Already notorious as an agent of market chaos, the crypto industry has also unleashed political havoc, leading to 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, Montenegro’s political landscape was thrown into disarray by the intervention of Do Kwon, the fugitive head of a failed crypto business whose collapse last year contributed to to a $2 trillion industry-wide drop.
In a handwritten letter sent to the authorities from the Montenegrin prison where he has been held since March, Mr. Kwon claimed he had “a very successful investment relationship” with the leader of the Europe Now Movement, the election leader, and that “friends in the crypto industry” had provided campaign funding 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 combined populist promises to raise salaries and pensions with promises to put the country on a clear path to joining the European Union by cleaning up the crime and corruption that flourished under Montenegro’s former leader Milo Djukanovic.
The party still won more votes but fell well short of expectations, finishing just ahead of a rival group that supports Russia and may now derail 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, a target of the disgraced crypto entrepreneur’s letter, which was reviewed by The New York Times and the existence of the which was leaked to the local media before the vote.
In an interview, Mr. Spajic denounced the accusations of Mr. Kwon as “super fake” and part of a “dirty political game” to damage his party’s chances. The lawyers of Mr. Kwon have not disputed the authenticity of the letter.
As the founder of Terraform Labs, Mr. Stanford-educated Kwon was once hailed as a pioneer in 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.” .”
The spectacular collapse in May 2022 of moon and a second cryptocurrency designed by Mr. Kwon, Earth USD, it transformed 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, his whereabouts a mystery until Montenegrin authorities announced in March that he had been detained while trying to board a private plane bound for Dubai in Podgorica, the capital, on a passport – fake rich
He had insisted it was genuine, but on Monday a court in Podgorica found Mr Kwon and a South Korean crypto-business partner guilty of using forged travel documents and sentenced them to four months in prison.
It is still unclear what Mr. Kwon in Montenegro before his arrest and when he arrived. His activities since his arrest are murkier.
Despite stripping himself 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, acting Prime Minister of Montenegro and political rival of Mr. Spajic, said there was no evidence that Mr. Kwon entered the country or checked into hotels, so authorities want to establish whether he had local collaborators.
“I’m not accusing Spajic of anything,” said Mr. Abazovic in an interview, “but we need to see what was happening in the crypto community here and whether it was involved in money laundering and campaign financing.”
Long a center for cigarette smuggling and cocaine trafficking during more than three decades of Mr. Djukanovic, 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 other blockchain believers, cryptography was the next big thing, according to Zeljko Ivanovic, the head of independent media group Vijesti.
“It was seen as an easy way out – a new secret recipe to replace the smuggling that had been Djukanovic’s recipe for decades,” Ivanovic said. “But the miracle cure turned out to be a disaster.”
Eager to attract talent, Montenegro last year granted citizenship to Vitalik Buterin, a Russian-Canadian and founder of Ethereum, the most popular cryptocurrency platform.
Mr Buterin said he “never met or spoke to Do Kwon, even through third parties”, and “never gave money to Europe Now”.
Mr Spajic posted a photo on Twitter of himself with Mr. Buterin, showing his new Montenegrin passport, and the message: “We will bring the best people in the world to Montenegro.”
Montenegro’s welcoming ways, however, also attracted George Cottrell, a British financier condemned by wire fraud in the United States, which later moved to Montenegro under a new name, George Co.
Mr. Cottrell, officials said, left Montenegro for London on June 9, shortly after police raided Salon Privé, a bar in the coastal resort town of Tivat that law enforcement officials believe is linked to him. It has gambling machines and a “cryptomat”, used to buy and trade digital currencies.
Ratko Pantovic, the lawyer of Mr. Cottrell, who is also represented by the lawyer, 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 being investigated for involvement in possible crypto-illegal activities.
Montenegro, Adzic said, had to be careful with 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 cellphones seized by authorities from Mr. Kwon at the time of his arrest for clues about what happened to billions of dollars invested in his digital currencies, which are now worthless.
However, more interesting for the Montenegrin authorities is what they may contain in relation to the campaign financing and the relationship of Mr. Kwon with Mr. Spajic.
In a court hearing on June 16, lawyers for Mr. Kwon said their client denied financing Mr. Spajic. The letter of Mr. Kwon, however, said that “other friends in the crypto industry” contributed.
“I have evidence of these communications and contributions,” said Mr. Kwon 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 worked for in Singapore: “He tricked us,” Mr. Kwon said. Spajic. he said, and met him again late last year in Belgrade.
That followed an announcement by South Korean prosecutors in September that Interpol, the world police organization, had issued a “red notice” for Mr. Kwon. Mr. Spajic said he had met Mr. Kwon just because “we wanted our money.”
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 planning to run for president at the time, explained that he was “raising a few million dollars for the next campaign” and “asked me to make a contribution.” Mr. Kwon said he refused.
Mr. Spajic said it was “absolutely false” that they were talking about campaign finance.
Milan Knezevic, the leader of the pro-Russian bloc that came second in the election, said he was pleased with his group’s unexpectedly strong result, achieved in part because of the disruption caused by Mr. Kwon, but still lamented that Montenegro has opened its arms. to cryptography experts.
It would have been better, said Mr. Knezevic, sitting in an office decorated with pictures of Russian 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 in Seoul.
