Cryptocurrency entrepreneur Do Kwon — who designed a cryptocurrency pair that failed spectacularly last year, sending the market crashing — was charged with fraud by federal prosecutors in New York on Thursday, hours after authorities in Montenegro arrested him. him as he was getting ready to board the plane. a trip.
Mr. Kwon, 31, and another person were arrested after using fake Costa Rican travel documents in a passport check before a trip to Dubai, Montenegro’s Ministry of Interior He said on Twitter. A few hours later, US prosecutors for the Southern District of New York filed criminal charges against Mr. Kwon for his management of Terraform Labs, the company behind the crashed cryptocurrencies Luna and TerraUSD.
Mr. Kwon faces eight counts, including wire fraud, commodity fraud, securities fraud, conspiracy to defraud, and engaging in market manipulation.
His whereabouts have been the source of intense speculation in the crypto world since last fall, when authorities in his native South Korea issued an arrest warrant for him and five others on financial charges. In September, Interpol, the international police organization, issued a “red notice” calling for his arrest, at the request of the South Koreans.
A spokesman for Mr. Kwon did not respond to a request for comment. A representative of the Ministry of the Interior of Montenegro referred the New York Times to the Twitter statement announcing Mr. Kwon’s arrest.
A graduate of Stanford University, Mr. Kwon rose to prominence as the founder of Terraform Labs, which released TerraUSD, a “stablecoin” designed to maintain a fixed price of $1, and Luna, a traditional cryptocurrency with a value that often fluctuates.
But digital currencies were closely related. TerraUSD was supposed to maintain its peg to the dollar through algorithms that peg it to Luna. With the cryptocurrency market booming in 2021 and early 2022, digital currencies are becoming extremely popular, with Luna’s total value reaching $40 billion.
When critics pointed out the risks in the algorithm’s design for coins, Mr. Kwon often shut them down, with quips like “I don’t argue with the poor.”
Then in May, Luna price fell, creating a so-called death spiral that sent TerraUSD down with it. The crash wiped out tens of billions of dollars in value overnight and triggered a market crash that sent down the prices of bitcoin, ether, and other popular cryptocurrencies. Investors in Luna and TerraUSD lost everything.
Criticized for his role in the implosion, Mr. Kwon has gone from a leading figure in the industry to one of the most iconic villains. In September, South Korean prosecutors charged him with violating the country’s financial laws, before Interpol issued the Red Notice.
In response to the arrest warrant, Mr. Kwon chirp He was willing to cooperate with the authorities. He said, “I’m not a runaway or anything like that.” Prosecutors responded that Mr. Kwon was “obviously on the run,” according to the statement yonhap, South Korean news agency.
Mr. Kwon has also faced scrutiny in the United States. In February, the Securities and Exchange Commission Accused masterminded a “billion-dollar securities fraud with crypto-assets.”
The federal indictment charges Mr. Kwon with a range of crimes, including making false statements about the success of his cryptocurrency and orchestrating a scheme to manipulate cryptocurrency prices.
The next steps in the legal drama are unclear. The United States is likely to request his extradition, but South Korea may also try to prosecute him there.
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