- In May 2022, Terra’s blockchain collapsed following the loss of correlation of its stable coin with the USD.
- As a result, some $60 billion was lost in the crypto market within hours.
- Since then, authorities have been searching for the crypto entrepreneur and his accomplices under various financial crime charges.
The mastermind of one of the biggest disappointments in the history of cryptocurrencies, Do Kwon, was arrested by Montenegrin authorities on Thursday. According to media reports, the creator of Terraform Labs was caught while trying to fly to Dubai on a private jet. Authorities reported that the detainee was posing as a Costa Rican citizen with a forged passport.
Authorities detained the suspect at the Podgorica airport for an hour to verify his documentation with the Costa Rican government. After determining the identity of the subject, he was transferred to a detention center where his fate will be decided to face justice.
Thus, after 6 months of search, the man considered at the time as the “King of Cryptocurrencies” is in the custody of the authorities. Several administrations such as the United States and South Korea point to the founder of Terra for various charges of illegal financial activity. Likewise, the businessman would face charges for the collapse of Terra, which led to a millionaire loss to crypto market investors.
The collapse of Terra and its tokens, UST and Luna, marked the crypto market’s shift into the so-called winter. Since then, the price of major coins plunged to alarming lows. Similarly, an endless list of companies went bankrupt as a result of the collapse of those blockchain protocols.
Do Kwon spent $100 million trying to go underground
According to local authorities, Do Kwon was caught after an escape plan that had been 6 months in the making. The next stop on that audacious project was to leave for Dubai on a fake passport. From there, his whereabouts would be very difficult to trace and the creator of Luna could finally get away with it. On the other hand, the media reported that that escape project took $100 million in Bitcoin.
The crimes for which the entrepreneur is wanted are varied and all have to do with the abrupt fall of Terra. Thus, prosecutors in South Korea, his native country, are accusing him of fraud. At the same time, in Singapore, the authorities have opened an investigation against him. It should be remembered that the company’s headquarters were registered in that city-state.
On the same day of his arrest, a large federal court in New York charged Luna’s creator with eight counts of securities fraud. After verifying the identity of Do Kwon and his companion, Han Chang-joon, both were taken to the European country’s prosecutor’s office. It should be noted that Montenegro has no investigations against him, so the arrest was on charges of document forgery.
On Friday, the authorities of the Balkan nation claimed that other documents of Belgian nationality found in the detainee’s belongings were also forged. The latter was confirmed by Interpol officials in Brussels. This arrest appears to close a chapter that triggered losses for millions of retail investors.
During the collapse of Terra, many people lost their life savings and there were reports of depression and suicide attempts.
Do Kwon’s attempt to clean up its image
Since the fall of Terra in May 2022, many things happened in the cryptocurrency world. The bankruptcy of dozens of exchanges and platforms was the first consequence. These included industry heavyweights such as Celsius, 3AC and others. This was followed by the collapse of FTX, which diverted Kwon’s media attention to Sam Bankman-Fried.
In between the collapse of Terra and FTX there was also an attempt to wash Kwon’s image by some news portals. Particularly, it is Coinage, from where an interview was conducted with the businessman just three months after the collapse that evaporated $60 billion dollars. In that work, the South Korean happily chatted with the interviewer, Zack Guzman, about “some of his mistakes”.
But the interview was not well received by the community and various media outlets such as Coindesk denounced the attempt to sensitize the view on Kwon. In any case, the coverage on the entrepreneur did not yield the positive results that those responsible for the fall of the chain and its tokens were probably hoping for.
The DeFi protocols in that ecosystem were the darlings of large and small investors alike. Anchor’s performance and the promise of a fully independent, synthetic dollar financial world made Do Kwon the star of the industry.
While that proposition lacked glaring holes and weaknesses, which Investor Times talked about before the collapse, criticism had little place. The community surrounding that project turned hostile and Kwon’s aggressive attitude on his social networks hid the danger behind it until it was too late. The shock of his fall is considered one of the biggest shocks in the history of virtual currencies.
Terra’s creators claim innocence
The fact that the minds behind Terra’s collapse are now behind bars does not mean that these characters are willing to give up. In fact, Kwon himself maintains his innocence as he has done in every appearance he has made since Terra’s downward spiral.
This time is no exception. The representative of the two arrested on Thursday, Branko Anđelić, confirmed that both deny the charges against them. Speaking to local media, the lawyer assured, “they said that their travel documents are valid, original, and insisted that the prosecutor’s office will officially check it.” On Friday it became known that the detainees were transferred to the Basic Court in Podgorica.
In a video released on Saturday, Kwon and Chan-joon are seen handcuffed and getting into one of the policy vans. The destination was towards one of the many hearings they will face from now on. Thus seems to come the end of a disastrous episode for that market and for the one who once held the title of the most influential entrepreneur in the crypto world.
About two months ago, the patience of Do Kwon’s victims was tested. In that sense, it became known that the founder of Terra was back to the world of entrepreneurship in the sector. DL News portal collected statements from some people working at Terraform Labs, who claimed that Kwon was actively involved in the work despite the arrest warrant hanging over him.
It should not be lost sight of the fact that after the Terra crash, Terra was relaunched dispensing with the stable coin UST. Also, the native Luna token was renewed, while the old one was renamed Luna Classic or LUNC.
SEC’s disdain for cryptocurrencies increases
U.S. financial regulators (SEC) have had an animus for cryptocurrencies ever since they started making noise. However, it wasn’t until the collapse of Terra that the disdain for that market increased considerably. With the bankruptcy of FTX and all the collateral storms that followed, the situation worsened.
This week alone there were two events that shook the digital currency market and in which Do Kwon was at least indirectly responsible. Such is the case of the measures against Justin Sun, creator of Tron for alleged wash trading. In this episode, eight celebrities, including Lindsay Lohan, were splashed. Kwon’s responsibility, it is worth mentioning, is due to the fact that his actions severely damaged the market’s reputation.
But the onslaught did not stop there, the same day of the measures against Sun, it was known that the SEC sent a Wells notice to Coinbase. This is one of the most important crypto trading platforms in the world. The company’s CEO, Brian Armstrong, criticized the regulators’ actions and described them as “unreasonable”.
In recent cases, the same agency applied heavy pressure on the exchange Kraken for the staking service they offer on their platform. Binance and stablecoins such as UST and USDC are expected to be next in the Securities and Exchange Commission’s crosshairs. It should be kept in mind that USDT is one of the pillar assets for cryptocurrency trading. Likewise, Binance is constituted as the most important exchange worldwide.
The outlook looks gray for the companies in the sector and enthusiasts fear that the winter could last for a longer period of time.
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