Last Wednesday, Seoul Southern District prosecutors issued a warrant for the arrest of Kwon and five other people who worked on both the currencies and Terraform Labs, the company Kwon co-founded. Prosecutors have not listed the charges, but investors have said he defrauded them in promoting the coins. TerraUSD – which used a computer program that claimed to peg its value to the US dollar – and a related token known as Luna, both took off in the past year, with each multiplying in value dozens of times before closing in May. crashed.
A Terra spokesperson did not respond to a request for comment. Kwon also did not respond to a request for comment. He said on Twitter on Sunday: “We are in the process of defending ourselves in multiple jurisdictions – we have held ourselves to an extremely high bar of integrity and look forward to clarifying the truth in the coming months.”
The red-notice request was originally reported by the Financial Times.
The Fall of Crypto Tests the Sustainability of a Hype-Driven Industry
The Kwon case is being watched closely as a sign of how aggressively law enforcement will prosecute those involved in supposedly illegal activities in the crypto space. Last month, the Treasury Department issued sanctions against Tornado Cash, which helps to anonymize crypto transactions, a strong example of a crackdown on technology-based financial instruments.
But chasing individuals into crypto is much rarer, and Kwon’s case could bode well for how other projects that lost large sums of value could be taken to court — and if, eventually, some investors could claim their money back.
Kwon, 31, graduated from Stanford University and worked briefly at Apple before returning to his home country several years ago to found a number of crypto projects, including Luna. Before the spring crash, Kwon was hailed as a visionary and even attracted a cult of everyday fans known as “Lunatics.”
Crypto has made its major upgrade. Even greater ambitions await.
It wasn’t just retailers either – Terraform also raised money from respective financiers such as Silicon Valley VC firm Lightspeed Venture Partners.
But in May, a rapid sell-off began for reasons still unclear, leading to the loss of more than $40 billion in value, according to analytics firm Elliptic, as the price of Luna dropped to near zero and TerraUSD dropped from $1 to $0.11. went. The collapse sparked a wider crypto crash that hit dozens of other assets and businesses.
Bitcoin has gone from nearly $40,000 to less than $20,000 since Terra’s collapse, and the total market value of crypto has plummeted by more than a trillion dollars in just a few months.
Shortly after, Kwon made an attempt to relaunch Luna, much to the outrage of many investors.
Law enforcement experts said they believed prosecution of the entrepreneur was possible but challenging given the vagaries of crypto, where the industry line between fraud and risky investments is often blurred.
Treasury urges federal regulators to crack down on crypto scams
“If someone walks into a bank and holds up a lot of money with a videotape of the whole thing, that’s a pretty obvious case,” said William Callahan III, a former Drug Enforcement Administration special agent who now serves as director of government and strategic affairs for a crypto company called the Blockchain Intelligence Group. “Investigating and prosecuting something like this requires a much more unique set of skills.”
He said the case against Kwon would likely be pursued or it could be proven that he knowingly misled investors by snooping for the coins or campaigning in good faith for a risky but legal venture.
Some of the evidence gathered so far by South Korean investigators, according to local media, includes allegations that Kwon and other Terraform executives decided to close their South Korean offices just a week before the currency crashed. Kwon has said the formwork was a long time in the making.
On Sunday, Kwon’s chase took a surreal turn on social media when Kwon, outspoken on Twitter, took to the platform to deny he is a fugitive.
“I’m not ‘on the run’ or anything like that – to any government agency that has shown an interest in communicating, we are fully cooperating and have nothing to hide,” he said. Posted.
But Seoul’s prosecutors were quick to deny it. He is “clearly on the run,” the office said in a statement, according to local Yonhap news agency.
Kwon joked that he would only give away his coordinates if “1) we’re friends, 2) we have plans to meet 3) we’re involved in a GPS-based web3 game.