The Singapore Police have officially opened an investigation into Do Kwon, founder of crypto firm Terraform Labs. According to Bloomberg report, investigators are looking into whether he committed capital markets law violations.
Terraform Labs created and issued UST, an algorithmic stablecoin tied to the US dollar. Unfortunately, UST collapsed in March 2022, wiping out 99% of its value and resulting in billions of dollars worth of losses for investors.
Singapore Police Investigate Crypto Fugitive Do Kwon and Terraform Labs
Do Kwon is one of the most infamous cryptofugitives in existence and his whereabouts remain a mystery. South Korea issued a warrant for his arrest last September due to his involvement in TerraUSD's collapse, which sent cryptocurrency markets into a tailspin.
He created TerraUSD stablecoin, designed to guarantee a constant US$1 value through an intricate combination of algorithms and trader incentives using sister token Luna. Unfortunately, its failure in May 2022 added fuel to the crypto market crash and led to the demise of several digital-asset companies.
Kwon is accused of fraud by the SEC and his company Terraform Labs was sued last year for $2 trillion in losses caused by his unstablecoin failure. According to the SEC, UST's algorithm had been manipulated, leading Kwon and Terraform Labs to purchase vast quantities of UST in an effort to restore its "peg," or value - which ultimately caused UST to drop below $1 in May 2021.
The SEC alleges in their suit that Kwon and his company took more than 10,000 BTC from their failed project and exchanged some tokens for cash through a Swiss bank. Kwon then attempted to resell UST tokens, but was unsuccessful.
Kwon abruptly disappeared after announcing his intention to sell UST tokens. Although listed as the founder of Terraform Labs on Singaporean business registry records, he hasn't been seen or heard from for months.
Bloomberg reported that Kwon was recently believed to be in Serbia, where South Korean police are actively tracking him. Last month, Seoul's Southern District Prosecutors' Office sent a high-level delegation to Serbia with the aim of capturing Kwon; however, no success has yet been made.
Interpol issued a red notice this week to law enforcement agencies to locate and arrest Kwon. He is suspected of swindling around $2.7 billion from the failed project before its collapse, and now South Korean authorities are hunting him down.
Kwon’s Hideouts
This year, the search for Terraform Labs founder Do Kwon has continued with reports pointing to his possible hiding place in Serbia. The wanted man is wanted for his involvement in LUNA and UST's collapse as well as capital-markets law violations. Additionally, he is under Interpol red notice protection.
According to reports, the South Korean Ministry of Justice requested Serbian authorities' help in tracking down Kwon after receiving information on his whereabouts. Earlier this week, one of Seoul's prosecutors and a senior Justice Ministry official made the journey to Serbia.
Kwon has repeatedly denied being on the run, yet there are multiple possible explanations why he might be living in Serbia. Given his status as under arrest in South Korea and an Interpol red notice, there could be several possible explanations why he might have left Europe.
Kwon may be able to avoid capture through the International Fugitive Round-Up and Arrest (INFRA) program. This initiative has resulted in the location or arrest of 1,000 fugitives; however extradition outside member countries of Interpol can prove challenging.
Interpol is composed of 195 countries, 31 of which have extradition treaties with South Korea. Unfortunately, Taiwan is not a member of Interpol nor has it signed an extradition treaty with South Korea.
Palau's government has a longstanding tradition of supporting judicial issues and mutual legal assistance, evidenced by its signing of the "Exchange of Judicial Materials" agreement with numerous other countries around the world. Furthermore, Palau has an interest in collaborating with Interpol on matters pertaining to global terrorism or other crimes that require international law enforcement cooperation.
Kwon may or may not feel secure in Serbia, but there's far too much to explore and do for him to stay put all the time. He should get out and enjoy some of Belgrade's sights; there's a farmer's market, an idyllic night club floating along the river, as well as plenty of other activities that will keep him occupied.
Kwon’s Twitter Account
Twitter is Kwon's go-to social media platform and he uses it to engage with the crypto community. Unfortunately, some users may misinterpret his tweets.
Terraform Labs and the crypto community may face a dilemma due to Kwon's disappearance of Terra USD and similar Luna tokens, for which law enforcement worldwide is actively searching for him. Recently, many have been calling on him to reveal his whereabouts via social media channels as part of an international manhunt.
Kwon's whereabouts were first investigated in September when South Korean prosecutors sought to freeze $39.6 million worth of cryptocurrency assets linked to Terraform Labs and Luna Foundation Guard project. This action prompted Interpol to issue a red notice to all law enforcement agencies worldwide.
As the investigation into Terra USD and other Luna tokens progressed, rumors spread that Kwon was hiding somewhere in Europe or Dubai. This news did not go down well amongst the crypto community as it raised fears that Kwon could be on the run for stealing $40 billion worth of Terra USD and similar Luna tokens.
On Wednesday, Kwon responded to reports by tweeting that he is not hiding and denies any connection to the frozen assets. Additionally, he attacked the media for spreading false information about his whereabouts and called on everyone to get their facts straight.
Prosecutors allege that Kwon left Singapore in September and traveled to a third country via Dubai. There, he transferred funds from Terraform Labs and Luna Foundation Guard to crypto exchanges OKX and KuCoin.
This is a clear sign that the LUNA ecosystem may have been compromised by an individual or group of hackers. If this occurs, it could spell the end for the entire ecosystem.
Over the last week, LUNA's price has been declining rapidly - down 58% in seven days to $2.98 with a market cap of $625 million.
Kwon’s Legal Issues
Singapore police are conducting an investigation into crypto fugitive Do Kwon and Terraform Labs Pte Ltd, the company he founded. A statement released Monday by police states that "investigations have begun in relation to Terraform Labs Pte." The inquiry is ongoing and Kwon is not currently in the country.
The Securities and Exchange Commission is pursuing fraud charges against Terraform Labs CEO Kwon and his company, alleging they sold unregistered securities and misled investors about the stability of UST and Luna tokens. Furthermore, the agency wants to impose penalties on Terraform and Kwon for failing to register with them.
In a press release, the SEC asserts that Terraform and Kwon violated federal securities law by selling an interconnected suite of crypto asset securities without registration. These included Luna, Wrapped Luna, UST, and Mirror (MIR) tokens as well as security-based swaps linking these to U.S.-based stocks.
Kwon sold unregistered securities to investors seeking profit, promising they would increase in value. Unfortunately, after the collapse of Terra/Luna trading system in May 2022, these securities lost more than 99% of their value - leading to billions of dollars in global losses.
Terraform's assets were mostly lost, yet many questions remain as to where Kwon and his company went after their failed algorithmic stablecoin launch in May. The SEC and Seoul prosecutors are both investigating potential criminal violations while other jurisdictions have issued arrest warrants for him and others.
Kwon and four other employees of Terra/Luna trading platform have already been issued an arrest warrant by a South Korean court in connection with its collapse; while United States authorities are considering filing charges against him as well. According to the SEC (Securities and Exchange Commission), Terraform and Kwon used various tactics to sell unregistered securities, including falsely representing that TerraUSD tokens were secure investments that would increase in value over time.
The SEC's complaint also notes Kwon and Terraform's efforts to promote and sustain an unsustainable lending protocol called Anchor, which offers interest payments on top of a token's price. Furthermore, Terraform provided $450 million in early 2022 through Luna Foundation Guard at Kwon's request.
The above references an opinion and is for information purposes only. It is not intended to be investment advice. Seek a duly licensed professional for investment advice.