Do Kwon, the former CEO of Terraform Labs and co-founder of the Terra blockchain ecosystem, has been arrested in Montenegro, according to a series of tweets by the country’s Minister of Interior, Filip Adzic. Do Kwon’s arrest has sent shockwaves through the crypto community, leading to a significant drop in the value of Terra’s native LUNA tokens.
Minister of Interior, Filip Adzic
In his tweets, Adzic announced that Montenegrin police had detained a person suspected of being “one of the most wanted fugitives,” South Korean citizen Do Kwon. The arrest took place at the Podgorica airport, where the suspect was found with falsified documents. Adzic added that the authorities were still waiting for official confirmation of identity. The unverified account of Adzic is followed by the official account of the Prime Minister of Montenegro, Dritan Abazovic, who also retweeted the announcement.
Do Kwon has been the target of multiple investigations and was even on Interpol’s red notice list after Terra’s stablecoin, terraUSD (UST), and its $40 billion ecosystem imploded last year, causing significant disruptions in the crypto markets. South Korean prosecutors had previously alleged that Kwon was hiding in Serbia, a country with no extradition agreement with South Korea. The Interpol red notice, issued on September 26, 2022, sought Kwon’s arrest for his alleged role in the collapse of the Terra Luna (LUNC) and Terra USD (USTC) ecosystem in May 2022. Regulatory authorities in South Korea, Singapore, and the U.S. have also been pursuing Kwon.
Montenegro does not have extradition agreements with either Singapore or South Korea but does have an old extradition treaty with the U.S. The country has complied with extradition requests for U.S. nationals in the past and communicates with Interpol on extradition matters. Although Kwon has spent substantial time in the U.S., it is unclear whether he is a U.S. citizen or permanent resident, or if he committed criminal acts against U.S. nationals, which would be necessary for potential extradition proceedings.
Securities and Exchange Commission
On February 16, 2023, the U.S. Securities and Exchange Commission (SEC) charged Kwon with “orchestrating a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.” Since March, the U.S. Department of Justice has also been investigating Kwon’s role in the collapse of the Terra Luna ecosystem. However, no criminal complaints have been filed against Kwon within the territory of the United States.
Following the news of Do Kwon’s alleged arrest, the crypto market reacted swiftly, with Terra’s native LUNA tokens experiencing a sharp decline. LUNA’s value fell by 8%, dropping 10 cents from $1.40 at the time of writing on Thursday. Luna Classic tokens also faced a decline, albeit a smaller one, with a drop of 3.7% according to data from CoinGecko.
The arrest of Do Kwon highlights the challenges that the cryptocurrency industry faces in terms of regulation and compliance. The Terra ecosystem’s implosion last year had a significant impact on the market, and Kwon’s arrest has renewed concerns about the stability of the sector. As regulatory authorities worldwide continue to scrutinize the actions of high-profile individuals within the crypto community, it remains to be seen what impact these investigations will have on the industry as a whole.