Fugitive 'Cryptocrash' Boss Is Arrested in Montenegro

Do Kwon of Terraform Labs faces charges in 2 countries over $42B crash
By Arden Dier,  Newser Staff
Posted Feb 17, 2023 7:11 AM CST
Updated Mar 24, 2023 5:46 AM CDT
'Cryptocrash' Boss Charged With Fraud
This June 19, 2015 file photo shows the seal of the US Securities and Exchange Commission at SEC headquarters, in Washington.   (AP Photo/Andrew Harnik, File)
UPDATE Mar 24, 2023 5:46 AM CDT

A cryptocurrency boss facing fraud charges in the US and South Korea has been arrested far away from both in Montenegro. Terraform Labs founder Do Kwon, charged in connection with the $40 billion collapse of the firm's cryptocurrency, has been wanted in South Korea since September. He and another man linked to the crash had allegedly been hiding in Serbia before changing location, the AP reports. Both were detained at Podgorica's airport while allegedly trying to fly to Dubai using fake Costa Rican passports. Montenegro's Interior Minister Filip Adzic described the arrest of "one of the world's most wanted fugitives," per the BBC. South Korea will now work on extraditing the 31-year-old Kwon.

Feb 17, 2023 7:11 AM CST

The Securities and Exchange Commission has charged Singapore-based Terraform Labs and its founder Do Kwon with orchestrating "a multi-billion dollar crypto asset securities fraud" following the collapse of sister cryptocurrencies LUNA and TerraUSD (UST). The SEC said Thursday that "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" beginning in April 2018 but weren't truthful with the public, "repeatedly claiming that the tokens would increase in value."

UST was pegged to the US dollar and maintained that peg by being interchangeable for LUNA. As CNBC reports, "users could always swap one LUNA for UST and vice versa at a guaranteed price of $1, regardless of the market price of either token at the time." But UST broke its peg when the price of LUNA became unstable. In May 2021, Kwon secretly recruited a third party to purchase massive amounts of UST to restore the peg while claiming victory for the algorithmic stablecoin, the SEC said, per CNBC. Still, the token would later collapse, costing investors some $42 billion and resulting in a sell-off of other major cryptocurrencies.

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Kwon and Terraform "committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors," said SEC Chairman Gary Gensler. In one example, they lied in claiming a popular Korean mobile payment app "used the Terra blockchain to settle transactions that would accrue value to LUNA," according to the SEC. Kwon is already facing fraud charges in his native South Korea, per the BBC. In December, authorities there issued an arrest warrant, saying Kwon was believed to be in Serbia. He has denied he is on the run without revealing his location. (More cryptocurrency stories.)

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