Last Wednesday, the Seoul Southern District Attorney’s Office issued an arrest warrant for Kwon and five others who worked on both currencies and Terraform Labs, the company Kwon co-founded. Prosecutors did not list the charges, but the investors said he defrauded them by promoting the coins. TerraUSD – which used a computer program that claimed to peg its value to the US dollar – and a related token known as Luna have both taken off in the past year, each multiplying in value dozens of times before breaking up. collapse in May.
A Terra spokesperson did not respond to a request for comment. Kwon also did not respond to a request for comment. He said on Twitter on Sunday that “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 coming months.”
The red notice request was originally reported by the Financial Times.
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The Kwon case is being watched closely as a sign of how aggressively law enforcement will pursue those who engage in allegedly illegal activity in the crypto space. Last month, the Treasury Department issued sanctions against Tornado Cash, which helps anonymize crypto transactions, in a strong example of a crackdown on tech-based financial tools.
But prosecuting individuals in crypto is much rarer, and Kwon’s case could be an indicator of how other projects that have lost large sums of value could be targeted in court — and if, eventually. , some investors might get their money back.
Kwon, 31, graduated from Stanford University and worked briefly at Apple before returning to his home country several years ago to found a number of crypto projects, including Luna. Prior to the Spring Crash, Kwon was hailed as a visionary and even attracted a cult following of everyday fans known as the “Lunatics”.
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It wasn’t just retail traders either – Terraform also raised funds from respective financiers such as Silicon Valley venture capital firm Lightspeed Venture Partners.
But in May, a rapid sell-off began for reasons still unclear, resulting in the loss of more than $40 billion in value, according to analyst firm Elliptic, as Luna’s price plunged to near zero and TerraUSD went from $1 to $0.11. The collapse helped trigger a broader crypto crash that affected dozens of other assets and businesses.
Bitcoin has fallen from nearly $40,000 to under $20,000 since the collapse of Terra, and the crypto’s total market value has fallen by more than $1 trillion in just a few months.
Kwon attempted to relaunch Luna soon after, much to the chagrin of many investors.
Law enforcement experts said they believe prosecuting the entrepreneur is possible but difficult given the vagaries of crypto, with the line in the industry between fraud and risky investments often blurred.
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“If someone walks into a bank and holds it for a lot of money with a videotape of it all, well that’s a pretty clear case,” said William Callahan III, a former Drug Enforcement special agent. Administration who now serves as the director of government and strategic affairs for a crypto company called Blockchain Intelligence Group. “Investigating and prosecuting something like this requires a much more unique skill set.”
He said the case against Kwon would likely hinge on whether it can be proven that he knowingly misled investors into buying the coins or that he was mounting a bona fide campaign for a risky business. but legal.
Some evidence gathered by South Korean investigators so far, according to local media, includes allegations that Kwon and other Terraform executives decided to close their offices in South Korea just a week before the collapse of the currencies. Kwon said the formwork has been underway for a long time.
On Sunday, Kwon’s pursuit took a surreal turn on social media when Kwon, outspoken on Twitter, took to the platform to deny he was a fugitive.
“I’m not ‘on the run’ or anything like that – for any government agency that has expressed an interest in communicating, we are in full cooperation and have nothing to hide,” he said. . job.
But Seoul prosecutors quickly denied that. He is “obviously on the run,” the bureau said in a statement, according to local news agency Yonhap.
Kwon joked that he would only give out his contact details if “1) we are friends, 2) we plan to meet 3) we are involved in a GPS-based Web3 game.”