Crypto fugitive Do Kwon arrested in Montenegro, says interior minister

Authorities in Montenegro have arrested a person believed to be South Korean fugitive Do Kwon, the crypto entrepreneur behind the $40 billion implosion of terraUSD and luna digital tokens last year.

In a statement on Twitter, Montenegro’s Interior Minister Filip Adzic said “the former cryptocurrency king” was arrested by police at Podgorica airport with forged documents.

The collapse of the terraUSD coin last year triggered an unprecedented crash in crypto markets that engulfed many of the industry’s leading players. Kwon, co-founder of Terraform Labs, was charged with fraud and capital market law violations in his home country and sparked an international manhunt after authorities failed to find him.

South Korean authorities said last year that he had traveled to an unknown country, believed to be Serbia, via Dubai after leaving Singapore, where Terraform was headquartered. His South Korean passport was also revoked. “We are waiting for official confirmation of identity,” Adzic added.

The meltdown of terraUSD and luna coins affected hundreds of thousands of investors, many of whom were drawn in by a scheme where customers could lend their terra coins for a return of up to 20 percent.

TerraUSD, a stablecoin, was designed to connect traditional and crypto markets. Traders use them as cash or a store of value between crypto trades. Most track the value of the dollar one-to-one, but terra was supposed to be aligned with algorithmic coding, so it didn’t need to be backed by hard assets.

Kwon and Terra have also been sued by the US Securities and Exchange Commission for allegedly orchestrating a cryptocurrency scam that led to billions of dollars in losses by selling a variety of digital assets not properly registered with regulators.

The SEC said the alleged fraud took place between April 2018 and May 2022.

Last May, terraUSD’s peg collapsed in dramatic fashion, triggering an unprecedented crisis of confidence in crypto markets that plunged companies such as Celsius and Three Arrows Capital into bankruptcy.

The collapse of terraUSD raised concerns among international regulators that the stablecoin industry poses stability risks to established finance as crypto becomes more integrated with conventional payment systems.

Last September, Interpol issued a red notice against Kwon, representing a plea to worldwide law enforcement to arrest the Terraform CEO. Since his disappearance, Kwon has continued to make statements on social media without sharing his location.

Terraform and Montenegro’s Interior Ministry did not immediately respond to a request for comment.