South Korean authorities have asked Interpol for a Red Notice to stop crypto entrepreneur Do Kwon from fleeing extradition, days after the Terra founder denied, in a message posted to his Twitter account, “on the run.” ” to be.
The international cat-and-mouse hunt comes amid another collapse in the sector’s value, apparently sparked by the “merger,” an unprecedented shift in the technical infrastructure underlying Ethereum, the second-largest cryptocurrency.
Kwon was the founder of the Terra/Luna cryptocurrency platform, an attempt to build a system that could compete with Ethereum. But Kwon’s attempts to build an “algorithmic stablecoin” that would hold its value at exactly $1 with no reserves to back it failed disastrously in the spring of 2022, wiping out more than $80 billion (£70 billion). value as the tokens were sold by panicked holders. and trigger a larger crypto crash that destroyed two-thirds of the value of the entire sector.
A charismatic frontman, Kwon was widely known for engaging in verbal altercations on social media with people who questioned the sustainability of his creation, even in its final days. Following reports this month that South Korean prosecutors were seeking his arrest, Kwon, who was apparently based in Singapore at the time, tweeted: “I’m not ‘on the run’ or anything – for a government agency that has shown an interest in communicating, we work fully together and have nothing to hide.”
Now South Korean prosecutors say they cannot contact Kwon, who has not tweeted since Friday. “We have initiated proceedings to put him on Interpol’s Red Notice List and have his passport revoked,” prosecutors told the Financial Times on Monday, as he “is apparently on the run and has no intention of getting ahead of us.” to show up for questioning”.
They said he dissolved the South Korean branch of his company, Terraform Labs, and traveled to Singapore at the end of April. Singapore police said Kwon is no longer in the country but will assist with the investigation. Kwon did not respond to a request for comment from the Guardian.
In June, former Kwon employees reported that their passports had been confiscated by the state to prevent them from following him as part of the government’s investigation into the failure of his business.
Kwon’s apparent flight comes amid another collapse in cryptocurrency markets, with Bitcoin down nearly 16% and Ethereum down nearly a quarter in a week. The defeat was apparently prompted by Ethereum’s “merger,” which saw the cryptocurrency switch from “proof of work” to “proof of stake,” a far less energy-intensive way of running the underlying infrastructure of much of the sector.
The transition was successful on its own terms, with the network transitioning seamlessly from one protocol to the other. As a result, the direct energy consumption of the Ethereum network has dropped by 99.98%.
The decentralized “miners” running the physical infrastructure needed to secure “proof-of-work” systems have the ability to migrate to other networks, but none offer anywhere near the profit potential that a miner does with a top-of-the-line “rig” could expect to make $50 a day on Ethereum until the merger, but only make pennies on other networks after the merger.
As a result, miners break up their rigs and sell the powerful graphics cards they run on. An Nvidia GeForce RTX 3080 that once sold for more than £1,000 thanks to supply shortages and demand from crypto miners can now be bought on eBay for half that.
But the move to a “proof of stake” system has raised new questions about the cryptocurrency’s regulatory status. The head of the Securities and Exchange Commission told The Wall Street Journal on Thursday that the postponement could result in Ethereum being regulated as a security because it could pass the “Howey Test,” a key legal obstacle to regulating tradable assets in the Ethereum US.
In a proof-of-stake system, “the investing public expects gains based on the efforts of others,” said SEC Chairman Gary Gensler. His comments prompted an immediate 5% drop in the price of Ethereum.