Story of Do Kwon, the computer scientist behind the 40 billion Earth-Moon crash arrested in Montenegro

Do Kwon’s escape is over. The 31-year-old Korean computer scientist suspected of being behind the biggest crash ever in the cryptocurrency world has been arrested in Montenegro. He had been among the most wanted men in the world since his Terraform Labs collapsed last May, burning $42 billion. Hundreds of thousands of savers involved all over the world. A crash that translated into a bloodbath on the cryptocurrency market where in a few days almost a trillion in value was burned, starting one of the darkest periods of the digital asset market.

The arrest in Montenegro, before a flight to Dubai

The manhunt ended Wednesday morning at the Padgorica airport, from where Do Kwon wanted to embark for Dubai with a Costa Rican passport. Few photos of him, as he tries to escape the gaze of the cameras by hiding behind a black hat. Now he will have to respond to the Seoul investigators and explain what happened in the hours leading up to the crash of Terraform Labs. Not the only aspect to clarify. The other leads straight to the heart of the invention that made him one of the absolute protagonists of the world of cryptocurrencies. Technical name: Algorithmic stable cryptocurrencies. One of the darkest, most dizzying and most sophisticated financial engineering solutions ever created. Capable of attracting billions and screwing them into a vortex that suddenly burned them. Today there are eight charges against Do Kwon, including the United States, South Korea and Montenegro. Fraud, scam, forgery of documents. Him accusations that, however, seem only to touch what he was able to create.

The birth of Terraform Labs

Year 2016. The cryptocurrency market is experiencing its first boom which will bring Bitcoin to be worth from 200 to 20,000 dollars. Do Kwon is 25 years old. He recently graduated from Stanford in the USA. He sells, with little success, computer products. Crypto appears to him to be a much more attractive business. He is approaching the first stablecoin projects, cryptocurrencies that do not fluctuate in value because they are anchored to currencies such as the dollar by a “one to one” relationship. Why are they created? Because they allow you to move more quickly in the world of crypto asset speculation, without having to switch between traditional currencies during trading. A boon for traders and small investors looking for easy money, the real engine that moves the crypto price surges.

Do Kwon senses the potential of this market. He works on the first projects. Then he has an intuition: to create another form of stablecoin. Instead of anchoring it to dollar reserves, he could create one that found its balance in the relationship between two related stablecoins. One tied to the dollar. The other to a cryptocurrency. He calls the first Earth. The second moon. An algorithm would have always maintained an equal relationship between the two extremes, which would have moved in perfect orbits. A bit like the Moon in relation to the Earth. Algorithmic stablecoins. Objective: to make exchanges even faster and more efficient, and to create a margin from the value that Luna would acquire over time.

The growth of a project that has reached a value of 5 billion

The mechanism is dizzying. But it creates excitement among cryptocurrency fans. Do Kwon becomes one of the absolute protagonists of the crypto market. A demi-god. He capable of giving ideas, vision and concreteness to the faith-based approach of cryptocurrency fans. Earth-Moon for many becomes the perfect ecosystem. Terraform Labs raises hundreds of millions of dollars in investments from venture capital fund parties and other crypto trading platforms. In November 2021 it touches the valuation of 5 billion dollars.

The crash of 2022, then the escape

Then something breaks. May 8, 2022. The financial markets are starting to deal with inflation, interest rates and international tensions. The markets collapse. The Nasdaq crashes. Bitcoin crashes and has immediate impact on Earth-Moon. What exactly happened is still unclear. But the algorithm that regulates the relationship between the two extremes of the swing breaks down. The huge mass of withdrawals of those days blew up the balance established up to then by the machines. In a few hours it becomes clear that it will be a bloodbath. Do Kwon first tries to defend himself on Twitter. He promises that every penny will be paid back. Then a last message: “I’m sorry for all the harm my creation has caused”. Then he loses track of himself. The judges are looking for him for the bankruptcy of Terraform Labs. Interpol is after him. Singapore. Dubai. Serbia. Then the end, after ten months, in the Montenegrin capital.