Fallen crypto impresario Do Kwon has funneled tens of millions of dollars out of an entity linked to his failed blockchain project since he was arrested in late March, South Korean prosecutors alleged.
The $29 million worth of digital tokens were likely moved by Kwon personally or at his direction, Dan Sunghan, director of the financial crime investigation bureau at the Seoul Southern District Prosecution Service, said in an interview with Bloomberg News.
Korean authorities are trying to determine the whereabouts of the assets, which were transferred from a crypto wallet belonging to Kwon’s Luna Foundation Guard (LFG), Dan said.
A lawyer for Kwon, Branko Andjelic, couldn’t be reached for comment on Dan’s allegations. Kwon has previously denied committing any wrongdoing, saying on Twitter in February that “I’ve stolen no money and never had ‘secret cashouts.’”
What happened to crypto held with LFG, which Kwon set up ostensibly to help defend his now-defunct stablecoin TerraUSD’s peg to the dollar, has been the subject of intense speculation since his project crashed in May last year and the South Korean native disappeared from public view. The funds Dan’s unit is tracing are in addition to the more than 10,000 Bitcoin the US securities regulator said in February that Kwon, 31, had already diverted from his entities.
Separately, Kwon and his associates still hold just over $13 million at Swiss crypto-focused lender Sygnum Bank AG, Dan said.
“We’re assuming that Do Kwon, or someone under his direction, took out the amount and moved it to another wallet, not to Sygnum, and cashed it out somewhere else,” after Kwon’s arrest, Dan said. Prosecutors don’t yet know where the funds ended up, he said: “We are tracking it.”
A spokesperson for Sygnum, which hasn’t been accused of any wrongdoing, declined to comment.
Travel Document Charges
Kwon was arrested in Montenegro on March 23 and has been charged there with using forged travel documents. He’s also been accused by US prosecutors of engaging in years-long crypto fraud, and faces similar charges in South Korea. Both countries are seeking Kwon’s extradition from Montenegro.
Kwon has pleaded not guilty to the charge in Montenegro of using forged travel documents.
The US and South Korean charges stem from the collapse of TerraUSD, the stablecoin Kwon helped create and which was a centerpiece of the Terra blockchain ecosystem. In early May last year, TerraUSD cratered from its dollar peg, sending crypto markets tumbling and setting off a wave of bankruptcies, from hedge fund Three Arrows Capital to crypto lender Celsius Network.
The US Securities and Exchange Commission alleged in February that Kwon kept moving crypto from his entities Luna Foundation Guard and Terraform Labs to a Swiss bank after TerraUSD imploded. More than $100 million of “fiat currency” was withdrawn from the Swiss bank between June 2022 and mid-February, the SEC said at the time, without naming the bank.
South Korean news service Digital Asset in April identified Zurich-based Sygnum as the Swiss bank. Finews, a Swiss news website, reported on April 25 that Sygnum transferred more than 70% of the $100 million to an escrow account at an international law firm based on a court order. The remainder was used to pay wages and bills owed by Terraform Labs, according to the Finews report, which cited unidentified sources.
The roughly $13 million that remains with Sygnum was moved from Luna Foundation Guard’s crypto wallet to a separate one, and then via an over-the-counter service to the bank, according to Dan. South Korean prosecutors are trying to have those funds frozen, he said, declining to comment on whether they have been in direct contact with Sygnum.
--With assistance from Emily Yamamoto and Rika Yoshida.