New York Times: How a crypto fugitive shook up politics in a troubled Balkan state

Just days before the elections in Montenegro, a letter written by Do Kwon, the fugitive and founder of the digital currency Luna, claimed that "friends" from the crypto industry provided campaign funding to one of the leading candidates

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Do Kwon, Photo: Boris Pejović
Do Kwon, Photo: Boris Pejović
Disclaimer: The translations are mostly done through AI translator and might not be 100% accurate.

Already known as a cause of market chaos, the crypto industry has now caused political chaos, upending a critical parliamentary election in Montenegro, a troubled Balkan state struggling to shake off the influence of organized crime and Russia.

Just days before the June 11 vote, the political landscape in Montenegro was thrown into disarray by the intervention of Do Kwon, the fugitive head of a failed crypto business whose collapse last year contributed to a $2 trillion drop in value across the industry.

In a handwritten letter sent to the authorities from the Montenegrin prison where he has been held since March, Kwon claims that he had a "very successful investment relationship" with the leader of the Europe Now Movement, the favorite in the elections, and that "friends from the crypto industry" secured the financing. campaigns in exchange for promises of a "friendly crypto policy".

It was expected that Europe will now receive a decisive mandate from the citizens in the elections for the new parliament. Their campaign combined populist promises to increase wages and pensions with promises that the country would take a clear path towards membership in the European Union, cleaning up the crime and corruption that flourished during the long-term rule of former Montenegrin leader Milo Đukanović.

The party still won the most votes, but far below expectations, finishing just ahead of a rival pro-Russia group that may now hinder efforts to form a stable pro-Western coalition government. Only 56 percent of the electorate voted, which is the lowest recorded turnout in elections.

Kwon's intervention "destroyed us", said the current leader of Europe, Milojko Spajic, who was the target of a letter from the disgraced crypto entrepreneur, which was seen by the New York Times and whose existence was leaked to the local media before the vote.

Spajic
Spajicphoto: Boris Pejović

Milojko Spajić, leader of the Evrpa Sad Movement, believes that Kvon's letter harmed his party's chances in the national elections. In the interview, Spajić dismissed Kwon's accusations as "false" and part of a "dirty political game" that harms his party. Kwon's lawyers did not dispute the authenticity of the letter.

As the founder of Terraform Labs, the Stanford-educated Kwon was once hailed as a pioneer in the crypto industry, responsible for the creation of the popular digital currency Luna, which he claimed was meant to change the world, and whose fans are proud to called "lunatics".

The spectacular collapse of Luna and TerraUSD, another cryptocurrency created by Kwon, in May 2022 turned him from a hero of innovation to a fugitive wanted by both the United States and South Korea on fraud charges.

After that, he disappeared, and his whereabouts were a secret until March, when Montenegrin authorities announced that he had been arrested while trying to board a private plane to Dubai in Podgorica, using a falsified Costa Rican passport.

He insisted the passport was authentic, but a court in Podgorica on Monday found Kwon and his South Korean crypto business partner guilty of using forged passports and sentenced them to four months in prison.

It is still unclear what Kwon was doing in Montenegro before his arrest and when he arrived. His activities after his arrest are even murkier.

Although his electronic devices were confiscated, the jailed Kwon allegedly somehow transferred $29 million from a crypto wallet linked to him, South Korean prosecutors said, confirming a Bloomberg News report.

Dritan Abazović, acting Prime Minister of Montenegro and Spajić's political rival, said that there is no record of Kwon entering the country or registering in hotels, so the authorities want to determine if he had local associates.

"I'm not accusing Spajić of anything," Abazović said in an interview, "but we have to see what happened in the crypto community here and whether she was involved in money laundering and campaign financing."

Abazovic
Abazovicphoto: Boris Pejović

Montenegro, which for many years was the center of cigarette smuggling and cocaine trade during more than three decades of Đukanović's rule, has in the last few years presented itself as the center of the crypto industry.

Spajić, who was the Minister of Finance at the time, predicted in 2022 that the cryptocurrency industry could make up almost a third of Montenegro's GDP within three years.

For Spajić and other proponents of blockchain technology, cryptocurrencies were the next Big Thing, according to Željko Ivanović, head of the independent media group Vijesti.

"It was seen as an easy way out - a new secret recipe to replace the smuggling that was Djukanovic's recipe for decades," Ivanovic said. "But the miracle cure turned into a disaster."

Last year, Montenegro granted citizenship to Vitalik Buterin, the Russian-Canadian founder of Ethereum, the most popular cryptocurrency platform, in order to attract talent.

Buterin stated that he "never knowingly met or talked to Do Kwon, including through third parties," and that he "never gave money to Europe now."

Abazović, Buterin and Spajić
Abazović, Buterin and Spajićphoto: Facebook

In May, he organized a blockchain conference in Montenegro attended by Spajić and Acting Prime Minister Abazović, in addition to high-tech enthusiasts.

The founder of Ethereum, Vitalik Buterin, received Montenegrin citizenship as part of efforts to develop the crypto industry in the country. Spajić posted a photo on Twitter with Buterin, holding his new Montenegrin passport, and the message: "We will bring the best people in the world to Montenegro."

However, with its hospitable approach, Montenegro also attracted George Cottrell, a British financier convicted of wire fraud in the United States of America, who later moved to Montenegro under the new name George Co.

Cottrell, officials said, left Montenegro and traveled to London on June 9, shortly after police raided Salon Privé, a bar in the seaside resort of Tivat that authorities believe is linked to him. The bar has gambling machines and a "cryptomat", which is used to buy and trade digital currencies.

Ratko Pantović, Cottrell's lawyer, who also represents the bar, said that his British client has nothing to do with the casino or the crypto industry.

Acting Minister of Internal Affairs of Montenegro, Filip Adžić, who oversaw the police raid in Tivat, stated that Cottrell was not accused of any crime, but that his possible participation in illegal crypto activities was being investigated.

Adžić said that Montenegro should be careful with business that, due to enabling anonymous transactions, "helps organized crime, terrorist financing and money laundering".

Adzic
Adzicphoto: Boris Pejović

U.S. and South Korean prosecutors want to examine three laptops and five cellphones seized by authorities during Kwon's arrest for clues about what happened to billions of dollars invested in his now largely worthless digital currency.

However, for the Montenegrin authorities, what is more important is what these devices may contain in relation to campaign financing and the relationship between Kvon and Spajić.

At a court hearing on June 16, Kwon's lawyers stated that their client denies financing Spajic's election campaign. However, Kwon's letter states that "other friends in the crypto industry" contributed to the campaign.

"I have evidence of those communications and contributions," Kwon said in his letter.

Spajic initially denied any relationship with Kwon, but later admitted that he had known him since 2018 and had invested money with him on behalf of an investment fund he claims he operated in Singapore - "he tricked us," Spajic said. - and that he met him again at the end of last year in Belgrade.

This happened after South Korean prosecutors announced in September that the global police organization Interpol had issued a "red warrant" for Kwon's arrest. Spajic said he met with Kwon only because "we wanted our money back."

Kwon made different statements, claiming in his letter that Spajic wanted to discuss campaign finance. He said that Spajić, who was then planning to run for president, explained to him that he was "collecting several million dollars for the upcoming campaign" and "asked me to contribute". Kwon said he refused.

Spajic said it was "absolutely false" that they discussed campaign financing.

Milan Knežević, the leader of the pro-Russian bloc that came second in the June 11 election, said he was happy with his group's unexpectedly strong result, achieved in part because of the disruption caused by Kwon, but he still regretted that Montenegro had opened its doors to crypto experts. .

Knezevic
Knezevicphoto: Boris Pejović

It would have been better, said Knežević, sitting in an office decorated with pictures of Russian President Vladimir Putin, if we had welcomed fighters from the Islamic State militant group.

"With ISIS, at least you know what you are facing," Knežević said. "But we have no idea what these people from the crypto industry are actually doing."

(New York Times)

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