Our weekly news from East Asia organizes the most important industry developments.
Chinese billionaire arrested in US for $1B financial fraud
According to an announcement published by the US Department of Justice (DOJ) on March 15, Chinese Billonaire Ho Wan Kwok (alias Miles Guo and more commonly known as Guo Wengui), has been arrested on a total of twelve charges, including wire fraud, securities fraud, bank fraud , and money laundering. Among many items, the DOJ alleged that Kwok/Guo “fraudulently obtained” more than $262 million from victims through the Himalayan Exchange cryptocurrency platform.
The Himalayan Exchange includes assets such as Himalayan Dollars (HDO), a considered stablecoin, and Himalayan Coins (HCN), a considered trading coin. According to the indictment, Guo told investors that HCN was backed by 20% gold and that he would compensate investors for “100%” of trading losses.
“If someone loses money, I can say that I will compensate you 100%. I give you 100%. Whoever loses money, I will cover it.”
Guo launched HCN and HDO coins in an initial coin offering (ICO) around November 1, 2021, when HCN was trading at around $0.10 each. Two weeks later, the Himalaya Exchange website stated that each HCN was worth 27 HDO, or $27, and had a total market cap of $27 billion.
Between September 2022 and March 2023, US authorities subsequently seized $634 million in the proceeds of Guo’s alleged fraud, including $278 million from bank accounts held by Himalaya Exchange and related entities. At the time of publication, Himalaya Exchange’s social accounts and website appear to be still online and active.
In another incident, Guo allegedly sold $452 million worth of common stock in an initial public offering (IPO) to more than 5,500 investors for GTV Media Group shares. The DOJ confirmed that in both cases, the entrepreneur misappropriated a large portion of investor funds and will seek forfeiture for the seized assets. Back in 2021, the US Securities and Exchange Commission took enforcement action against three companies that had unregistered ICOs and IPOs. At that time, the company agreed to pay $486.6 million in fines, $17.6 million in prejudgment interest, and a combined $35 million in civil penalties.
The billionaire is reportedly a close friend of former White House chief strategist Steve Bannon. Rising to fame through real-estate and construction in China, he fled the country in 2014 after receiving information about his impending arrest on charges of bribery, kidnapping, money laundering, fraud and rape. He began living in self-imposed exile in the US, sought asylum, and was a vocal critic of the Chinese Communist Party (CCP). However, some of the documents Guo used to criticize the CCP have been suspected of being fake. An Interpol red notice for the arrest has reportedly been active since 2017.
To defeat communism buy my coin
For Chinese billionaires, “reducing CCP” is a worthy goal of crypto promotion. In 2020, Guo founded the political movement “New Federal State of China” (NFSC) with the aim of overthrowing the CCP together with the non-profit organization Himalaya Supervisory, which is related to the cryptocurrency exchange.
Apart from educating his audience about the evils of communism, Guo also used the official brand of NFSC and Himalaya Supervisory to encourage his followers about the perceived benefits of HDO and HCN coins:
“Himalayan Coin will crush Bitcoin in no time if certain countries grant Himalaya Reserve or Himalaya Coin a visual banking license and virtual banking exchange.”
In another “lecture” dated shortly before the arrest, Guo explained to the audience that “the US and Communist China are fighting for power to establish a blockchain standard that will regulate all digital currencies,” but the most important thing is that the NFSC will be the one to emerge victorious in the struggle:
“Ultimately, people will have to use digital US dollars, and then, the US will be responsible for setting the future blockchain standards. However, the US has encountered a rival called the CCP. So when these two tigers fight, we [the NFSC] will be champions.”
Guo claims to have invested $100 million into the NFSC movement. However, the source of the funds is reportedly under investigation by the US Federal Bureau of Investigation. The Chinese billionaire was arrested on March 15 in New York and soon after, his luxury apartment in Manhattan caught fire. It is unclear if the two incidents are related.
Do Kwon officially lost during the highly publicized LUNC bet
In March 2022, CEO and co-founder of South Korea Terraform Labs Do Kwon received two bets from cryptocurrency traders GiganticRebirth (GCR) and Algod, totaling $11 million, with a bet that the price of Terra Luna (LUNC) would not be lower than $92.4 and $88 . each token, respectively, by March 13, 2023. Bets resulted in a $22 million prize money pool, held in escrow by Cobie’s private blockchain.
After the price of LUNC drops to almost zero in May 2022 as part of the $40 billion Terra Luna ecosystem, Cobie pays off the bet, buying LUNC as a hedge if the price recovers. However, Cobie’s fence was reportedly lost when cryptocurrency exchange FTX filed for bankruptcy in November 2022, freezing more than one million creditor assets and nine million user deposits. The current status of the fund is still unclear.
The US Securities and Exchange Commission began charging Terraform Labs and Kwon with “defrauding investors in a crypto scheme,” while the FBI and the Department of Justice began investigating the company’s collapse in March 2023.
If he lost almost all of his net worth in the implosion of LUNC and the extra $11 million from the bet was not enough, Kwon was reportedly on the run from the authorities in Serbia, a country with no extradition agreement with South Korea. Interpol issued a red notice arrest warrant for Kwon in September 2022 at the request of South Korean prosecutors, accusing him of fraud in connection with the Terra Luna crash. South Korean prosecutors have also been in Serbia to look for blockchain executives since February 2023.
Zhu Su’s spiritual journey through bankruptcy and Islam
Compared to the precarious situation faced by Do Kwon, Zhu Su, and Kyle Davies, the two founders of now-bankrupt Singaporean hedge fund Three Arrows Capital (3AC), things look pretty good. Despite fleeing from creditors with a total of more than $10 billion in claims, the two men have yet to face criminal charges for their role in the bankruptcy of 3AC that resulted in themselves and major partners in the centralized financial space such as Voyager Digital and Genesis. Global.
The liquidator claimed that Davies and Su were somewhere in Indonesia or the United Arab Emirates, where foreign court orders are reportedly difficult to enforce. Currently, Davies actively shares his views on trending financial stories via Twitter, while occasionally trying to get sympathy for the “frustration” of 3AC’s current bankruptcy proceedings.
Su is also active on Twitter, except that his interests have turned from the material world to the realm of philosophy, religion and, more sophisticated introspection. On March 15, Su mentioned Prophet Muhammad (PBUH), the founder of Islam, as follows:
“Rasulullah SAW said, “There is no patience if there is no wrongdoer, and there is no wisdom if there is no experience”.
Su previously made a similar reference to Islam on November 27, 2022, writing that “Allah does not fill souls except those within his capacity.”
Interestingly, cryptocurrency and blockchain are currently the subject of intense controversy in Islamic circles. Some Islamic scholars label all cryptocurrencies and blockchain-related activities as haram (forbidden), making them prohibited under all circumstances. Others, such as the crown prince of Dubai Sheikh Hamdan bin Mohammed bin Rashid Al Maktoum, support the technology and they want to incentivize at least 5,000 blockchain and metaverse companies to move to the United Arab Emirates by 2027.
