Crypto fugitive and Terra founder Kwon says he has not seen arrest warrant

Do Kwon, co-founder of Terraform Labs, said that he has cooperated with all document requests he has received from authorities. PHOTO: BLOOMBERG

NEW YORK - Crypto fugitive Do Kwon, who faces charges in South Korea related to his collapsed stablecoin ecosystem, said he’s cooperating with prosecutors but has not seen the arrest warrant issued for him.

“We haven’t seen a copy of the arrest warrant so every piece of data we are consuming is from the media,” the co-founder of Terraform Labs said in an interview on the Unchained podcast published Tuesday and hosted by journalist Laura Shin. He added that he has cooperated with all document requests he has received from authorities. 

Kwon refrained from specifying his whereabouts during the discussion, citing threats he has received. The 31-year-old’s location has been unclear since South Korea in mid-September issued a warrant for his arrest on charges linked to the US$60 billion (S$85 billion) wipeout of two tokens he created, TerraUSD and Luna. Singapore authorities have said he is no longer there.

Algorithmic stablecoin TerraUSD was meant to have a constant US$1 value via a mix of algorithms and trader incentives involving Luna but the edifice imploded in May, sending shockwaves through the crypto market and catching regulators off guard.

Terra’s collapse exacerbated a US$2 trillion crypto rout and spurred the unravelling of the once high-flying digital-asset hedge fund Three Arrows Capital. Contagion also buffeted lenders and brokers such as Voyager Digital and Celsius Network.

Critics argue Kwon created a giant Ponzi system that was doomed to fail as it relied in part on luring investors with unsustainable interest rates of 20 per cent. He has countered that he acted in good faith in an attempt to create a new kind of currency.

In the months before Terra’s implosion, Kwon cultivated a brash online persona, frequently taking to Twitter to taunt his detractors. That is an approach he now regrets, he told Ms Shin. 

“So I think I got too much carried away interacting with other people on Crypto Twitter,” he said. “I think in retrospect I should have held myself to a more stringent standard.”

Prosecutors in Seoul have accused Kwon and five others of crimes including breaches of capital-markets law. He is also the subject of an Interpol red notice. Kwon has rejected any wrongdoing, denied he is on the run and argued that the case against him has become “highly politicised”.

When pressed by Ms Shin about authorities not being able to physically deliver an arrest warrant to him, Kwon said he also has not seen a PDF version of the document, “so besides application of the Capital Markets Act we haven’t seen what specific charges we are facing”.

A key issue is whether Luna is subject to securities law – echoing a wider question officials globally are asking about the status of digital tokens.

A court in South Korea earlier in October said there was room for legal argument over whether Luna does qualify as a security as it dismissed a request to detain an executive linked to Terraform Labs.

In late September, a Bitcoin reserve connected to Kwon, the Luna Foundation Guard, denied transferring digital tokens after a trail of coin movement prompted South Korean prosecutors to take steps to freeze assets.

Local reports say officials have frozen about 95 billion won (S$94.8 million) of assets they claim are Kwon’s. He has said he does not know who owns them. BLOOMBERG

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