Fugitive Cryptocurrency Founder Terra Arrested in Montenegro

(Podgorica) Fugitive Terra cryptocurrency founder Do Kwon has been arrested in Montenegro, the interior minister announced on Thursday.

“Montenegro Police have arrested a suspected one of the world’s most wanted fugitives, South Korean Do Kwon, co-founder and CEO of Terraform Labs,” Filip Adzic tweeted.

The suspect was arrested at the airport in the capital Podgorica, in possession of “falsified documents”.

“We are awaiting official confirmation of his identity,” Filip Adzic continued.

The US stock market watchdog, the SEC, indicted Do Kwon in mid-February for “orchestrating a multi-billion dollar fraud in crypto assets”.

Interpol had issued a red notice in September to locate him, at the request of South Korean prosecutors. The prosecution had asked the Foreign Ministry in Seoul to revoke his passport, claiming that Do Kwon was “on the run”.

The collapse of Terraform Labs and the crash of the Terra cryptocurrency last year cost investors nearly $40 billion and rocked the global cryptocurrency market.

Terraform Labs offered a so-called stable cryptocurrency, or “stablecoin”, the Terra.

In principle, the price of a stablecoin is backed by that of a traditional currency or tangible assets, which guarantees investors more stability in the very volatile world of cryptocurrencies.

But the stability of some of these cryptocurrencies is not ensured by currency reserves, but by an algorithm that makes arbitrages based on the supply and demand of another cryptocurrency.

This was the case of Terra, which was backed by the cryptoasset developed by the Luna Foundation Guard.

According to the SEC complaint, Terraform and Do Kwon “repeatedly duped investors” by claiming that a popular Korean payment app had used the technology behind the Terra to settle transactions that would increase the value of the Luna.

The Terraform Labs system “was simply a fraud inflated by an algorithmic pseudo ‘stablecoin’, the price of which was controlled by the defendants, not by any computer code,” said senior SEC official Gurbir Grewal.

In April 2022, the value of Terra had reached its highest level. According to CoinMarketCap, it was then the fourth largest stablecoin and the tenth leading cryptocurrency by market value.

A month later, the Terra had lost more than half its value in just 24 hours, causing panic.

Very quickly, the stablecoin and its sister token Luna fell to zero, hitting the savings of many small investors.

South Korean authorities have since opened several criminal investigations into the case.