South Korea issues arrest warrant for fallen ‘crypto king’ Do Kwon

A South Korean court issued an arrest warrant for Do Kwon, the co-founder of collapsed cryptocurrency operator Terraform Labs, over allegedly violating capital market rules after the $40bn implosion of the terra and luna tokens earlier this year.

The court on Wednesday also issued arrest warrants for five other people connected to Terraform Labs staying in Singapore, according to a spokesperson for the Seoul Southern District Prosecutors’ Office. Daniel Shin, the co-founder of Terraform Labs, was not included among the five other people.

Prosecutors have accused Kwon of financial fraud, arguing that his terraUSD stablecoin was a kind of investment security under South Korea’s capital markets act. They believe Kwon is in Singapore but declined to say if they had located him.

The spokesperson said prosecutors were exploring “many ways” to arrest and extradite him from Singapore, including co-operating with Interpol or nullifying his South Korean passport. Singapore is not on South Korea’s list of bilateral extradition treaties.

Terraform Labs and Kwon could not immediately be reached for comment.

The embattled crypto entrepreneur said in an interview last month he had not been in contact with South Korean authorities. The 31-year-old told crypto media start-up Coinage that it was “kind of hard” to decide whether to return to Korea because “we’ve never been in touch with the investigators”.

Shaun Leong, partner at international law firm Withers, said the Mutual Assistance in Criminal Matters Act allowed authorities in Singapore to give assistance if requested by the Korean authorities.

If the Korean authorities placed Kwon on the Interpol “red notice” he “would likely face serious difficulties in travelling outside of Singapore as he may be detained at international borders during his travels” he added.

South Korean prosecutors and police are investigating Kwon and his company after two complaints were filed on behalf of 81 investors over allegations that the business deceived investors.

Kwon went to an elite foreign language high school in Seoul and studied computer science at Stanford University. In 2018, he co-founded Terraform Labs in Singapore with Daniel Shin, the prominent founder of South Korean ecommerce unicorn Ticket Monster.

The pair launched the terraUSD stablecoin in 2020. The stablecoin had an algorithmic relationship with the luna cryptocurrency that peaked at $116 at the start of April, but collapsed to zero over the course of just a few days in May.

The meltdown affected hundreds of thousands of investors, many of whom were drawn in by a scheme in which clients could lend out their terra for a yield of 20 per cent.

The so-called Anchor Protocol, the mechanism through which the 20 per cent yield was offered to investors, is understood to be one of the areas of interest for the investigation.

The heavy losses borne by Korean crypto investors made the brash and divisive Kwon a villainised figure in his native South Korea following media reports of multiple suicides associated with the collapse.

In the interview with Coinage, Kwon said he counted himself as one of the crash’s victims.

“I don’t want to seem like my losses are larger in terms of emotional impact compared to people who had less to go on and then put [in their] entire life savings and then the terra system went down,” said Kwon. “[But] this was essentially my life . . . I bet big, and I think I lost.”

Additional reporting by Mercedes Ruehl in Singapore

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