Last Wednesday, the Seoul South District Attorney’s Office issued an arrest warrant for Kwon and five other people who worked on both the currencies and Terraform Labs, the company that Kwon co-founded. Prosecutors did not list any charges, but investors said he deceived 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 called Luna both launched last year, each multiplying in value dozens of times before crashing in May.
A Terra spokesman 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 standard of integrity and we look forward to clarifying the truth over the next few months.”
The Red Notice request was originally reported by the Financial Times.
Crypto’s plunge is testing the durability of a hype-driven industry
The Kwon case is being closely watched as it is a sign of how aggressively law enforcement will prosecute those involved in allegedly illegal activities in the crypto space. Last month, the Treasury imposed sanctions on Tornado Cash, which helps anonymize crypto transactions, a stark example of a crackdown on technology-based financial instruments.
But the prosecution of individuals in crypto is much rarer, and Kwon’s case could be a role model for how other projects that have lost large sums in value could be targeted in court — and whether some investors might eventually reclaim their money.
Kwon, 31, graduated from Stanford University and briefly worked at Apple before returning to his home country a few years ago to found a number of crypto projects, including Luna. Before the spring crash, Kwon was hailed as a visionary, even attracting a cult of everyday fans known as the “Lunatics.”
Crypto has made its big upgrade. Even greater ambitions await you.
It wasn’t just retailers — Terraform also raised money from related financiers like Silicon Valley VC firm Lightspeed Venture Partners.
But in May, for reasons that are still unclear, a rapid sell-off began, leading to more than $40 billion in value, according to analytics firm Elliptic, as Luna’s price fell to almost zero and TerraUSD from $1 to $0.11 rose. The collapse helped spark a broader crypto crash that affected dozens of other assets and businesses.
Bitcoin has surged from nearly $40,000 to under $20,000 since Terra’s collapse, and the total market value of crypto has plummeted by more than $1 trillion in just a few months.
Kwon made an attempt to relaunch Luna shortly thereafter, much to the outrage of many investors.
Law enforcement experts said they believe prosecution of the entrepreneur is possible, but a challenge given crypto’s whims as the line in the industry between fraud and risky investments is often blurred.
Treasury Department urges federal agencies to crack down on crypto fraud
“If someone walks into a bank and holds it up with a videotape of the whole thing for a lot of money, then that’s a pretty clear case,” said William Callahan III, a former DEA special agent who now serves as director of government and strategic affairs for a crypto company called Blockchain Intelligence Group. “Investigating and prosecuting something like this requires much more unique skills.”
He said the case against Kwon would likely relate to whether it can be proven that he knowingly misled investors to look for the coins or whether he was campaigning in good faith for a risky but legit venture has started.
Some evidence gathered so far by South Korean investigators includes claims that Kwon and other TerraForm executives decided to close their South Korean offices just a week before the currencies crashed, according to local media. Kwon said the formwork had been a long time in the works.
On Sunday, the persecution of Kwon took a surreal turn on social media when Kwon openly took to Twitter to deny that he is a refugee.
“I’m not ‘on the run’ or anything – for any government agency that has shown an interest in communicating, we are fully cooperating and have nothing to hide,” he said Posted.
But Seoul prosecutors were quick to deny this. According to local Yonhap news agency, he is “apparently on the run,” the bureau said in a statement.
Kwon joked that he would only reveal his coordinates if “1) we’re friends, 2) we have plans to meet up, 3) we’re involved in a GPS-based Web3 game.”