International crime agency Interpol has issued a red notice for the arrest of Terra Labs co-founder and chief executive Do Kwon after the $40 billion collapse of so-called stablecoin TerraUSD and sister token Luna, according to a report by The Wall Street Journal on Tuesday.
Prosecutors in South Korea applied for the red notice after a Seoul court issued an arrest warrant for Mr Kwon, 31, and five colleagues on September 14 for breaching the country’s capital markets law.
On Monday, the cryptocurrency entrepreneur tweeted that he is “making zero effort to hide”, adding that “I go on walks and malls”, Bloomberg said.
Mr Kwon was believed to have been in Singapore, where Terra Labs is now based, but the city-state’s police force said on September 17 that he was “currently not in Singapore” and his whereabouts were unknown, Agence France Press reported.
However, in a series of tweets on the same day, Mr Kwon said: “I am not ‘on the run’ or anything similar — for any government agency that has shown interest to communicate, we are in full co-operation and we don’t have anything to hide.”
Stablecoins are digital tokens pegged to fiat currencies, such as the US dollar, and are generally managed to preserve capital value, provide liquidity and minimise exposure to market risks, Fitch Ratings said in a note in May.
However, Terra’s value is derived from algorithmic processes, which means the backing entity’s cryptocurrency reserve was not large enough to serve as a source of stability when its algorithmic peg mechanism came under speculative pressure, the rating agency added.
The collapse of TerraUSD and Luna led to a massive sell-off in cryptocurrencies in May that wiped more than $200bn in value from the market in 24 hours. TerraUSD fell as low as 20 cents and caused thousands of investors worldwide to lose their life savings.
A month later, Bitcoin dropped below the key $20,000 level for the first time since December 2020, while about $2 trillion has been wiped from the market value of cryptocurrencies since late last year, according to data compiled by CoinGecko.