Terraform Labs Founder Do Kwon Charged with Fraud In Relation to $40B Crypto Crash

By Spencer Hulse Spencer Hulse has been verified by Muck Rack's editorial team
Published on March 24, 2023

Do Kwon made quite a name for himself with Luna, going on and on about its potential. He raised over $200 million from major investment firms, and despite skepticism, the value inflated beyond $40 billion. Then it collapsed, leading to the current arrest and fraud charges faced by the crypto trash talker, who once proudly referred to his investors and supporters as “Lunatics.”

The Fall of Terraform Labs

Do Kwon dismissed concerns over the “technological underpinnings” with taunts and arrogance. However, everything eventually came crumbling down around him in May of 2022. Luna, as well as another currency developed by Kwon, TerraUSD, collapsed. It was such a major crash that it impacted the rest of the industry.

  • It caused a sharp drop in the price of Bitcoin.
  • More than $300 billion in value was lost across the cryptocurrency ecosystem.
  • Despite the collapse, some investors made it out before the crash, reaping immense profit.

One example of a company that made a profit was Pantera Capital, a hedge fund that invested around $1.7 million and turned it into somewhere in the range of $170 million. However, not all were lucky, and it left people looking for the person responsible. To many, Do Kwon and his irresponsible backers were at fault.

  • TerraUSD was known as a stablecoin, but it was not backed by a traditional asset like cash or treasuries.
  • The “stability” it offered came from algorithms linking it to Luna, which were used to push borrowing and lending activities.

In the end, it only took a bit of panic from falling prices and economic hardship to bring the entire operation to its knees. What was worth billions became worthless almost overnight.

Do Kwon’s Arrest In Montenegro

According to Montenegro officials, Do Kwon, who is wanted by both the US and South Korea in relation to the $40 billion crypto crash, was arrested for using forged travel documents. It comes after a warrant for his arrest was brought forth by the South Korean government in September.

At the time, South Korean officials also asked Interpol to issue a Red Notice, which is “a request to law enforcement worldwide to locate and provisionally arrest a person pending extradition, surrender, or similar legal action.”

It has been alleged that Kwon violated capital markets laws, and last month the Securities and Exchange Commission (SEC) sued him and Terraform Labs, claiming Luna and TerraUSD were sold as unregistered securities.

Prior to the arrest, Kwon was hiding in Serbia, but he was forced to flee because South Korean authorities were closing in. Both the US and South Korea plan to extradite Kwon to make him face charges, according to Bloomberg.

The Charges Faced by Do Kwon

Federal prosecutors in New York have indicted Kwon on fraud charges, which took place mere hours after his arrest. The total charges total eight, including conspiracy to defraud and engage in market manipulation. Other charges include:

  • Wire Fraud
  • Commodities Fraud
  • Securities Fraud

These charges are in relation to the crypto crash, and they are separate from the civil charges against him filed by the SEC. It represents the latest action brought against irresponsible actors in the crypto industry.

By Spencer Hulse Spencer Hulse has been verified by Muck Rack's editorial team

Spencer Hulse is the Editorial Director at Grit Daily. He is responsible for overseeing other editors and writers, day-to-day operations, and covering breaking news.

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