Tech titans fall: The CEOs arrested for platform-linked crimes

Pavel Durov, the co-founder and CEO of encrypted messaging app Telegram, was arrested at Le Bourget airport in the suburbs of Paris on Saturday evening after touching down from Azerbaijan on a private jet.

France’s OFMIN, an agency tasked with preventing violence against minors, had issued an arrest warrant for Durov as the coordinating agency in a preliminary investigation into alleged offenses including fraud, drug trafficking, cyberbullying, organized crime and promotion of terrorism, one of the sources close to the case told AFP.

Durov is suspected of failing to take action to curb the criminal use of his platform.

Binance Holdings, the entity that operates the world’s largest cryptocurrency exchange, Binance.com, was charged with anti-money laundering, operating an unlicensed money-transmitting business and violating U.S. sanctions.It was ordered to pay over $4 billion to resolve the Justice Department’s investigation into violations related to the Bank Secrecy Act, failure to register as a money transmitting business and the International Emergency Economic Powers Act.

“Binance turned a blind eye to its legal obligations in the pursuit of profit. Its willful failures allowed money to flow to terrorists, cybercriminals and child abusers through its platform,” said Secretary of the Treasury Janet L. Yellen.

Sentenced on April 30, Zhao started serving a four-month prison sentence in May, making him the richest person to spend time in a U.S. federal jail.

Zhao, born in 1977, is a Chinese-Canadian. Before founding Binance in 2017, he worked at leading financial institutions. He still holds about 90% of Binance’s shares and has a net worth of US$60 billion as of Aug. 25, according to Forbes.

In March 2023, Do Kwon, the founder and CEO of the blockchain company Terraform Labs, was arrested in Montenegro after a long period in hiding.

The crypto tycoon, whose real name is Kwon Do-hyung, had been on the run for months after fleeing South Korea and then Singapore before the company’s crash in 2022.

Kwon was arrested along with an accomplice at an airport in the capital Podgorica.

Do Kwon (2nd, L), a cryptocurrency entrepreneur, who created the failed Terra (UST) stablecoin, is taken to court in Podgorica, Montenegro, March 24, 2023. Photo by Reuters

A month before that, the Korea Times reported that Kwon had transferred a total of more than 10,000 Bitcoin, equivalent to US$240 million, to the wallet address of a financial institution in Switzerland.

The company’s TerraUSD was promoted as a “stablecoin” pegged to stable assets like the U.S. dollar, preventing drastic fluctuations. Kwon marketed it as the next big thing in crypto, attracting billions in investments and global hype.

However, TerraUSD and its sister token Luna collapsed in May 2022, leading experts to label it a glorified Ponzi scheme that wiped out many investors’ life savings. Kwon fled South Korea before the crash, evaded capture for months, and was eventually arrested in Montenegro with fake travel documents.

In January, Terraform Labs filed for bankruptcy in the U.S.

Early this month, a Montenegro appeals court cleared the path for Kwon’s extradition to South Korea, AFP reported.

Sam Bankman-Fried, born in 1992, founded the cryptocurrency exchange FTX in 2019, becoming a direct competitor to Coinbase and Binance.

In November 2022, FTX faced a crisis due to insufficient reserve assets to meet a massive wave of withdrawals from users. Subsequently, Bankman-Fried was forced to file for bankruptcy.

Sam Bankman-Fried, who founded and led FTX until a liquidity crunch forced the cryptocurrency exchange to declare bankruptcy, is escorted out of the Magistrate Court building after his arrest in Nassau, Bahamas, Dec. 13, 2022. Photo by Reuters

He was sentenced to 25 years in prison by a judge in March for stealing $8 billion from customers of the now-bankrupt FTX cryptocurrency exchange, Reuters reported.

The sentence was handed down after a U.S. court rejected Bankman-Fried’s claim that FTX customers did not actually lose money and found that he lied during his trial testimony. He was found guilty on seven fraud and conspiracy counts stemming from FTX’s 2022 collapse in what prosecutors have called one of the biggest financial frauds in U.S. history.

According to court records, FTX had more than one million creditors, including many leading tech companies such as Apple, Meta, Netflix, LinkedIn, Adobe, and AWS. The 50 largest creditors alone accounted for about $3.1 billion.

In September 2023, Zhu Su, the co-founder of 3AC, was arrested at Singapore’s Changi Airport while attempting to leave the city-state.

The 37-year-old Singaporean entrepreneur later served a two-month prison sentence before being released in December that year.

At its peak in 2022, 3AC managed about $10 billion in assets, making it one of the most prominent crypto hedge funds in the world, according to CNBC.

The firm filed for bankruptcy in mid-2022 after the plunge in cryptocurrency prices and a particularly risky trading strategy combined to wipe out its assets and leave it unable to repay lenders.

Su and co-founder Kyle Davies fled, leaving behind a US$3 billion debt. Although suspected of wrongdoing leading to 3AC’s collapse, Su only served a short prison term for failing to cooperate during the company’s bankruptcy proceedings and has not been required to repay any funds or faced additional charges.