Terra founder Do Kwon at risk of Interpol red notice as net tightens

Entrepreneur Do Kwon faces arrest in South Korea along with five others over the Terra unravelling. PHOTO: BLOOMBERG

SEOUL - South Korean prosecutors have asked Interpol for help in arresting Mr Kwon Do-hyeong, the progenitor of a US$60 billion (S$84.4 billion) cryptocurrency wipeout, as they seek to charge him with alleged crimes including breaking capital markets laws.

"Prosecutors on Monday have made a request to Interpol for its assistance to locate Kwon, whose whereabouts remain unknown, and to have him handed over to Korea," the prosecutors office said late on Monday in a text message.

Interpol would typically issue a red notice seeking assistance from law enforcement globally to make an arrest after receiving an official request for help. It could take about a week before a notice is issued.

Mr Kwon, better known as Do Kwon, had moved from South Korea to Singapore, where his now collapsed Terraform Labs project had a base, but the city-state says he is no longer there. Mr Kwon has denied being on the run, even as prosecutors in Seoul seek his detention and say he is trying to avoid redress.

There has been "circumstantial evidence of escape" ever since he left for Singapore, and that is why an arrest warrant was issued in the first place, the prosecutors' office said earlier.

The implosion of the TerraUSD algorithmic stablecoin and its sister token Luna sparked huge losses in crypto markets, which were already reeling from tightening monetary policy. Digital assets have yet to recover and regulators are pouring over the wreckage to see how to avoid a repeat. In South Korea, earlier ardour for crypto is being usurped by growing disdain.

Mr Kwon tweeted over the weekend that he does not "have anything to hide" and is in "full cooperation" with officials but did not publicly reveal his location.

"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," he also said on Twitter.

However, the Yonhap News Agency in a report cited prosecutors as saying that Mr Kwon is not cooperating with probes and has told investigators via an attorney that he has no intention of appearing before them for questioning.

Mr Kwon faces arrest in South Korea along with five others over the Terra unravelling. Officials could cancel his passport, which in theory would require him to return to Seoul within 14 days of receiving the notice of revocation.

He has a Singapore employment pass that is due to expire on Dec 7 and an application for another pass is pending, government records show.

Not so stable

The TerraUSD stablecoin, also known as UST, crumbled from its dollar peg earlier this year and brought down the ecosystem that Mr Kwon had built. This has triggered probes as far afield as the United States amid renewed regulatory scrutiny of stablecoins - tokens supposed to be pegged to an asset like the US dollar.

Crypto companies, meanwhile, are also waking up to the need for far stronger risk management after a series of blow-ups including Terra, the Three Arrows Capital hedge fund and crypto lender Celsius Network.

"Officials are asking questions, like how exposed were companies to some of these players that went down, and they want to take measures to make sure counterparty risk is addressed," said Mr Sagar Sarbhai, head of business solutions and advisory at Fireblocks. "People are concerned that crypto could have a contagion effect and are being cautious." BLOOMBERG

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