SAN FRANCISCO — Not long after the South Korean government issued an arrest warrant for him, Do Kwon, a cryptocurrency businessman turned fugitive, joined a live stream with two popular cryptocurrency podcasters.
They arranged for Kwon to speak alongside Martin Shkreli, a former pharmaceutical executive who was sentenced to seven years in prison for fraud. “Hey, Do,” Shkreli said on the broadcast in November. “I just wanted you to know that jail is not that bad. It's not the worst thing in the world."
Kwon smiled and nodded. "That's good to know," he said.
On Thursday, Kwon, 31, was arrested in Podgorica, the capital of Montenegro, as he and a fellow traveler tried to board a private flight to Dubai, United Arab Emirates. They were detained after using fake Costa Rican passports, according to authorities, and also carrying travel documents from Belgium that appeared to be forged.
The arrest was the culmination of a remarkable story of international intrigue and nerve in the cryptocurrency industry. Kwon became the target of criminal investigators in at least three countries after two cryptocurrencies issued by his company, Terraform Labs, crashed virtually overnight.
The crash triggered a market crash that plunged the prices of popular digital currencies such as bitcoin and ether, and sparked a crisis in the cryptocurrency industry. In just a few days, Kwon went from industry luminary to industry villain. Some investors in his virtual currencies lost his life savings.
After his business collapsed, Kwon traveled across Europe and Asia, from Singapore to Serbia and Montenegro, insisting on Twitter that he was not "'on the run' or anything."
Even as global authorities sought his arrest, Kwon gave interviews to reporters and podcasters, and tried to revive his cryptocurrency business with a new digital currency. In a brief call with The New York Times earlier this month, Kwon said he had not "turned down requests" to share his location with authorities.
"Obviously they know where I am," he said.
His arrest is now about to start an extradition battle. On Thursday, federal prosecutors for the Southern District of New York indicted Kwon on eight counts of fraud. Authorities in his native South Korea have also charged him with financial crimes.
South Korea plans to "proceed with the extradition process in accordance with the law and international agreements," the country's Justice Ministry said in a statement on Friday.
A year ago, Kwon was one of the richest and most powerful figures in the crypto industry. After graduating from Stanford University with a computer science degree, he founded Terraform Labs, which issued two closely linked digital currencies: TerraUSD, a stablecoin priced at $1, and Luna, a more traditional cryptocurrency with a fluctuating value.
TerraUSD was designed to maintain its $1 value through the financial engineering that connected it to Luna. The coins became very popular and the value of all Lunas in circulation rose to $40 billion as the cryptocurrency market grew in 2021 and early 2022.
Kwon cultivated a brash persona on Twitter, fending off critics with tweets like "I don't debate the poor." His fans who were passionate about him called themselves "Lunatics". One of his prominent venture capital backers, Mike Novogratz, even had a Luna-themed tattoo of a wolf howling at the moon.
Then Kwon's business collapsed. In May, the price of Luna plummeted, taking TerraUSD with it. The implosion wiped out tens of billions of dollars of value and caused a ripple effect that led to the collapse of major cryptocurrency firms, including FTX, the exchange founded by Sam Bankman-Fried.
Soon, Kwon was the subject of criminal investigations. In September, South Korean prosecutors charged him and five other people with violating the country's financial laws. Interpol, the international police organization, issued a "red notice" demanding his arrest. Singapore police also said they were investigating Kwon.
According to the Interpol office in Seoul, South Korea, Kwon arrived in Singapore in April before leaving for the United Arab Emirates in September, the month South Korea issued the arrest warrant for him. Investigators believed the trip to the United Arab Emirates was a stopover on the way to Serbia, where Kwon had gone into hiding with Han Chang-joon, Terraform's former chief financial officer.
Even after Luna's epic collapse, Kwon believed he could return to the cryptocurrency industry and introduced a new digital currency. He told an acquaintance that his goal was to make his coin one of the 10 most valuable cryptocurrencies, without pegging it to a stablecoin, according to a person familiar with his thinking.
After Bankman-Fried's company collapsed, Kwon began posting frequently on Twitter. On December 7, he linked to a Times article reporting that the Justice Department was investigating whether Bankman-Fried engaged in market manipulation that led to Luna's collapse.
“What was done in the dark will come to light,” he wrote.
On the recent call with the Times, Kwon said he had released a few open source projects, using a term that generally refers to software created in code that is made available to the public. “I call it technological philanthropy,” he said. "It doesn't really have business models or tokens or anything like that."
But the pressure on him was mounting. In February, the Securities and Exchange Commission charged him with orchestrating a multibillion-dollar securities fraud. Privately, he confided that he was having a midlife crisis and that he was spending too much time thinking and not coding enough, according to the person familiar with his thinking.
Kwon arrived in Montenegro about 10 days ago, said Dritan Abazovic, the country's prime minister. On Thursday he went to the airport with Han, his colleague from Terraform. They presented Costa Rican passports, which immigration checks revealed to be forged.
Montenegrin police arrested Kwon and Han at 9 a.m. local time and notified the Interpol office in Seoul, seeking confirmation that it had correctly identified them, according to the South Korean Justice Ministry statement. A fingerprint match confirmed their identities.
During the arrest, the Montenegrin authorities confiscated the travel documents, as well as several mobile phones.
“Montenegro is providing great support to fight all kinds of criminals,” Abazovic said in an interview on Friday. "It is our duty to try to cooperate with other partners."
Kwon spent Thursday night in police custody. After the arrest, he was photographed being led into a police vehicle in Montenegro, wearing a gray Nike sweater and sweatpants. He was scheduled to appear in court Friday night, according to his local attorney, Branko Andelic. A representative for Kwon and Terraform Labs did not respond to a request for comment.
The next step in the case is likely to involve extradition, a complex legal process that can sometimes take months to unfold. Nick Biase, spokesman for the US attorney's office for the Southern District of New York, said US prosecutors were seeking Kwon's extradition. The South Korean government said Friday it also planned to extradite Kwon.
“We will see what the first request is, and after that we are ready to do the extradition to the country that is looking for him,” Abazovic said in the interview.
Whatever Kwon's ultimate fate, the news of his arrest was greeted with celebrations in the crypto community, where he has become a deeply unpopular figure since the collapse of Luna and TerraUSD.
“I have been waiting for this moment for a long time,” tweeted an account that has tried to mobilize victims of the Luna crash.
