Terra founder Do Kwon may be trying to escape probes, prosecutors say

SEOUL – South Korean prosecutors raised the prospect that Do Kwon, the progenitor of a US$60 billion (S$84.4 billion) cryptocurrency wipeout, is trying to evade redress over a meltdown that shook digital asset markets worldwide.

Kwon had moved from South Korea to Singapore, where his now collapsed Terraform Labs project had a base, but the police in the city-state says he is no longer there. Kwon’s location is unclear and he denies being on the run even as prosecutors in Seoul seek his arrest for allegations including breaches of capital-markets law.

There has been “circumstantial evidence of escape” ever since he left for Singapore, and that is why an arrest warrant was issued in the first place, the prosecutors’ office said in a text message. It declined to comment on whether the office knows of Kwon’s whereabouts or plans to contact Interpol.

The implosion of the TerraUSD algorithmic stablecoin and its sister token Luna sparked huge losses in crypto markets, which were already reeling from tightening monetary policy.

Digital assets have yet to recover and regulators are pouring over the wreckage to see how to avoid a repeat. In South Korea, earlier ardour for crypto is being usurped by growing disdain.

Kwon tweeted over the weekend that he does not “have anything to hide” and is in “full cooperation” with officials but did not publicly reveal his location.

“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 next few months,” he also said on Twitter.

However, the Yonhap News Agency in a report cited prosecutors as saying that Kwon is not cooperating with probes and has told investigators via an attorney that he has no intention of appearing before them for questioning.

Kwon faces arrest in South Korea along with five others over the Terra unravelling. Officials could cancel his passport, which in theory would require him to return to Seoul within 14 days of receiving the notice of revocation.

He has a Singapore employment pass which is due to expire Dec 7 and an application for another pass is pending, government records show.

Not so stable

The TerraUSD stablecoin, also known as UST, crumbled from its US dollar peg earlier this year and brought down the ecosystem Kwon had built. That has triggered probes as far afield as the United States amid renewed regulatory scrutiny of stablecoins – tokens supposed to be pegged to an asset like the dollar.

Crypto companies, meanwhile, are also waking up to the need for far stronger risk management after a series of blowups including Terra, the Three Arrows Capital hedge fund and crypto lender Celsius.

“Officials are asking questions like, how exposed were companies to some of these players that went down, and they want to take measures to make sure counterparty risk is addressed,” said Sagar Sarbhai, head of business solutions and advisory at Fireblocks. “People are concerned crypto could have a contagion effect and are being cautious.” BLOOMBERG