South Korean authorities have issued an arrest warrant for Do Kwon, founder and CEO of Terraform Labs, according to multiple global reports.
Bloomberg report that Do Kwon – real name Kwon Do-hyeong – is currently in Singapore and the South Korean government may ask Interpol to help apprehend the CEO and could seek help from Singaporean officials.
Terraform Labs’ stablecoin UST and cryptocurrency LUNA unexpectedly crashed in May, sparking a global crypto rout, after investors lost faith in the stability of its underlying principles. Binance and Coinbase, two major cryptocurrency exchanges, delisted the token and discontinued support for its trading pairs. Since then, several exchanges have reintroduced the old token with limited support.
The shocking collapse of the Terra stablecoin cost the cryptocurrency market more than $200 billion, while the price of Luna Terra has dropped by nearly 80%.
Terraform Executives’ Illegal Activities
South Korean officers searched the home of Terraform Labs co-founder Daniel Shin in July as part of an investigation into allegations that illegal activities contributed to Terra’s demise. Furthermore, authorities have stated that Kwon must notify them of his return to South Korea.
Despite authorities prohibiting his staff from leaving the country, Kwon stated in an interview last month that South Korean prosecutors had not contacted him and said he was not facing any charges. Kwon said in the video interview:
“It’s kind of hard to make that decision, because we’ve never been in touch with the investigators. They’ve never charged us with anything.”
According to multiple sources, six people have had warrants issued by a South Korean court, and the prosecutors believe the defendants violated capital market laws in the country.
Arrest Warrant for Terra founder Do Kwon
The investigation team comprises five prosecutors from the Financial and Securities Crime Unit 1 Team and the Financial Investigation Division 2 of the Seoul Southern District Prosecutors’ Office.
According to the legal community, CEO Kwon, Nicholas Platias, a founding member of Terraform Labs, and employee Han Mo remained in Singapore. Arrest warrants have been filed and issued for six people involved.
Arrest Warrant out for Do Kwon (founder of Terra)
– Korea's Financial Security Crime Team found evidence of "Fraudulent transactions" in the form of investment contract securities
— Garlam (@GarlamWON) September 14, 2022
Violating the Capital Market Act
The prosecution is yet to issue a statement on the arrest and details remain fluid. The individuals were previously suspected of violating the Capital Market Act, but official sources have confirmed this. According to reports, authorities opened an investigation after discovering that Terra and Luna qualify as “investment contract securities” under the Capital Market Act.
Investment contract securities are a type of security in which money is invested in a group project in the hopes of profiting. Prosecutors claim they engaged in fraudulent activities under the Capital Market Act, such as failing to carry out joint ventures. Investors have been purchasing UST for the past six months for one main reason: earning a 20% yield from borrowing and lending platform Anchor.
When I read about the ‘algorithm’ of @terra_money it sounds just like a crypto version of a pyramid scheme. Investors were promised 20% returns backed by a token whose value is driven only by demand from new investors in the token. There is no fundamental underlying business.
— Bill Ackman (@BillAckman) May 17, 2022
Many people said it sounded like a Ponzi scam when it was first introduced since they figured Terra couldn’t possibly pay out such a high rate of return to all of their investors. Even Terra staff members admitted as much but justified the price as a form of advertising.
– Arrest warrant is valid for 1 year and will try tactics such as Interpol cooperation and invalidating passports to bring them inhttps://t.co/Ug9085to4X (in Korean)
— Garlam (@GarlamWON) September 14, 2022
As reported by Chosun, the arrest warrants are “valid for one year.” The prosecution is considering taking action, such as asking Interpol to add Kwon to its “red alert” list and evoking Kwon’s passport.
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