alleges {that a} U.S.-based buying and selling agency was concerned in a secret Could 2021 bailout when the terraUSD token misplaced its greenback peg. The incident, the SEC says, was later used to help the fraudulent declare that the terraUSD token was self-balancing. Which means it might be thought of not merely a monetary funding however an act in furtherance of fraud.

CoinDesk reporting has confirmed this entity was Chicago-based Soar Crypto. It’s unclear why Soar has not confronted authorized fallout for what an bold prosecutor may simply characterize as aiding and abetting fraud – significantly when the agency reportedly reaped $1.28 billion in earnings from its participation.

What occurs to Terra? What about Terra 2.0?

All the things Do Kwon has ever touched is basically nugatory. I strongly suggest getting out of any monetary or skilled entanglements with these tasks.