Terraform Labs Co-founder Do Kwon Wanted In 195 Countries. What’s Next?

The inclusion of Kwon on Interpol’s most-wanted list raises concerns about the potential repercussions for him and the crypto industry.

Do Kwon Was Issued a Red Notice

The cat-and-mouse game between South Korean officials and Do Kwon has reached a new level of intensity.

Prosecutors in Seoul revealed that the co-founder of Terraform Labs had been put on Interpol’s red notice list, making him a fugitive in 195 countries. Since Bloomberg’s first article, the prosecutors have verified the news in several outlets. At the time of publication, CoinCulture had reached out to the prosecutors, Kwon, and Terraform Labs reps for comment, but none had responded.

The Seoul Southern District Prosecutor’s Office said on September 19 that it had added Kwon to the international police organisation’s wanted list, thus intensifying the search for the key person behind the failed Terra ecosystem.

Since Terra’s UST stablecoin lost its peg with the dollar in a $40 billion wipeout that shook the crypto market, authorities worldwide have investigated Kwon and Terraform Labs. Kwon and Terraform Labs departed South Korea for Singapore before Terra’s crash, but on September 17, Singapore police reported that he had fled the country. South Korean officials later rejected Kwon’s assertion that he was not on the run on Twitter. 

I am not “on the run” or anything similar – for any government agency that has shown interest to communicate, we are in full cooperation and we don’t have anything to hide

— Do Kwon 🌕 (@stablekwon) September 17, 2022

Kwon said that he was defending himself in many jurisdictions, and they had held themselves to an extraordinarily high standard of honesty and looked forward to revealing the truth in the coming months.

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

— Do Kwon 🌕 (@stablekwon) September 17, 2022

Evidence Against Do Kwon

The 31-year-old Stanford graduate might face jail time for Terra’s spectacular wipeout. Prosecutors wish to interview Kwon and five other persons linked with Terraform Labs for alleged violations of capital markets legislation. The allegations involve the financial losses sustained by thousands of investors in Terra’s native tokens.

After Terra fell, South Korean authorities investigated Kwon on suspicion of tax fraud and conducting a Ponzi scheme. He was facing class action lawsuits in Korea and the United States. In June, the SEC inspected how Terraform Labs advertised its main product amid arguments over whether Kwon and his firm deceived investors by classifying UST as a stablecoin. It is unclear, however, how the prosecutors want to bring their case against Kwon and to what degree he has violated the law.

Whatever matter awaits Kwon, he will require legal counsel. Terra’s LUNA suffered a near-total collapse in May, raising concerns about Kwon’s financial health. Terra’s Luna Foundation Guard reportedly spent over $1 billion worth of Bitcoin to save UST, leaving the organisation with around $80 million in Bitcoin and other digital assets. Due in part to the unclear nature of Kwon and Terraform Labs’ activity, their current token holdings and other reserves are unknown. However, according to CoinGecko, the original Terra and Terra 2.0 blockchains are jointly valued at around $2.2 billion.

The Domino Effect of Terra

Due to the magnitude of Terra’s collapse, there is a significant probability that authorities will be determined to make an example out of Kwon. The incident precipitated a decline in the crypto market, negatively impacting Three Arrows Capital and several once-major crypto lenders, but regular investors were likely the largest losers. 

As the price of its LUNA token increased, Terraform Labs effectively hired those who praised Kwon as the project’s vocal hero and referred to themselves as Lunatics. But as the blockchain crumbled and investors began losing their life savings (and, in some instances, their lives), Kwon became crypto’s public enemy number one, launching the current manhunt.

While the crypto market continues to suffer due to Terra’s collapse and terrible macroeconomic conditions, officials are analysing ways to prevent a repetition of UST’s demise in the future. Last Monday, U.S. senators introduced a measure to prohibit algorithmic stablecoins similar to the UST, possibly endangering other decentralised dollar alternatives such as MakerDAO’s DAI. Throughout crypto’s 13-year existence, other projects have risen and fallen, but none have garnered as much regulatory attention as Terra’s demise.

The potential arrest of Kwon has not gone ignored in the market. Interestingly, both LUNC (the ticker for the first LUNA) and the new LUNA token that powers Kwon’s second try at a Terra blockchain are trading in the green. According to CoinGecko, LUNC has increased by 26.4% due to interest in the project’s new 1.2% tax burn, while LUNA has risen by 7.8%. 

But price updates are unlikely to calm Kwon’s mind. He made no secret of his pride in LUNA’s rise earlier this year. Still, with a global manhunt to worry about, it’s safe to assume that he is currently preoccupied with more important matters than green candles.

Update: In a series of tweets published on Monday, Kwon broke his silence on the Interpol development by stating that he was “writing code” in his home. “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 stated that he was making no effort to conceal himself.