SINGAPORE (The Straits Times/Asia News Network): The fugitive and co-founder of Singapore-based Terraform Labs, the crypto firm behind the infamous Terra/Luna tokens that crashed last year, was charged with fraud by US prosecutors in New York on Thursday (March 23).
This was hours after authorities in Montenegro arrested him as he prepared to board a flight.
Do Kwon, a South Korean national, faces eight counts, including wire fraud, commodities fraud, securities fraud, and conspiracy to defraud and engage in market manipulation.
Montenegro Interior Minister Filip Adzic said on Twitter that Kwon was detained in the airport of the country’s capital of Podgorica with false documents. Also detained was Hon Chang Joon, Terraform Lab’s chief financial officer.
Media reports said it was unclear if Kwon’s arrest was at the request of US authorities.
Terraform Labs, a firm registered in Singapore but not under the regulator’s purview as it is not licensed, was behind the original stablecoin TerraUSD and sister token Luna. Both crashed spectacularly last May, costing investors more than US$40 billion (S$53 billion).
According to the US indictment, Kwon allegedly deceived investors about aspects of the Terra blockchain, including its technology and the extent to which it had been adopted by users.
The indictment also said he made false and misleading statements in a television interview and on social media about the alleged scheme.
US prosecutors also accuse Kwon of misleading purchasers of cryptocurrencies issued by Terraform Labs, including Luna and TerraUSD, also known as UST.
Kwon is also accused of engaging in market manipulation with an unnamed US trading firm to alter the market price of UST.
Kwon’s arrest comes after the US Securities and Exchange Commission (SEC) in mid-February charged Terraform Labs and Kwon with orchestrating a multi-billion dollar crypto asset securities fraud.
According to the SEC’s complaint, from April 2018 until the 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.
The SEC accused Kwon and his firm of committing fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.
The crash of UST and its sister token Luna triggered the fall of many cryptocurrency firms, including prominent ones such as hedge fund Three Arrows Capital, Singapore lender Hodlnaut, brokerage Voyager Digital and lender Celsius Network.
TerraUSD and Luna’s collapse eventually sparked a massive crypto winter or market sell-off that has yet to recover, given the rising interest rate environment.
In March, Singapore police said they started a probe linked to Terraform Labs.
In September last year, South Korea issued a warrant for Kwon’s arrest and he left Singapore.
South Korea has said that Kwon, who previously denied any wrongdoing, is the subject of an Interpol red notice, or international wanted notice. He faces charges of fraud and breaches of capital markets law in South Korea.
In February, Kwon was believed to be in Serbia. The 31-year-old previously denied that he was in hiding, but did not reveal his whereabouts.