International crime agency Interpol has confirmed the arrest of Terraform Labs co-founder and chief executive Do Kwon, who has been on the run since the $40 billion collapse of his so-called stablecoin TerraUSD and sister token Luna last May.
The cryptocurrency entrepreneur was arrested in Montenegro along with Terraform’s chief financial officer, Han Chang Joon, and his identity was confirmed through a fingerprint match, Interpol’s national central bureau in Seoul told CNN on Friday.
On Thursday, Filip Adzic, Montegro’s Internal Affairs Minister, posted on Twitter and Facebook that a man suspected of being Mr Kwon was arrested at Podgorica airport as he was trying to leave the country to fly to Dubai.
“Montenegrin police have detained a person suspected of being one of the most wanted fugitives, South Korean citizen Do Kwon, co-founder and CEO of Singapore-based Terraform Labs,” Mr Adzic said in the social media post.
“The former ‘cryptocurrency king’, who is behind losses of more than 40 billion dollars, was detained at the Podgorica airport with falsified documents, and South Korea, the USA and Singapore are demanding the same. We are waiting for official confirmation of identity."
In September, Interpol issued a red notice for Mr Kwon, 31, after a Seoul court issued a warrant for his arrest, as well as five colleagues, for breaching the country’s capital markets law.
At the time, Mr Kwon was believed to have been in Singapore, where blockchain company Terraform Labs was based, but the city-state’s police force said on September 17 that he was “currently not in Singapore” and his whereabouts were unknown.
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, according to Fitch Ratings.
However, Terra’s value was 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 ratings agency added.
The collapse of TerraUSD and Luna led to a massive sell-off in cryptocurrencies, wiping more than $200 billion in value from the market in only 24 hours.
The collapse triggered the “crypto winter”, resulting in the failure of other crypto companies including Three Arrows Capital, Voyager Digital, Celsius and, more recently, Sam Bankman-Fried’s FTX and Alameda Research.
At the time, 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 was wiped from the market value of cryptocurrencies, according to data compiled by CoinGecko.
Mr Bankman-Fried, 30, was arrested in the Bahamas on December 12 after federal prosecutors in the US charged him with eight criminal counts — including conspiracy, wire fraud and money laundering — for allegedly misusing billions of dollars in customer funds before the $9 billion collapse of FTX and Alameda Research.
Mr Bankman-Fried is currently under house arrest in California and will face trial on October 2.
Hours after Mr Kwon’s arrest, prosecutors from the US attorney’s office in Manhattan charged him with an eight-count indictment, including securities fraud, commodities fraud and conspiracy, according to a report by Bloomberg.
“Another count in the indictment accuses Kwon of engaging in market manipulation with an unidentified US trading firm to alter the market price of TerraUSD,” it said.
The US attorney’s office in Manhattan is also overseeing Mr Bankman-Fried’s case.
It is unclear if Mr Kwon was arrested at the request of US or South Korean authorities.