Crypto Founder Do Kwon Indicted in US After Montenegro Arrest

Facts

• On Thursday, South Korean entrepreneur Do Kwon, who is accused of orchestrating the $40B collapse of cryptocurrencies TerraUSD and Luna, was charged with fraud in the US following his arrest in Montenegro.¹
• The arrest of the crypto entrepreneur, confirmed by local Montenegrin government authorities, came after months of searching for him. According to police, he was found at Podgorica airport attempting to board a flight to Dubai with multiple fake passports. He was formally charged with forgery on Friday.²
• The eight-count US charges against him — including securities fraud, wire fraud, commodities fraud, and conspiracy — follow related civil charges brought by the US Securities and Exchange Commission against Kwon and Terraform Labs last month.³
• Kwon is a co-founder of Terraform Labs, the company behind Terra blockchain protocol and the stablecoin TerraUSD and its sister coin Luna. TerraUSD was promoted as being pegged to the US dollar to prevent volatile price swings, however, officials allege its value was actually linked with Luna.¹
• The collapse of TerraUSD and Luna in May 2022 wiped out about $40B from the crypto market and is said to have kicked off a downward spiral that became known as the "crypto winter," from which the industry has continued with the fall of FTX, a major cryptocurrency exchange, in November.⁴
• According to an unnamed source, the US is planning to seek his extradition. South Korea, however, is also seeking to extradite him under charges of violating its capital market law.⁵

Sources: ¹Al Jazeera, ²Reuters, ³The Economic Times, ⁴CNN, and ⁵Forbes.

Narratives

• Narrative A, as provided by Wall Street Journal. The Securities and Exchange Commission has a strong case against Kwon and Terraform Lab for misrepresenting the risk of TerraUSD and misleading US investors, who purchased billions of dollars of the digital assets, wiping out their savings and igniting the "crypto winter." Not only should Kwon be held accountable, but more importantly, financial regulators must clean up the cryptocurrency market by way of stricter regulations.
• Narrative B, as provided by Washington Post. If found guilty, Kwon should undoubtedly be held accountable, however, one bad apple isn't indicative of an entire industry and this shouldn't be used to push the case for crypto regulation — a policy based on fear. Such a move will only hurt innovation and come at the expense of crypto companies that will have to foot the bill to accommodate new rules.

Predictions