The economy is still generating jobs. A year ago, a lot of economists and Federal Reserve policy makers thought that it would be shedding them by now.

On Friday, the Labor Department reported that the U.S. added a seasonally 150,000 jobs in October from the previous month, versus September’s gain of 297,000 jobs. Some of that step down was due to auto workers’ strikes, which have since been resolved but temporarily caused workers to not draw pay checks.

Average hourly earnings rose 0.2% from a month earlier, putting them 4.1% higher than a year earlier. That was the smallest year-over-year gain since June 2021, though unlike then wages are now outpacing inflation.

One takeaway is that the job market is moderating, but not buckling—a message reinforced by a variety of other data, including low levels of weekly unemployment claims and layoffs. Another is that the Federal Reserve is probably through with tightening: Futures markets on Friday morning indicated that the chance of the central bank raising its target range on overnight rates at its December meeting was below 10%. The yield on the 10-year Treasury note, which briefly hit 5% less than two weeks ago, continued to retreat Friday, falling to 4.53% midmorning.

This wasn’t the sort of job market the Fed expected. When policy makers offered projections last December, they forecast that the unemployment rate would average 4.6% in this year’s fourth quarter, versus the 3.7% rate (since revised to 3.6%) they had seen in the November 2022 job report. That was tantamount to a recession forecast, though they didn’t put it that way, since such a large increase in the unemployment rate would count as a strong signal the U.S. is in a downturn. Friday’s report showed the October unemployment rate at 3.9%.

Economists got it wrong, too. In October of last year, forecasters polled by The Wall Street Journal estimated the unemployment rate at the end of 2023 to be at 4.7%, on average. They also put the chances of a recession within the next 12 months at 63%. By last month, they dropped the recession chance to 48%. Available data show that, as a group, economists have never forecast a recession before it has actually started. Now it looks as if the one time they did forecast one, they were either wrong or early.

It is easy to make fun of other people’s past forecasts, but considering the hurdles the economy has had to clear, it really is striking that it has done so well. A year ago there was some hope that the continued recovery in the service sector, and service-sector jobs, might help take up the slack as the goods sector adjusted to slowing demand. But there was also the concern that the service sector could run out of steam before the goods sector found its footing.

Another worry: That the excess savings that Americans had built up after the pandemic struck would run out, and that would cut into their ability to spend. But recent revisions to the available data suggest there was more money left in the tank than thought.

To these, add that inflation has cooled despite the addition of 2.4 million jobs so far this year, and gross domestic product is expanding much faster than economists expected. Plus, at least so far this year, the economy has made it through a regional bank crisis, a sharp increase in both short- and long-term borrowing costs, and the resumption of student-debt payments.

The jury is out on what happens next. The cooling in the job market could turn into a lurch lower, for example, as the full effect of the Fed’s past rate increases begins to take hold. Inflation, which is still too high, could accelerate, prompting the central bank to further tighten the screws.

But the chances of the economy avoiding a recession seem stronger now than they did even a few months ago. A lot of that would be down to luck, but it would nonetheless be something worth celebrating.

It’s called “pig butchering.”

Armies of scammers operating from lawless corners of Southeast Asia—often controlled by Chinese crime bosses—connect with people all over the world through online messages. They foster elaborate, sometimes romantic, relationships, and then coax their targets into making bogus investments. Over time, they make it appear that the investments are growing to get victims to send more money. Then, they disappear.

In recent months, China has unleashed its most aggressive effort to crack down on the proliferation of the scam mills, reaching beyond its territory and netting thousands of people in mass arrests. Its main target is a notorious stretch of its border with Myanmar controlled by narcotics traffickers and warlords.

For decades, frontier fiefdoms such as those in Myanmar have been havens for gambling and trafficking of everything from drugs to wildlife to people. Now, they are dens for pig-butchering operations.

The scammers operate out of secretive, dystopian compounds, many of which are run by Chinese fugitives who fled their country to places where it was easier to flout the law. They cheat Chinese citizens out of billions of dollars each year, as well as victims across the globe. The U.S. Treasury Department in September warned Americans about the scams.

In addition to remote hillside towns in Myanmar, these heavily guarded enclaves are also found in gambling hubs such as Cambodia’s Sihanoukville and Poipet. Cambodian authorities have carried out sporadic raids with China’s help, but the problem has persisted.

For Beijing, it is a significant source of embarrassment that Chinese criminals are at the centre of scams ensnaring people the world over, said Jason Tower, Myanmar country director for the United States Institute of Peace, an independent research organisation founded by the U.S. Congress that specialises in conflict mitigation.

China is “quite sensitive to the narratives that could potentially emerge,” he said. “These are largely Chinese crime groups which China, for years, did very little to check.”

The operations flourished during the Covid-19 pandemic when border trade stopped and internet use surged. They have also fuelled a human-trafficking crisis.

Many of the scammers entrapping people are themselves victims of human trafficking, lured abroad by fake job ads and held captive by withholding pay and passports. The United Nations human-rights office says more than 120,000 people may be forced to work as scammers in Myanmar, with another 100,000 in Cambodia.

One Malaysian trafficking victim told The Wall Street Journal that he was trained to spend weeks or months “fattening” his victims by gaining their trust before “butchering” them. His story was similar to those told by others lured into working in the scam mills. After responding to an ad on a job-recruitment website, he said he accepted an offer for a customer-service role in Cambodia. Once there, he was driven to a prison-like complex in Sihanoukville and forced to work as a scammer under threats of violence.

He said he had a handler who trained him, supplying him with a smartphone preloaded with fake social-media accounts, a “victim list” containing contact information of potential targets and various scripts designed to break the ice and build their trust. After several weeks, he said he convinced a driver who brought people and supplies to the compound to help him escape.

Regional migration researchers have documented trafficking from dozens of countries. Many victims come from Southeast Asia but some from as far as Brazil and Kenya.

“China is starting to signal that enough is enough,” said Inshik Sim, a Bangkok-based lead analyst for the U.N. Office on Drugs and Crime’s regional operations.

In August, China launched a “special joint operation” with three nearby countries and increased pressure on armed groups that oversee remote parts of Myanmar, convincing them to hunt down, round up and repatriate almost 5,000 Chinese nationals suspected of illicit activity.

Chinese authorities have zeroed in on several border areas that are part of Myanmar but are fully controlled by armed groups. These places have often drawn large investments from Chinese nationals—both legal and illicit. Many Chinese people, including notorious fugitives, live in these enclaves, where the Mandarin language and Chinese currency are commonplace.

The Wa Self-Administered Division, located along China’s southwestern border, is of particular interest to China, in part because Beijing has so much leverage over it. The area is home to the ethnic minority Wa people, who claim the territory as their ancestral home. China has been the group’s main benefactor for decades; historians say they helped the Chinese Communist Party flush out enemies who fled across the border in the 1950s and ’60s. The area later became a major economic gateway to resource-rich Myanmar.

Independent researchers say its de facto leadership, the United Wa State Army, commands a force of more than 20,000 people armed with modern Chinese equipment such as portable surface-to-air missiles and armoured vehicles.

The area has been a major source of opium for almost two centuries, and in recent decades has become a leading producer of synthetic drugs such as methamphetamine. The U.S. Treasury blacklisted the UWSA in 2003 under the Kingpin Act, and has sanctioned dozens of people and businesses linked to the group, calling it “the largest and most powerful drug trafficking organisation in Southeast Asia.”

The UWSA and other criminal networks have increasingly turned to scamming in addition to the drug trade.

According to a 2022 report in Chinese state media, authorities blocked 2.1 million fraudulent websites and some $51.6 billion in suspicious transactions over the previous year. Beijing has warned citizens to look out for dubious rebate offers, investment schemes and unsolicited contact from anyone claiming to represent a company or law enforcement.

The first sign of a serious cleanup came in early September, when China worked with the UWSA to orchestrate two days of raids that ended with more than 1,000 suspects being marched across the border into Chinese custody. Then China upped the ante, taking aim at the group’s leadership.

On Oct. 12, China’s Ministry of Public Security said arrest warrants had been issued for two senior Wa officials accused of leading scam networks: the state’s construction minister Chen Yanban and a mayor named Xiao Yankui. Four days later, the UWSA said both had been stripped of their roles. Their whereabouts is unknown.

The same day, Chinese authorities said they had transferred 2,349 “telecommunication fraud” suspects from Myanmar two days prior—the single largest such handover. China says 4,666 suspects have been repatriated from Myanmar since the crackdown began earlier this year.

“This is by any measure a major operation, which speaks to the impact on China and Chinese citizens, and the seriousness with which Beijing is approaching this,” said Richard Horsey, senior adviser on Myanmar for the International Crisis Group, a Brussels-based think tank specializing in conflict prevention.

While China may be turning up the heat on cybercriminals along its border, experts say scamming is so lucrative that the ringleaders are likely to simply look for more fertile ground—areas in weak states where law enforcement is lax.

“These groups are not going to go away easily,” said Tower, of the U.S. Institute of Peace. “They’re sitting on a massive source of capital and there are many fragile places in the world that they’ll be able to exploit.”

SYDNEY—Macquarie Group’s first-half net profit fell by 39%, but the company said its strong capital position means it could soon begin buying back shares worth up to 2.0 billion Australian dollars (US$1.29 billion).

Macquarie, Australia’s biggest investment bank and asset manager, said its net profit for the six months through September fell to A$1.42 billion, from A$2.31 billion a year earlier.

Chief Executive Shemara Wikramanayake said Macquarie’s underlying client franchises were resilient amid less certain market conditions.

“Our annuity-style businesses saw growth in loan books, deposits and assets under management, but the first-half result was substantially down compared to a strong period of realizations in the prior corresponding period,” she said. “Our markets-facing businesses delivered solid performances despite lower market activity and volatility levels.”

Macquarie said its group capital surplus was A$10.5 billion at the end of September, down from A$12.6 billion at end-March. Still, the company said its financial position comfortably exceeded regulatory minimum requirements, allowing it to buy back shares worth up to A$2 billion.

Macquarie’s annuity-style activities contributed A$1.3 billion to first-half profit, although this down 43% on a year earlier. This reflected the timing of asset realizations in green investments in Macquarie Asset Management, which more than offset a positive result in Banking and Financial Services.

Markets-facing activities, which include most of its Commodities and Global Markets businesses, fell 32% on year to A$1.56 billion.

“The prior corresponding period featured a strong performance from commodities in CGM together with material asset realizations in Macquarie Capital,” said the company.

Directors declared an interim dividend of A$2.55 per share, lower than a payout of A$3.00 a share a year ago. Still, that beat under consensus forecasts compiled by FactSet, which projected Macquaries’s interim dividend would be A$2.42.

Macquarie’s net operating income of A$7.91 billion was down 8% on year, while operating expenses of A$5.92 billion rose by 6% on year.

International income accounted for 65% of Macquarie’s total income, the company said

Macquarie, which has a reputation among analysts for conservative forecasts, didn’t provide specific guidance.

Sam Bankman-Fried’s lawyers rested their case Tuesday after seeking to rehabilitate the FTX founder’s credibility from the prosecutors’ two-day grilling.

Bankman-Fried, dressed in a grey suit, floundered through the end of Assistant U.S. Attorney Danielle Sassoon’s cross-examination.

For a second day, Sassoon walked Bankman-Fried through balance sheets, communications and tweets, again highlighting inconsistencies—or what she portrayed as outright lies—between the defendant’s public statements and his private knowledge.

Bankman-Fried repeatedly told jurors he couldn’t recall many of his past statements. He said he couldn’t remember the exact time line of things.

Defence attorney Mark Cohen sought to elicit testimony to explain his client’s evasiveness. He asked about reasons for his foggy memory and his use of a private jet and his contempt for regulation.

“You used the phrase ‘f— regulators,’ ” Cohen said, referring to a series of messages between Bankman-Fried and a Vox reporter. “Was that the full extent of the chain?”

It wasn’t, said Bankman-Fried, adding that he felt that his efforts to work with regulators might have only led to more bad regulation. “I was somewhat frustrated,” he said.

Cohen asked about the huge amount of evidence in the case—suggesting his client couldn’t possibly remember every document—and his many media interviews.

Bankman-Fried told the jury he talked to about 50 reporters during the time between FTX’s collapse and his arrest, typically preparing between 30 seconds and an hour for each interview. When he testified before Congress, others helped him prepare his testimony, he said.

Bankman-Fried’s testimony, which formed the bulk of his defence team’s presentation, is likely crucial to jurors’ determination of whether to find him guilty of fraud and other charges. Closing arguments are scheduled for Wednesday, clearing the way for the jury to likely get the case on Thursday.

About half of the jurors watched Bankman-Fried as he spoke. Some scribbled notes and others gazed at the floor. One man closed his eyes. Damian Williams, the Manhattan U.S. attorney who has given priority to prosecuting cryptocurrency cases, sat in the front row of the courtroom gallery.

Bankman-Fried again answered some of the prosecutor’s questions by quibbling with their premise. When asked about an $8 billion hole in the balance sheet of Alameda Research, FTX’s sister hedge fund, he said that “hole” wasn’t the word he would use. He said he couldn’t speak with exact confidence about whether some FTX customers, outside of its sister hedge fund, had special privileges.

Sassoon asked if it was Bankman-Fried’s practice to maximise making money even with the risk of going bust. “It depends on the context,” he replied. He later added, “With respect to some of them, yes.”

Sassoon concluded her cross-examination by playing a recording of a Nov. 9, 2022, all-hands meeting in which Caroline Ellison, the former chief executive of Alameda Research and Bankman-Fried’s former girlfriend, spoke with Alameda staffers. Ellison, her voice halting, said she had talked about Alameda’s use of customer funds with Bankman-Fried and two of his top deputies, Nishad Singh and Gary Wang.

“Ms. Ellison identified you, Gary and Nishad as her co-conspirators, correct?” Sassoon asked.

Sassoon showed jurors a document, from Dec. 25, 2022, in which Bankman-Fried appeared to be analysing his own potential legal jeopardy and assessing how the government viewed the alleged conspiracy. While it was public that Ellison and Wang were cooperating with prosecutors, Bankman-Fried wasn’t sure if Singh, a former FTX executive, would be charged.

“They don’t seem to be keeping a seat warm for him as a defendant,” the document said.

“You wrote that, Mr. Bankman-Fried?” asked Sassoon. “I think so,” he said.

Singh, who later pleaded guilty, testified for the government earlier in the trial.

Later, Bankman-Fried’s lawyer referenced a photograph of Bankman-Fried on a private jet, reclining with his eyes closed. The prosecution had showed the jury the photo as an example of excess spending. Cohen asked Bankman-Fried if he remembered the photo.

“A very flattering one,” Bankman-Fried said sarcastically, before agreeing that using a private jet was a valid business expense.

“It was very logistically difficult to travel between the Bahamas and a few places, chiefly Washington, D.C.,” the FTX founder told the jury.

After the defence attorney wrapped up, Sassoon told the judge she had no more questions. Bankman-Fried took a long swig from his water bottle as he stepped down for his final time from the witness stand.

Fallen crypto tycoon Do Kwon was ready to get out of Montenegro. He and his colleague arrived at the small Balkan country’s main airport, where a Bombardier business jet was waiting to take them to Dubai.

Inside the VIP terminal, Kwon handed his passport to an immigration officer, who swiped it. An alert flashed across the officer’s screen. Kwon, it said, was the target of an Interpol red notice—a request to police around the world to arrest him.

Kwon had been lying low in the Balkans for months, but his luck was running out. About two hours earlier that day, March 23, a tipster had separately warned Montenegro’s top cop, Interior Minister Filip Adžić, that Kwon was likely in the country.

The tipster sent Kwon’s passport details to the interior minister’s phone, according to Adžić, who recounted the arrest for The Wall Street Journal. When Adžić called the border police chief, officers had just detained Kwon at the airport.

“Do you know who that person is?” the interior minister said he told the chief. “He is famous and he has a lot of money.”

U.S. and South Korean authorities had been investigating Kwon over his role in one of the biggest disasters in cryptocurrency history. In May 2022, two tokens that he created, TerraUSD and Luna, crashed in value. The implosion erased $40 billion from the cryptocurrency markets and triggered a chain reaction that pushed other digital-asset firms into bankruptcy. Investors around the world lost their savings.

The investigators concluded that he lied to investors, and suspected he was secretly sitting on a crypto fortune. He now faces charges in both the U.S. and South Korea, including fraud and violations of capital-markets laws. Prosecutors in South Korea have said that if convicted there, Kwon would likely face the longest jail term for a financial crime in the country’s history.

Kwon denied committing fraud. But just before he faced potential arrest, he vanished from his home in a Singapore luxury high-rise. He taunted authorities by tweeting and giving interviews from his undisclosed location. Even after his capture, he kept stirring up drama: A letter he sent from prison to Montenegro’s prime minister unleashed a major political scandal in the tiny U.S. ally.

The 32-year-old Kwon now sits in a Montenegrin prison, where he is kept in isolation. Officials found that the Costa Rican passport he showed at the airport was a fake. The U.S. and South Korea are battling for his extradition. If sent to the U.S., he would likely end up in the same New York jail that now houses Sam Bankman-Fried—another disgraced crypto tycoon, whose companies were fatally weakened by fallout from the TerraUSD-Luna crash.

This account of Kwon’s life on the lam is based on interviews with officials in South Korea and Montenegro, current and former employees of his company, Terraform Labs, and people close to Kwon. He didn’t respond to requests for comment given to his Montenegrin lawyer.

‘Steady lads’

TerraUSD was a stablecoin, designed to maintain a price of $1. Crypto investors often use stablecoins as a haven to save profits from successful trades. TerraUSD differed from many other stablecoins because it wasn’t backed by dollars in a bank. A so-called algorithmic stablecoin, it relied on complicated financial engineering and the collective efforts of traders to keep its $1 peg.

Kwon hailed TerraUSD as the centerpiece of a new monetary system, uncontrolled by banks and governments. Some crypto observers warned it was a ticking time bomb.

On May 7, 2022, its price began to slip, spooking investors. The trigger for the decline was a few big withdrawals from Anchor Protocol, a sort of pseudo-bank that offered investors annual returns of nearly 20% for TerraUSD deposits.

“Deploying more capital – steady lads,” Kwon tweeted as TerraUSD tumbled. His team tapped a $3 billion reserve fund to bolster the stablecoin. He scrambled to arrange a bailout. Nothing worked. Within days, TerraUSD was worth pennies.

Investors were furious. They had poured billions into TerraUSD, putting most of it in Anchor, which many treated as a savings account. Others had gambled on Luna, a related coin that fell more than 99%.

While Terraform Labs was based in Singapore, Seoul was perhaps the crash’s epicenter. Kwon, a South Korean citizen who graduated from an elite foreign-language high school in Seoul and studied computer science at Stanford University in California, had been a figure of national pride. Some 100,000 South Koreans lost money on TerraUSD and Luna, officials there say. Complaints flooded into prosecutors’ offices.

It was Dan Sung-han’s job to lead the investigation. A boyish-looking 49-year-old, Dan heads the Financial Crime Investigation Bureau of the Seoul Southern District Prosecutors’ Office. Local media have dubbed the unit the Grim Reaper of Yeouido, referring to Seoul’s financial district, for its fights against stock-market fraud and manipulation.

“It took us a good amount of time to build a solid understanding of the crypto market,” Dan said.

The South Korean investigators raided Terraform’s local office. They questioned current and former employees. They seized evidence from seven South Korean crypto exchanges, hauling away blue boxes stuffed with documents, laptops, smartphones and external hard drives.

Crypto high roller

Kwon at the time was living with his wife and infant daughter in the Sculptura Ardmore, a ritzy Singapore high-rise. His duplex apartment included a 46-foot-long cantilevered outdoor swimming pool. He kept Japanese whisky and Cuban cigars on hand for guests.

The baby had been born just weeks before the crash. Kwon named her Luna, after his cryptocurrency. “My dearest creation named after my greatest invention,” he tweeted just after her birth, posting a picture of the newborn.

That summer, Kwon met friends at French and Japanese restaurants including Les Amis, with three Michelin stars. He mused to some associates about visiting Europe with his family on an extended trip, so he could be relatively anonymous in a new city.

At one party he attended in Singapore, not long after the crash, many of the attendees were crypto entrepreneurs who came to show their support for Kwon. Cristal Champagne and Martell XO cognac flowed freely, according to one person familiar with the event.

Meanwhile, Kwon’s investors were suffering.

In war-torn Ukraine, web designer Yuri Popovich said he lost $9,000 that he had stashed in TerraUSD because he didn’t trust his country’s banks. In Britain, a 36-year-old IT consultant lost more than $30,000. He said it took him two months to muster the courage to tell his wife. He took a job as a window cleaner to pay the bills.

In Taiwan, local media reported that a man fell to his death from his 13th-floor apartment in an apparent suicide, after telling friends and relatives that he had lost some $2 million on Luna.

Kwon told the Journal through a spokesman in June 2022, “I’ve been devastated by recent events and hope that all the families who’ve been impacted are taking care of themselves and those that they love.”

A Singapore law firm, Drew & Napier, prepared to sue Kwon on behalf of a group of TerraUSD investors who said they collectively lost more than $50 million.

On Sept. 6, 2022, Kwon marked his 31st birthday at home. His wife shared photos with friends of him enjoying a Korean meal with her and playing with their baby.

The next day, a representative of Drew & Napier arrived at the Sculptura Ardmore to serve him with lawsuit papers—but he was already gone.

Red notice

On Sept. 7, Kwon flew to Dubai, and then Serbia, South Korean prosecutors say. He settled in the capital, Belgrade, known for its nightlife scene and tech sector.

Days later, South Korean prosecutors obtained a warrant for Kwon’s arrest on charges that he had violated the country’s capital-markets law. They had worked long hours, feeling intense public pressure to bring Kwon to justice. Dan, their leader, sometimes napped on a black recliner in his office.

Among other alleged irregularities, Dan’s investigators zeroed in on the relationship between Terraform Labs and Chai, a South Korean payment app that at one point boasted two million users.

Before the crash, Kwon had repeatedly claimed that Chai used his firm’s Terra blockchain to move funds between users and merchants. The claim was a key selling point for investors, who saw Chai’s use of Terra as a rare real-world use of blockchain technology. Proponents see blockchain—the underlying technology behind bitcoin and other cryptocurrencies—as a way to empower individuals while cutting out banks and other traditional middlemen.

But Kwon’s claim was false, South Korean prosecutors alleged. In reality, they said, Chai used traditional payment systems to settle transactions and its use of blockchain was a sham. Lawyers for Chai founder Daniel Shin said Chai initially used the Terra blockchain to process payments, but stopped in 2020. Shin, a former business partner of Kwon’s, has denied wrongdoing. Lawyers for Kwon have defended his statements about Chai.

“I am not ‘on the run’ or anything similar,” Kwon tweeted on Sept. 17 after news of the arrest warrant. He still refused to reveal his location, citing threats to his security.

South Korean prosecutors filed a red notice through Interpol, the global policing body, effectively asking cops worldwide to capture Kwon.

From Serbia, Kwon told one crypto-industry associate that he had a deal with the local government. He told another that Serbian law enforcement allowed him to remain even after learning about the Interpol red notice.

Serbia’s Interior Ministry, Justice Ministry, Foreign Affairs Ministry and main public prosecutor’s office didn’t respond to interview requests.

Kwon continued to manage Terraform Labs from hiding, and pushed a long-shot plan to revive its Terra blockchain. He joked with colleagues in Terra Rebirth League, a group on the Telegram messaging app with over 300 members, according to messages seen by the Journal.

Early in his stay in Belgrade, Kwon lived in an apartment near Knez Mihailova, a pedestrian street in central Belgrade known for its shops, sidewalk cafes and 19th-century architecture, said Milojko “Mickey” Spajić, a politician from Montenegro who met Kwon there.

Spajić told the Journal that Kwon invited him for a visit, and the two spent about an hour chatting over coffee, including about Kwon’s ambitions to revive Terra.

The two had known each other since 2018, when Spajić—then a Singapore-based partner with venture-capital firm DAS Capital—agreed to invest $75,000 in Luna. He later returned to his homeland and entered politics, and hoped to turn Montenegro into a blockchain development hub.

Spajić said he didn’t know at the time that Kwon was a fugitive.

On Oct. 12, Kwon registered a company called Codokoj22 d.o.o. Beograd, listing himself and Chang-joon Han as directors, according to Serbia’s corporate registry.

Han was a former Terraform Labs and Chai executive who joined Kwon in the Balkans. Serbian real-estate records from December 2022 show Han owned a 4,300-square-foot apartment in an affluent neighborhood of Belgrade.

On Nov. 8, Kwon made an appearance on UpOnly, a livestreamed crypto podcast. He bantered with another guest: Martin Shkreli, the former hedge-fund manager who had been imprisoned on securities-fraud charges.

“Jail’s not that bad,” Shkreli told him. “It sucks, but it’s not the worst thing ever.”

“Good to know,” Kwon replied.

The pressure builds

Within days of Kwon’s departure from Singapore, investigators in South Korea learned through Interpol bureaus that he was in Serbia, said Dan, the head prosecutor. On Dec. 12, prosecutors in Seoul publicly confirmed his whereabouts. Kwon’s activity on Twitter dropped off sharply.

Later that month, South Korea formally asked Serbia to arrest Kwon and extradite him.

In late January, Dan and a South Korean Justice Ministry official flew to Belgrade. Over several days, they met Serbian law-enforcement officials. The Serbians shared details on the company Kwon had incorporated and his internet address, Dan recalled. They promised to hand over Kwon if he was caught.

On Feb. 16, the U.S. Securities and Exchange Commission sued Kwon for fraud, accusing him of lying about the stability of TerraUSD and Chai’s use of blockchain. The agency also said Kwon and Terraform Labs converted thousands of bitcoin into cash via a Swiss bank, and withdrew more than $100 million after the crash.

Lawyers for Kwon and Terraform Labs criticised the SEC’s lawsuit as government overreach. They denied the Swiss bank allegations, saying the money transfers were for business expenses, and disputed the SEC’s allegations about Chai.

On March 11, Kwon posted his final message in Terra Rebirth League. Replying to a message from an admirer in the private Telegram group, Kwon posted a picture of North Korean leader Kim Jong Un raising his hand in a triumphal greeting.

Two days later, the Journal reported that the U.S. Justice Department was also investigating the TerraUSD crash.

Arrest

Kwon slipped across the border into Montenegro in mid-March and hunkered down in Petrovac, a resort town on the Adriatic Sea, police say.

On March 23, he and Han took a taxi to the airport in the country’s capital of Podgorica, a drive that usually takes about an hour. They paid their driver 4,000 euros ($4,230), a huge sum for ordinary Montenegrins.

After Kwon’s passport triggered the alert, officers detained him and Han, who was also found to have a fake Costa Rican passport. Border police searched the men’s luggage and found three laptops, five phones and one more set of fake passports from Belgium.

“Everyone is looking for me,” a downcast Kwon told the officers, according to Adžić, the interior minister.

Han protested their detention, according to Adžić, saying, “We are VIPs everywhere that we go.” Han didn’t respond to requests for comment through his lawyers.

Hours later, federal prosecutors in New York filed fraud charges against Kwon. A South Korean ambassador soon showed up at Adžić’s office to discuss extradition proceedings.

A Montenegrin court convicted Kwon and Han for using forged passports. It sentenced them to four months in prison, but they can be held longer as they await extradition. Kwon has said he didn’t realise the passports were fake, and that he was swindled by the agency in Singapore that obtained them for him.

Since his arrest, Kwon has been confined to Spuž prison, a cluster of brick buildings in a valley near Podgorica. He is allowed outdoors for one hour a day in a yard surrounded by a barbed-wire fence, overgrown fields and a rock-strewn mountainside.

After being jailed, Kwon had a tearful reunion with his wife, in which he expressed regret for the trouble he had caused her and their young daughter, a person familiar with the matter said.

Kwon tried to post bail of 400,000 euros ($423,000), but prosecutors opposed his request, calling him a flight risk.

On June 5, a one-page letter from Kwon arrived at the office of Montenegrin Prime Minister Dritan Abazović. The letter, in Kwon’s tidy handwriting, described his friendly ties with Spajić, the politician who had met Kwon in Belgrade—and a rival of the incumbent prime minister. Spajić’s party was expected to win an election days away.

The letter said Spajić tried to raise funds from Kwon and other “friends in the crypto industry,” according to a copy seen by the Journal.

Spajić denied asking Kwon for money. He said the letter was a trick masterminded by his political foes and the Serbian secret police. He suggested that Kwon was duped into writing the letter with a promise that Montenegrin authorities would free him on bail and let him escape the country. Serbia’s intelligence agency didn’t respond to a request for comment.

The letter prompted an uproar. Rival politicians attacked Spajić, who had built up an image as a corruption fighter, saying he had cozied up to a crypto fugitive. Spajić’s party narrowly won the June 11 election, putting him on track to become Montenegro’s next prime minister.

Kwon hasn’t disputed that he wrote the letter. His Montenegrin lawyer, Goran Rodić, said Kwon didn’t donate to Spajić. The lawyer declined to share more details, citing an open investigation.

European officials who visited Spuž prison last year said its cells were poorly ventilated and stiflingly hot in the summertime. They also noted poor hygiene and overcrowding.

To occupy his time, Kwon watches television with a limited number of English-language channels in his cell, his lawyer said during a sweltering day this summer.

“Considering the current weather conditions, and considering the general nature of being in prison, I think he is doing OK,” Rodić said