Terra founder Do Kwon arrested in Montenegro with falsified documents, Interior Minister says
Law finally catches on Terra founder Do Kwon. The founder of Terraform Labs is reportedly arrested in Montenegro, according to a tweet by the country’s minister of interior, Filip Adzic. Do Kwon was detained at the Podgorica airport with falsified documents, Interior Minister added.
In a post on Twitter, Filip Adzic said:
“ONE OF THE WORLD’S MOST WANTED FUGITIVES WAS ARRESTED IN PODGORICA. Montenegrin police have detained a person suspected of being one of the most wanted fugitives, South Korean citizen Do Kwon, co-founder and CEO of Singapore-based Terraform Labs.”
U PODGORICI UHAPŠEN JEDAN OD NAJTRAŽENIJIH SVJETSKIH BJEGUNACA
Crnogrska policija lišila je slobode lice za koje se sumnja da je jedan od najtraženijih bjegunaca, južnokorejski državljanin Do Kwon, suosnivač i izvršni direktor Terraform Labs sa sjedištem u Singapuru.
— Filip Adzic (@filip_adzic) March 23, 2023
Before his arrest, Kwon has been the target of several investigations that cut across many countries including the United States. Do Kwon was charged with fraud by the SEC in connection with the TerraUSD Stablecoin collapse. He was even on Interpol’s red notice after stablecoin terraUSD (UST) and its $40 billion ecosystem imploded last year, sending shockwaves across the crypto markets.
In May 2022, TerraUSD (UST) stablecoin collapsed and lost 99% of its value, wiping out the life savings of crypto investors as traders offload the cryptocurrency. Terra was ranked among the top 10 most valuable cryptocurrencies before the collapse. A few months later, South Korea issued an arrest warrant for Terra founder Do Kwon after he went into hiding.
Almost a year later, the United States Securities and Exchange Commission (SEC) charged Do Kwon and his company, Terraform Labs, with fraud, alleging that they orchestrated a multibillion-dollar “crypto asset securities fraud,” the SEC announced Thursday.
According to the SEC’s complaint, from April 2018 until the TerraUSD scheme’s collapse in May 2022, Terraform and Kwon raised billions of dollars from investors by offering and selling an inter-connected suite of crypto asset securities, many in unregistered transactions.
These included “mAssets,” security-based swaps designed to pay returns by mirroring the price of stocks of US companies, and Terra USD (UST), a crypto asset security referred to as an “algorithmic stablecoin” that supposedly maintained its peg to the U.S. dollar by being interchangeable for another of the defendants’ crypto asset securities, LUNA.
Like many stablecoins, UST was pegged at a 1-to-1 ratio with the dollar. Minting one new UST required “burning,” or destroying, one luna. This structure allowed for arbitrage opportunities that were key to maintaining the peg. In May 2022, the sudden collapse of Luna and TerraUSD roiled crypto markets around the world. Terra Luna, the cryptocurrency associated with TerraUSD (UST), suddenly collapsed overnight losing 99% of its value as crypto investors lost their life savings.
Kwon, who is also the founder of the blockchain platform Terraform Labs, has been accused of fraud by crypto investors in the wake of the collapse.
Terra, which ranked among the top 10 most valuable cryptocurrencies, dropped from its $120 peak last month to below $1 on May 13. Terra’s luna UST is a controversial stablecoin designed to support UST’s one-to-one peg with the U.S. dollar. The implosion of the Terra platform led to combined losses of approximately $60 billion between UST and its sister cryptocurrency luna.