Already notorious as an agent of market chaos, the crypto industry has now also wreaked political havoc, upsetting a critical general election in Montenegro, a troubled Balkan nation struggling to shake off the grip of organized crime and Russian influence.
Just days before the June 11 vote, the political landscape in Montenegro was turned upside down by the intervention of do kwonthe fugitive head of a failed crypto business whose collapse last year contributed to a $2 trillion industry crash.
In a handwritten letter sent to authorities from the Montenegrin jail where he has been held since March, Mr Kwon said he had "a very successful investment relationship" with the leader of the Europe Now Movement, the frontrunner in the elections, and that "friends in the crypto industry" had provided campaign funds in exchange for promises of "crypto-friendly policies."
Europe Now was expected to win a decisive popular mandate in the elections for a new Parliament. His campaign mixed populist promises to raise wages and pensions with promises to put the country on a clear path to join the European Union by cleaning up the crime and corruption that flourished under the former leader of Montenegro, Milo Djukanovic.
The party still won the most votes but fell short of expectations, finishing just ahead of a rival Russia-backing group that may now disrupt efforts to form a stable pro-Western coalition government. Only 56 percent of the electorate voted, a record low turnout.
Mr. Kwon's intervention "destroyed us," said Europe Now leader Milojko Spajic, one of the targets of the disgraced crypto entrepreneur's letter, which was reviewed by The New York Times and whose existence was leaked to the media. premises before the vote.
In an interview, Spajic denounced Kwon's accusations as "super false" and part of a "dirty political game" to hurt his party's chances. Mr. Kwon's lawyers have not questioned the authenticity of the letter.
As the founder of Terraform Labs, the Stanford-educated Mr. Kwon was once hailed as a pioneer of cryptography, responsible for the design of a popular digital currency, Luna, he said would change the world and whose fans he proudly referred to as "Lunatics". .โ
He spectacular collapse in May 2022 of Moon and a second cryptocurrency that Mr. Kwon designed, Terra USD, it transformed him from a hero of innovation into a fugitive wanted by both the United States and South Korea on fraud charges.
After that, he disappeared, his whereabouts remaining a mystery until the Montenegrin authorities announced in March that he had been arrested while trying to board a private plane to Dubai in Podgoricathe capital, using a forged Costa Rican passport.
He had insisted it was genuine, but a court in Podgorica on Monday found Mr. Kwon and a South Korean cryptocurrency business partner guilty of using forged travel documents and sentenced them to four months in jail.
It is still not clear what Mr. Kwon was doing in Montenegro before his arrest and when he arrived. His activities since his arrest are more shady.
Although stripped of his electronic devices, the jailed Mr. Kwon appears to have somehow moved $29 million from a crypto wallet linked to him, South Korean prosecutors said, confirming a Bloomberg News report.
Dritan Abazovic, Montenegro's interim prime minister and Spajic's political rival, said there were no records of Kwon entering the country or checking into hotels, so authorities want to establish whether he had local associates.
"I'm not accusing Spajic of anything," Abazovic said in an interview, "but we need to see what was going on in the crypto community here and if she was involved in money laundering and campaign financing."
Long a hub for cigarette smuggling and cocaine trafficking during Djukanovic's rule for more than three decades, Montenegro has promoted itself in recent years as a hub for the crypto industry.
In 2022, Mr. Spajic, who was the finance minister at the time, predicted that the industry could account for almost a third of Montenegro's economic output within three years.
For Mr. Spajic and his fellow blockchain believers, cryptocurrencies were the Next Big Thing, according to Zeljko Ivanovic, director of independent media group Vijesti.
โIt was seen as an easy way out: a new secret recipe to replace the bootleg that had been Djukanovic's recipe for decades,โ Ivanovic said. "But the miracle cure turned out to be a disaster."
Eager to attract talent, Montenegro last year citizenship granted to Vitalik Buterin, Russian-Canadian and founder of Ethereumthe most popular cryptocurrency platform.
Mr. Buterin said he "never knowingly met or spoke to Do Kwon, including through third parties," and "never gave Europe Now any money."
mr spajic posted a photo on Twitter of himself with Mr. Buterin, showing his new Montenegrin passport, and the message: โWe will bring the best people in the world to Montenegroโ.
However, Montenegro's welcoming ways also attracted George Cottrell, a British financier. convicted of wire fraud in the United States, which later moved to Montenegro under a new name, George Co.
Cottrell, authorities say, left Montenegro for London on June 9, shortly after police raided Salon Privรฉ, a bar in the coastal resort town of Tivat that authorities believe is connected to him. It has gaming machines and a "cryptomat", which is used to buy and trade digital currencies.
Ratko Pantovic, Cottrell's lawyer, who also represents the bar association, said his British client had no connection to the gambling hall or the crypto industry.
Montenegro's acting interior minister, Filip Adzic, who oversaw the police raid in Tivat, said Mr Cottrell had not been charged with any crime but was under investigation for his involvement in possibly illegal crypto activities.
Montenegro, Adzic said, had to beware of a business that, because it facilitates anonymous transactions, "is good for organized crime, good for financing terrorists and good for money laundering."
US and South Korean prosecutors want to examine three laptops and five cell phones seized by authorities from Mr. Kwon at the time of his arrest for clues about what happened to the billions of dollars invested in his digital currencies, now mostly worthless.
However, of greater interest to the Montenegrin authorities is what they may contain in relation to campaign finance and Mr. Kwon's relationship with Mr. Spajic.
In a court hearing on June 16, Kwon's lawyers said their client denied financing Spajic's election campaign. However, Mr. Kwon's letter said that "other friends in the cryptocurrency industry" contributed.
โI have evidence of these communications and contributions,โ Mr. Kwon said in his letter.
Mr Spajic initially denied any connection to Mr Kwon but later acknowledged that he had known him since 2018 and invested money with him on behalf of an investment fund he says he was working for in Singapore: "he misled us", the Mr. Spajic said, meeting him again late last year in Belgrade.
That followed an announcement by South Korean prosecutors in September that Interpol, the global police organization, had issued a โred noticeโ for the arrest of Mr. Kwon. Spajic said that he had met Kwon only because "we wanted our money back."
Mr. Kwon gave a different account, stating in his letter that Mr. Spajic wanted to talk about campaign finance. He said that Mr. Spajic, who was then planning to run for president, explained that he was "raising a few million dollars for the next campaign" and "asked me to make a contribution." Mr. Kwon said that he refused.
Spajic said it was "absolutely false" that they were discussing campaign financing.
Milan Knezevic, the leader of the pro-Russian bloc that finished second in the election, said he enjoyed his group's unexpectedly strong result, achieved in part because of the disruption caused by Kwon, but still regrets that Montenegro has opened its arms. to crypto experts.
It would have been better, Knezevic said, sitting in an office decorated with photos of Russia's President Vladimir V. Putin, to have hosted fighters from the Islamic State militant group.
"At least with ISIS, you know what you're up against," he said. "But we have no idea what these crypto people are actually doing."
Alisa Dogramadzieva contributed reporting from Podgorica and Tivat, Montenegro, and choe sang hun from seoul.
