Do Kwon, the founder of Terraform Labs, a cryptocurrency company that collapsed causing two of its cryptocurrencies to fail and causing the market to crash, has been arrested in Montenegro.
Kwon became a fugitive after the South Korean government issued a warrant for his arrest and was sought by authorities in at least three countries.
He travelled around Europe and Asia, insisting on Twitter that he was not “on the run” while giving interviews to reporters and podcasters and attempting to revive his company. In the end, his efforts were fruitless and he was apprehended by Montenegrin authorities.
In November 2022, Kwon made a livestream appearance with Martin Shkreli, a former pharmaceutical executive who was sentenced to seven years in prison for fraud.
Kwon was charged with eight counts of fraud by federal prosecutors in the Southern District of New York on Thursday, while South Korea also accused him of financial crimes. His arrest is expected to set up a battle over his extradition.
Kwon was one of the richest and most powerful figures in the crypto industry a year ago after he founded Terraform Labs. This startup issued two digital currencies: TerraUSD, a stablecoin with a price of $1, and Luna, a more traditional cryptocurrency with a fluctuating value. TerraUSD was designed to maintain its $1 value through financial engineering that connected it with Luna.
The coins became popular, and the value of all the Luna in circulation climbed to $40bn as the crypto market boomed in 2021 and early 2022. However, the value of Luna dropped precipitously in May, bringing TerraUSD down with it, causing the collapse of major crypto companies including FTX, the exchange founded by Sam Bankman-Fried.
Kwon, who cultivated a brash persona on Twitter and had passionate followers, was then the target of criminal investigations. This caused a lot of backlash, as people felt that he was unfairly targeted. Some even accused the government of being behind the investigations in an attempt to quash the burgeoning crypto industry.
Kwon’s arrest comes after he was caught trying to board a private flight to Dubai with a fake passport. He was traveling with a companion, and both of them attempted to use forged Costa Rican passports. They were also carrying travel documents from Belgium that appeared to be falsified.