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USA | Mar 31, 2023

Crypto founder Do Kwon indicted in US following Montenegro arrest

/ Our Today

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Hon Chang-joon, business partner of Do Kwon, the cryptocurrency entrepreneur who created the failed Terra (UST) stablecoin, is taken to court in handcuffs on charges of allegedly forging official documents, in Podgorica, Montenegro, March 24, 2023. (File Photo: REUTERS/Stevo Vasiljevic)

NEW YORK/PODGORICA/SEOUL (Reuters)

Do Kwon, the cryptocurrency entrepreneur behind two digital currencies that lost an estimated US$40 billion or more last year, has been charged with fraud by United States (US) prosecutors.

An eight-count indictment against Kwon was made public in the US District Court in Manhattan, several hours after news of his arrest earlier Thursday (March 30) in Montenegro.

Lawyers for Kwon in the US did not immediately respond to requests for comment after business hours.

Do Kwon, the cryptocurrency entrepreneur, who created the failed Terra (UST) stablecoin, is taken to court in Podgorica, Montenegro, March 24, 2023. (File Photo: REUTERS/Stevo Vasiljevic)

Thursday’s indictment charges Kwon, a South Korean national who co-founded Terraform Labs and developed the TerraUSD and Luna currencies, with two counts each of securities fraud, wire fraud, commodities fraud and conspiracy.

The criminal case follows related US Securities and Exchange Commission civil charges against Kwon and Terraform last month.

Kwon had been a fugitive for several months, and South Korean authorities issued an arrest warrant for him last September.

“This has been shared with the Seoul Southern District Prosecutors’ Office and Interpol in Montenegro.”

An official at the KNPA

South Korean police said today (March 31) that the identity of the suspect arrested in Montenegro had been confirmed as Kwon after his fingerprints matched the information held by the country’s National Police Agency (KNPA).

“This has been shared with the Seoul Southern District Prosecutors’ Office and Interpol in Montenegro,” one official at the KNPA said.

Prosecutors will work with other institutions to carry out a swift repatriation, a spokesperson for the country’s prosecution service said.

Montenegro’s interior ministry said police detained a person thought to be Kwon and a second suspect, who were trying to board a flight to Dubai at Podgorica airport.

Police found forged passports of Costa Rica and Belgium during the encounter, the ministry said.

“The person is suspected of being one of the most wanted fugitives, South Korean national Do Kwon, a co-founder and CEO of the Singapore-based Terraform Labs,” Interior Minister Filip Adzic wrote on Twitter.

“The former cryptocurrency king who is behind losses of over US$40 billion, has been apprehended at the Podgorica airport with forged documents,” Adzic added.

Do Kwon, the cryptocurrency entrepreneur, who created the failed Terra (UST) stablecoin, is taken to court in Podgorica, Montenegro, March 24, 2023. (File Photo: REUTERS/Stevo Vasiljevic)

TerraUSD was a so-called “stablecoin” designed to maintain a constant US$1 price, while Luna’s value fluctuated.

But authorities have said TerraUSD and Luna were paired, such that a decline in one could take down the other.

They also said Kwon misrepresented the stability of TerraUSD, once among the top 10 cryptocurrencies by market value.

REPEATED FALSE AND MISLEADING STATEMENTS TO BUILD TRUST

Both currencies crashed last May, with TerraUSD’s price sinking to less than one penny.

In its civil case, the SEC accused Kwon and Terraform of “orchestrating a multi-billion dollar crypto asset securities fraud.

“We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors,” SEC Chair Gary Gensler said in a statement at the time.

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