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SEC Charges Terraform and CEO Do Kwon with Defrauding Investors InCrypto Schemes (sec.gov)
211 points by npalli on Feb 16, 2023 | hide | past | favorite | 94 comments



Fun fact: South Korean government officials believe Do Kwon is currently hiding in Serbia.

https://www.bbc.com/news/business-63940181#:~:text=South%20K....


I've spent a lot of time in Serbia. Put it like this: If they put a bounty on his capture, Do Kwon isn't going to last five minutes. (I can tell you right now that he's 80% likely to be holed up in a condo in one of the new Belgrade Waterfront developments. He'd stick out like a sore thumb anywhere else.)

An interesting fact about Serbia is that all visiting foreigners are required to register at their neighborhood police station & provide the cops with an address, passport details, and contact details. Usually the hotels will do this for you automatically. Basically, though, what this means for Do Kwon is that he already has a searchable file.

Hey... Wait... do these new SEC charges mean that there is now a bounty? Maybe I ought to make some calls.


> all visiting foreigners are required to register at their neighborhood police station & provide the cops with an address, passport details, and contact details

Yeah, because a criminal mastermind is going to be bothered with a detail like that. Most tourist don't do this bureaucratic step.


We're talking about a white collar conman, not Scarface, here.


Also a Korean in a rather ethnically homogeneous European country.


China has been cultivating closer ties with Serbia in order to establish a presence in Europe. Chinese people no longer attract any attention in Belgrade.


There's a Chinese community in Belgrade, but it's fairly small, very blue-collar, and their residences aren't concentrated in any one neighborhood or location. (There is a "Chinese mall" where they hang out. This is a run-down place, nearly half of which was recently destroyed by fire, where you can buy cheap electronics and Chinese-import foods.) These Chinese immigrants are rarely able to speak or understand English and mostly speak Mandarin and Serbian.

They have nothing in common with Do Kwon, and it's unlikely that he'd be able to hide among them.


> Chinese people no longer attract any attention in Belgrade

Not helpful if you’re the one Korean!


Still if he's tracked down to a neighbourhood or a village, anyone will be able to say where the Asian guy lives.


They are required to do so, but nobody ever does. I've been there for work several times over the last years and had checked up on that before going and people there told me not to bother and that the police really didn't care and might not even do the registration.


If you stay at a hotel, they usually take care of it for you automatically. That is, the hotel will send your relevant details to the nearest police office, in a batch with everybody else who checked in that day. You typically won't be aware of it.

It's not a universal practice, though. But I'd bet that somebody like Do Kwon, like most people, stayed at a hotel for at least a few nights after landing in Belgrade.


Ah good point, yes, you are probably right. I did not stay in hotels though. But your point is well taken, the same used to be the case in France for hotels and even campings.


It was my understanding that every country requires this, even the US. More recently I've also noticed it on Airbnb rentals.


https://www.srbija-nekretnine.org/en/apartments/for-sale/bel...

Some nice places down there! Didn't realize Belgrade was so chic.


Those prices are shockingly expensive to me for such small, outdated apartments in a less-desirable country like Serbia!


Real estate prices are way up in Belgrade recently due to refugees coming from Ukraine and Russia. Probably some money laundering as well. The listings linked above are for the new Belgrade Waterfront development, which is a fairly desirable location.


Would a refugee from Ukraine go to Serbia? My impression is that both ultra nationalism and support for Putin’s invasion are common in Serbia.


Depending on which side of the divide they were from, yes, sure. Also lots of ethnic Russians that found their environment suddenly a lot less friendly from the Baltics.


Most ethnic Russians I know from Ukraine don’t support the invasion.

One had weird men show up to her neighbourhood in Donetsk for years, that didn’t speak Russian like anyone else from Donetsk, and violently confront locals and then the police. This is the “violence against ethnic Russians” that Putin made up.


It has to be so frustrating for the many ethnic Russians in Ukraine to see their lives upended like this and to be negatively associated with something that they had absolutely no say in. I recall a bit of video footage from early on in the war where a native Russian from the South East of Ukraine told a bunch of Russian soldiers to go home and leave the people there in peace. They were getting along quite well until Russia stirred the pot. Some of them now even refuse to speak Russian.


Belgrade is (was?) a world-class city. At least top 100


I guess it's technically correct that riverfront is waterfront...


The foreigner address registration thing isn't actually enforced. No one bothers to do it anymore, at least not if they're staying at a private residence.


The bounty has to be higher than the bribe Do Kwon can pay


It’s Serbia. They will take the bribe, and then still capture him to take the bounty. Double prize.


The bribe would involve him getting the f out of course


The bribe would get him into a truck. Will the truck go to safety, or to higher profits? Have you never watched a movie?


I assume he isn’t that stupid but when things close in fast he probably have no choice or time to arrange a fool proof exchange


He can't bribe thousands of people, can he?


> he already has a searchable file

Wouldn’t one use an alias?


Not at all. He is making ZERO EFFORT TO HIDE!


US bounties are not reliable. The government pays of it feels like it.

Bail bonds bounties are a different thing, but I don’t think federal courts use them


Well with the amount of money he absconded, he can probably afford a passport of someone that looks relatively like him.


Absconded means to leave in a secret hurry, not to take something. If you put 'money he absconded with' that would make sense.


Take note, crypto people. The days of instructing people about how the code is the contract, centralized exchanges are DeFi, Web 3.0 fixes all the issues, etc. - those days appear to be numbered.


There was nothing DeFi about Terra. They coopted the term. The chain was completely centralized and controlled by them.


The problem is that most of the DeFi is either actually centralized in some way and are lying to the clients, or they are truly decentralized and therefore any bug in the programming will take it down immediately, see dozens of "hacks" of DeFi bridges just last year alone, each one in tens or hundreds of millions in equivalent.


> those days appear to be numbered

There's a block chain for that!


Hey, have you heard about BarnCoin? It's the newest cryptocurrency on the block, and it's a game-changer. The beauty of BarnCoin lies in its ability to do anything as long as the blockchain is co-resident with the hashgraph. Any sensible DeFi runs the co-residency requirements over the actions in this way, anyway.

For those who don't know, a hashgraph is a distributed ledger technology that is known for its speed and security. When combined with a blockchain, it creates an incredibly powerful platform that can handle virtually any transaction. BarnCoin is the first cryptocurrency to take advantage of this technology, and the results are incredible.

Because the blockchain is co-resident with the hashgraph, BarnCoin can process transactions faster and more efficiently than any other cryptocurrency on the market. It's also incredibly secure, which means you don't have to worry about your transactions being hacked or tampered with.

But it's not just speed and security that makes BarnCoin stand out. The possibilities for what can be done with this cryptocurrency are endless. From simple transactions like buying and selling goods and services, to more complex applications like voting systems and smart contracts, BarnCoin can handle it all.

So, if you're looking for a cryptocurrency that can do anything, look no further than BarnCoin. With its unique combination of blockchain and hashgraph technology, it's the future of digital transactions.


That will teach you to do infrastructure as code!


I'm guessing this is a joke, but "Terraform Labs" is being charged, not "Terraform", a product made by Hashicorp.


Either way, I used to work on “Terraform” and had a heart in mouth moment here thinking I was about to get dragged into court for something. Phew!


what about trademark infringement?


Trademarks are scoped by product/service category and geographical region.

> An example of the first type is that although Maytag owns the trademark "Whisper Quiet" for its dishwashers, makers of other products may describe their goods as being "whisper quiet" so long as these products do not fall under the same category of goods the trademark is protected under.

https://en.wikipedia.org/wiki/Trademark#Limits_and_defenses_...


Terraform is more infrastructure as config file. Think CDK, Bicep or Pulumi for actual code.


Are configs not code? I’ve had tons of config files in code bases. Where would you draw the line?


For me, config files are variable assignments at runtime that don't require recompiling. If they contain logic/code they become scripts.


What do you define as "code?" Terraform has conditionals, loops, etc. Modules act a little like function calls, since they have inputs, outputs, etc.


What about languages that are interpreted?


Lol. Came here and to crack the same joke.


I was expecting this to have a "2022" year designation, but no, this was Feb 16th, 2023 (today).

https://chaindebrief.com/wp-content/uploads/2023/02/sec.png

For context: Kraken has been around since 2011 and therefore weathered many a cryptocurrency winter and is a beacon of trust in the storm of fraud and rug-pulls and other outright illegal and immoral behaviour seemingly inherent to the cryptocurrency industry.


The SEC is awfully slow. They should have had enough to arrest him a long time ago and now he's probably living on billions in Russia or something


> they should have had enough to arrest him a long time ago

The SEC is a civil agency. It can't arrest anybody.


They apply to a court to get a civil penalty. You can be arrested by a court for flouting a court order like “don’t leave the country pal”, once it has established jurisdiction through the service process. Detaining people to enforce court orders is one of the core powers of the judiciary. Bringing an action and serving him while he was inside the jurisdiction of the court would have been good.


> apply to a court to get a civil penalty

“Apply” as in win a trial. That’s not quick. And it requires a track record of Kwon flouting the agency.


You apply to have the case heard. The judge says ok, you served him, I will exercise my jurisdiction and hear this, Mr Kwon, show up in court next Tuesday (or else). It should not result in detention in a normal case. But it can.


Was he ever in the US? I thought he fled from South Korea.


Yes and yes. He is fleeing actual prosecution on criminal charges by the South Koreans.

He has even been served a subpoena by the SEC while in the US before. He was forced to sit down and respond to questions. He sued them about it because the SEC is supposedly not meant to serve you in public, but I suspect he was a pretty tricky guy to serve at all. Early enforcement would have been good, and it maybe would have required a bit of force given what we know about his flight risk.

https://news.bitcoin.com/sec-files-action-against-terraform-...


My guess would be they’re not slow, they probably just waited to release this info publicly until it was prudent or didn’t have the potential to damage their case. Since he’s in hiding now it seems like that’s precisely why they’re going public, to smoke them out.


“The wheels of justice turn slowly, but grind exceedingly fine.”


Serbia as of December, it seems[1]!

[1]: https://www.bbc.com/news/business-63940181


They also seem to be going after Terraform Labs, which is an active legal entity in South Korea (Edit: Actually appears to be Singapore now). Impeding their current work on (I kid you not!) Terra 2.0 may still prevent a future ponzi meltdown.


The joke is that the SEC steps in only after the money is lost. Or their actions cause a stock to tank and everyone loses their money anyway. When the SEC halts trading on a penny stock, when it resumes trading is instantly worthless or close to it, so again people lose money. Basically, the SEC is useless at preventing people from losing money.

Scams will always exist and scammers will always find new ways to scam people, no matter how many warnings there are. Advance fee scammers find are now doing crypto giveaways in which a victim sends 'x' crypto in the promise of '2x 'more. Crypto is the latest iteration of penny stock pump and dump scams.


The SEC kind of steps in as soon as they have reason to investigate, they even have a rather profitable whistleblower program (profitable for the whistleblower who gets between 10 and 30% of every fine above 1 million). The SEC is a civil agency charged with protecting "investors", not defrauded customers. The latter is, to the best of my knowledge, referred to prosecutors by the SEC (I think the southern district of New York).


The SEC can only bring civil charges. Their enforcement actions are also procyclical: They collect the bodies.



Can courts in random countries charge you even if you are not a citizen or ever set foot there? Like can a random judge in Morocco charge you with a crime and then you visit Egypt and you end up arrested and extradited to Morocco? Not exactly what is going on here but there are other cases where this is happening (Assange for example)


Fix the heading!

InCrypto s/b In Crypto


Too bad the SEC cannot bring criminal charges. Not sure why criminal charges have not been filed yet


South Korea issued an arrest warrant last year


Are you sure they haven’t? There are commonly parallel cases not reported by the same outlet, you’d have to check the DOJ‘s website


> sure they haven’t?

No, but if they did, it was illegal and unenforceable and didn't go anywhere.

> commonly parallel cases not reported by the same outlet, you’d have to check the DOJ‘s website

The SEC can make criminal referrals to the DoJ.


This is https://www.terra.money/ which I don’t think has any affiliation with Hashicorp’s terraform


Thank you, I was deeply confused for a moment.

I almost had to click through to the article!


definitely no affiliation.


I was just in the middle of learning our own terraform provider with great enjoyment aka "under the loving strokes of a Dwarf's axe". Looking at my monitor, blurred with tears, I asked for help and a very good colleague saved me. Work done, beers owed, I checked HN, saw this and texted him this link with "speaking of terraform". Chuckles all around!


[flagged]


distributed parasitic unregulated and lawless faux paradisal casino of fictional worthless tokens being recklessly circulated towards victims after being made out of thin air.


wrong: Not made out of thin air, but made by creating massive pollution.


Sooo... Thick air?


So... crypto is stocks?


No.

stocks have fundamental value that is tied to a public company's performance. There is no fundamental or intrinsic value in crypto.


Wait a second, I got a _crazy_ idea. Bear with me, you might be onto something...

Is it even remotely possible that the same thing might be happening with crypto, and that Bitcoin/Ethereum/etc value is directly tied to the fundamental/intrinsic value of being able to use the relative decentralized network, therefore reflecting their performance? If no one was using Ethereum because it's worthless it would be valued at zero... but it's not at zero despite being worthless because it's being used... so maybe it's not worthless after all, and has fundamental/intrinsic value? Mindblowing, I know...


Unless you accept the difficulty of the math involved and the electricity spent during solving the mining as the backing value.


Nope.

There is no value to wasting electricity just to solve meaningless mining puzzles all to build a distributed ponzi scheme.


the company has a value from it's stocks; it's stocks have a value from the company... which means it's just as scammy as was said about crypto.

either way, they both have value; it's just about the market.


distributed leaderless Ponzi scheme.


sector where poorly run companies are masqueraded as the sector itself.


The 90% give the 10% a bad name


closer to 99%

a lot of people don't realize how the same skew is present in sectors they respect as well. crypto sector's transparency just shows you every single unincorporated idea monetized for an unknown person's benefit, right alongside massive mismanaged corporations.

the same thing is going on forever everywhere.

its more analogous to being able to see every single phishing attack all at once and considering the organization behind it as the same level of importance as Google, suggesting they equally represent the tech sector.

or looking at every active and defunct LLC registered in every single jurisdiction on the planet and using that as a reason to say it is representative of the economy. just very unrelated things.


The scams and crime are the sector.


This is just so stupid, EVERYBODY knows crypto is a giant scam. Why would they prosecute people for grifting a pigeon? Absolute waste of resources.


Good.

But this isn't enough. need the SEC and the DoJ to go after and completely shutdown all crypto exchanges and charge the founders involved or abetting a gigantic quasi-ponzi scheme out of selling these fictitious tokens.

I think the govt needs to issue a wanted list for crypto, listing the founders and VCs who invested trying to make a giant profit out of it.


> the SEC and the DoJ to go after and completely shutdown all crypto exchanges and charge the founders involved or abetting a gigantic quasi-ponzi scheme

Could you clarify? Are you implying all crypto is illegal? I don't deal with crypto myself, but I don't recall hearing any issues with companies such as coinbase, etc.


Yes they are, and they should be shutdown.




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