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Terraform Labs co-founder and CEO Do Hyeong Kwon was reportedly arrested Thursday at an airport in Montenegro’s capital city of Podgorica, according to the country’s Minister of Interior, Filip Adzic.
“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,” he said.
Montenegrin authorities are still confirming that the individual arrested is Kwon, based on the claim that the person was in possession of falsified documents when detained.
Local reports in South Korea also indicate that "a person presumed to be the CEO of Terraform Labs" had been arrested in Montenegro. The country's national police agency reportedly said that it had "confirmed" that the person arrested was "the same person as CEO Kwon with photo data."
The arrest comes almost a year after the collapse of the Terra ecosystem last May, an event that thrust the digital assets industry firmly into crypto winter and contributed to the failure of several firms like the crypto hedge fund Three Arrows Capital (3AC).
It involved the implosion of LUNA and the algorithmic stablecoin TUSD, swiftly wiping away $40 billion in digital asset markets as the coins plummeted in value. The event sent the price of Bitcoin tumbling from $40,000 the around $27,000 two weeks later.
South Korean authorities issued an arrest warrant for Do Kown last September, months after his home was raided as part of a criminal probe into the collapse of the Terra ecosystem. The International criminal police organization later approved South Korea’s request to issue a red notice for Kwon, making him a wanted criminal worldwide.
The price of LUNA toppled after the announcement of Kwon’s potential arrest, sinking to $1.30 from $1.40 in just over an hour, posting a loss of 8% over the past day, according to CoinGecko.
Terra UST, later rebranded to TerraClassicUSD, sunk as well, notching a loss of 6% over the past day.
Like FTX founder and former CEO Sam Bankman-Fried, Kwon saw his reputation swiftly tarnished by the collapse of his project. Though Kwon was once a bombastic character on crypto Twitter, his account went cold in December, not long after he accused Bankman-Fried of sparking the Terra ecosystem’s collapse.
This is fairly public knowledge at this point, but the large currency contraction that UST went through in Feb 2021 was started by Alameda, when they sold 500mm UST in minutes to drain its curve pools during the MIM crisis
— Do Kwon 🌕 (@stablekwon) December 8, 2022
Last month, Kwon was charged with violating securities law by the Securities and Exchange Commission, which accused him of “orchestrating a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.”
The complaint was filed in the U.S. District Court for the Southern District of New York, where Bankman-Fried’s criminal case brought by the U.S. Justice Department currently plays out.
In addition to claims centered on LUNA and Terra USD, the SEC’s complaint took issue with tokens marketed by Kwon that represented publicly traded stocks on Terraform Labs’ Mirror Protocol.
“We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for LUNA and Terra USD,” said SEC Chair Gary Gensler. “We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors.”