Do Kwon Is Wanted in 195 Countries. What Happens Next?
South Korean prosecutors have said that Interpol has issued a red notice for the Terraform Labs chief.
Kwon’s addition to Interpol’s wanted list raises questions about the possible consequences for him and the broader crypto space.
Do Kwon Handed Red Notice
The cat-and-mouse chase between South Korean authorities and Do Kwon just stepped up a gear.
Prosecutors in Seoul confirmed Monday that the Terraform Labs co-founder had been added to Interpol’s red notice list, effectively making him a wanted fugitive in 195 countries. Bloomberg first reported on the update and the prosecutors have since confirmed the news with multiple publications. Crypto Briefing reached out to the prosecutors, Kwon, and Terraform Labs representatives for comment but had not received a response at press time.
The Seoul Southern District Prosecutors’ Office said on September 19 that it had initiated the process of adding Kwon to the international police organization’s wanted list, escalating the manhunt for the central figure behind the failed Terra blockchain.
Authorities worldwide have been investigating Kwon and Terraform Labs since Terra’s UST stablecoin lost its parity to the dollar in May in a $40 billion wipeout event that rocked an already-shaky cryptocurrency market. Kwon and Terraform Labs left South Korea for Singapore ahead of Terra’s blow-up, but Singapore police said on September 17 that he’d fled the country. Kwon took to Twitter that day to tell his followers that he was “not ‘on the run,’” a claim that South Korean officials later refuted.
“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 over the next few months,” Kwon wrote.
The Case Against Kwon
Though Kwon’s name did not appear on Interpol’s website at press time, today’s update is the clearest sign yet that the 31-year-old Stanford alum could face jail time over Terra’s spectacular wipeout.
Prosecutors are looking to speak with Kwon and five other individuals affiliated with Terraform Labs for alleged violations of capital markets law, and they’ve said that the charges concern the financial losses thousands of investors suffered on Terra’s native tokens.
South Korean enforcement probed Kwon on suspicion of tax fraud and running a Ponzi scheme after Terra collapsed, and he’s also facing class action lawsuits in Korea and the U.S. In June, the SEC began looking into how Terraform Labs marketed its flagship product amid debates over whether Kwon and his company misled investors in labeling UST as a stablecoin. So far, though, it’s unclear how the prosecutors plan to present their case against Kwon, and to what extent he’s fallen foul of the law.
Whatever case awaits Kwon, he’ll need legal representation. With Terra’s LUNA suffering a virtual 100% collapse in May, questions have been raised over Kwon’s financial health. Terra’s Luna Foundation Guard memorably said it spent over $1 billion worth of Bitcoin on an attempt to save UST, which would have left the organization with about $80 million in Bitcoin and other digital assets. Kwon and Terraform Labs’ current token holdings and other reserves are unclear in part due to the opacity of their activity, but the original Terra and Terra 2.0 blockchains are collectively worth about $2.2 billion, per CoinGecko data.
Terra’s Domino Effect
While Kwon’s fate is still unknown, there’s a good chance that authorities will be set on making an example of him due to the scale of Terra’s collapse. The incident caused a slide in the crypto market that hit Three Arrows Capital and a series of once-giant crypto lenders, but retail investors were arguably the biggest losers in the blow-up. Terraform Labs successfully rallied an audience of devotees that called themselves the “Lunatics,” praising Kwon as the project’s outspoken hero as the price of its LUNA token rallied. But once the blockchain collapsed and investors started losing life savings (and in some cases, their lives), Kwon became crypto’s public enemy number one, setting the stage for the ongoing manhunt.
While the crypto market is still suffering thanks to Terra’s downfall and weak macroeconomic conditions, regulators are taking note of how to prevent a repeat of UST’s collapse in the future. U.S. lawmakers put forward a bill last week that would introduce a ban on UST-like algorithmic stablecoins, potentially threatening other decentralized dollar alternatives like MakerDAO’s DAI. Crypto has seen countless projects rise and fall over its 13-year history, but none have drawn as much regulatory attention as Terra’s failure. That’s a bad sign for Kwon and Terraform Labs, and it could be the catalyst that leads to more stringent checks on the space for years to come.
Kwon’s possible arrest has not gone unnoticed in the market. LUNC (the ticker for the original LUNA) and the new LUNA token powering Kwon’s second attempt at a Terra blockchain both plummeted after previous updates from the prosecutors, but interestingly, they’re both trading in the green today. LUNC has jumped 26.4% amid interest in the project’s new 1.2% tax burn, while LUNA is up 7.8%, per CoinGecko data. Still, price updates are unlikely to settle Kwon’s mind today; while he made no secret of his pride in LUNA’s surge earlier this year, with a global police chase to contend with, it’s probably fair to assume that his mind is on bigger things than green candles at the moment.
Update: Kwon broke his silence on the Interpol development in a series of Monday tweets, saying that he was “writing code” in his living room. “For something that has notice in the name it sure gives no notice,” he added, pointing out that his name does not yet appear on Interpol’s website. He also said that he was “making zero effort to hide.”
Disclosure: At the time of writing, the author of this piece owned ETH and several other cryptocurrencies.
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