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Do Kwon, the South Korean cryptocurrency entrepreneur responsible for the $40 billion bombing of Terra USD and Luna Digital Token last year, was charged with fraud in the United States hours after his arrest in Montenegro.
In a 12-page indictment unsealed Thursday, U.S. prosecutors say Kwon “misled individuals about aspects of the Terra blockchain, including its technology and the extent of user adoption” of the cryptocurrency. He was accused of deceiving customers.
Kwon, who is facing eight criminal charges including securities, commodity and wire fraud, repeated the misleading claims in a television interview in October 2019 and in social media posts the following year, prosecutors alleged.
Kwon’s lawyer did not respond to a request for comment.
Earlier on Thursday, Montenegro’s Interior Minister Filip Azic said on Twitter that a “former crypto tycoon” was detained by police at Podgorica airport with fake documents.
The U.S. Attorney’s Office for the Southern District of New York said it would seek Kwon’s extradition, but declined further comment on the case.
The collapse of the terraUSD coin last year caused an unprecedented crash in the crypto market, engulfing many of the industry’s major players. Kwon, co-founder of Terraform Labs, had previously been charged with fraud and violating capital markets laws in his home country, and an international investigation was launched after authorities were unable to locate him.
South Korean authorities said last year that he had traveled to an unknown country, believed to be Serbia, via Dubai after leaving Singapore, where Terraform is headquartered. His Korean passport was also cancelled. “We are waiting for official confirmation of the identity,” Adjić added.
The collapse of terraUSD and luna coins affected hundreds of thousands of investors, many of whom were attracted by the facility that allows customers to lend out terracoin at yields of up to 20%.
TerraUSD, a stablecoin, was designed to connect traditional and crypto markets. Traders use them as a store of cash or value between cryptocurrency transactions. While most track dollar value on a 1:1 basis, Terra was supposed to maintain integrity through algorithmic coding, so it didn’t need to be backed by hard assets.
Kwon and Terra are also being sued by the U.S. Securities and Exchange Commission for allegedly arranging a cryptocurrency scam that resulted in billions of dollars in losses by selling numerous digital assets that were not properly registered with regulators. It is being
According to the SEC, the fraud took place between April 2018 and May 2022.
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Last May, the terraUSD peg collapsed in dramatic fashion, causing an unprecedented crisis in confidence in the crypto market and forcing companies like Celsius and Three Arrows Capital into bankruptcy.
The collapse of terraUSD fueled concerns from international regulators that the stablecoin industry poses stability risks to existing finance as cryptocurrencies become more integrated with traditional payment systems.
In September, Interpol issued a red notice against Kwon and petitioned law enforcement agencies around the world to arrest the Terraform boss. Since his disappearance, Kwon has continued to speak out on social media without disclosing his location information.
Terraform and Montenegro’s Interior Ministry did not respond to requests for comment.
