When the TerraUSD stablecoins depegged in May, it precipitated a $48 billion collapse in the luna cryptocurrency. Four months later, on Wednesday, South Korean authorities issued an arrest warrant for Do Kwon, the founder of Terraform Labs, according to South Korean publication Chosun Ilbo. Kwon’s Terraform Labs was behind the Terra blockchain, the TerraUSD (UST) stablecoin and the luna cryptocurrency.
Though Terraform Labs is based in Singapore, Kwon was born in South Korea and remains a South Korean citizen. Kwon is one of several Terra employees for whom an arrest warrant was issued, Chosen Ilbo reports. Kwon is wanted for violating South Korea’s Capital Markets Act, with prosecutors reportedly charging that UST and luna should have been classified as “investment contract securities.” It mirrors moves by the SEC to similarly designate several major cryptocurrencies as securities.
Terra was contacted for comment but did not immediately respond.
Terra was known for its dual cryptocurrencies UST and luna. Like all stablecoins tied to the US dollar, UST was designed to always be worth $1. Terra encouraged people to park their savings in UST, offering a 19.5% yield rate — meaning $10,000 deposited in UST would earn 19.5% interest annually. In May, however, the UST stablecoin depegged after $2 billion was removed from the protocol. Once it became clear that UST would be unable to retain its peg, both it and luna, the value of which is tied to UST, collapsed. (Read a more detailed explainer here.)
Prior to the crash, luna and UST had a combined market cap just under $50 billion, according to CoinMaketCap data. Crypto investment firm Three Arrows Capital had over $200 million invested in luna, and eventually declared bankruptcy as a result. Its inability to repay creditors led to Voyager Digital, a lending platform, to also declare bankruptcy.
When Terra cofounder Daniel Shin’s home was raided by South Korean authorities in July, Bloomberg reported that prosecutors were investigating whether Kwon had evaded taxes by moving crypto profits into an offshore account.
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