Last Wednesday, the Seoul Southern District Public Prosecutor’s Office issued an arrest warrant for Kwon and five other people who worked both on the coins and at Terraform Labs, the company Kwon co-founded. Prosecutors did not list the charges, but investors have 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 took off last year, each multiplying in value dozens of times before crashing in May.
A Terra spokesman 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 in the coming months.”
The red notice request was originally reported by the Financial Times.
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Kwon’s case is being closely watched as a sign of how aggressively law enforcement will go after those who engage in allegedly illegal activities 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 the search for individuals in cryptocurrencies is much rarer, and the Kwon case could be an indicator of how other projects that lost large sums of value could be attacked in court, and whether, eventually, some investors could get their money back.
Kwon, 31, graduated from Stanford University and briefly worked at Apple before returning to his home country several years ago to found a number of crypto projects, including Luna. Before the spring crash, Kwon was hailed as a visionary and even attracted a cult of everyday fans known as “Lunatics”.
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It wasn’t just retail traders: Terraform also raised money from respective financiers, such as Silicon Valley venture capital firm Lightspeed Venture Partners.
But a rapid sell-off began in May for reasons that remain unclear, causing more than $40 billion in value to be lost, according to analytics firm Elliptic, as Luna’s price fell to near zero and TerraUSD passed. from $1 to $0.11. The crash helped trigger a broader crypto crash that affected dozens of other assets and companies.
Bitcoin has gone from nearly $40,000 to less than $20,000 since the Terra crash, and the total market value of cryptocurrencies has plummeted by more than $1 trillion in just a few months.
Kwon attempted to relaunch Luna soon after, much to the outrage of many investors.
Law enforcement experts said they believed prosecution of the businessman was possible but challenging due to the vagaries of cryptocurrency, as the line in the industry between fraud and venture investing is often blurred.
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“If someone walks into a bank and holds it up for a large amount of money with a videotape of everything, well, that’s a pretty clear case,” said William Callahan III, a former Drug Enforcement Administration special agent who he now serves as director of government and strategic affairs for a crypto firm 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 revolve around whether it can be proven that he knowingly misled investors in seeking the coins or was mounting a campaign in good faith for a risky but legal venture.
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 South Korean offices just a week before the coins crashed. Kwon has said that the formwork was a long time in the making.
On Sunday, the search for Kwon took a surreal turn on social media when Kwon, speaking openly on Twitter, took to the platform to deny that he is a fugitive.
“I’m not ‘fugitive’ or anything like that. To any government agency that has shown an interest in reaching out, we are in full cooperation and have nothing to hide,” he said. aware.
But Seoul prosecutors quickly denied it. He is “obviously at large,” the office said in a statement, according to the local Yonhap news agency.
Kwon joked that he would only give out his coordinates if “1) we’re friends, 2) we have plans to meet up, 3) we’re involved in a gps-based web3 game.”