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The Kwon Identity: Fugitive Terraform Labs founder Do Kwon arrested using fake papers in Montenegro

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(Kitco News) - Do Kwon, the founder and CEO of Terraform Labs and the orchestrator of one of the largest and most damaging frauds in the history of crypto, has finally been arrested in Montenegro early Thursday morning.

The arrest was first reported on twitter by Bankless, and was later confirmed by news service Yonhap citing South Korean officials. According to Filip Adzic, Montenegro’s Minister of Interior, Kwon “was detained at the Podgorica airport with falsified documents.”

The pressure to capture Kwon had been mounting since he fled his native South Korea following the collapse of the Terra ecosystem in May 2022, with a South Korean court issuing an arrest warrant on Sept. 17 and Interpol issuing a Red Notice two weeks later.

The United States was the latest entity to join in formally targeting Kwon with criminal charges. On Feb. 17, the U.S. Securities and Exchange Commission (SEC) charged Do Kwon with securities fraud, writing that Kwon and Terraform orchestrated “a multi-billion dollar crypto asset securities fraud involving an algorithmic stablecoin and other crypto asset securities.”

According to the SEC’s complaint, between April 2018 and May 2022, Kwon and his firm “raised billions of dollars from investors by offering and selling an inter-connected suite of crypto asset securities, many in unregistered transactions.” These included so-called ‘mAssets’ that mirrored the price of U.S. stocks, and Terra USD (UST), the algorithmic stablecoin pegged to the U.S. dollar and “interchangeable for another of the defendants’ crypto asset securities, LUNA.”

The SEC said Terraform and Kwon “touted and marketed UST as a ‘yield-bearing’ stablecoin, which they advertised as paying as much as 20 percent interest through the Anchor Protocol,” and that they “repeatedly misled and deceived investors that a popular Korean mobile payment application used the Terra blockchain to settle transactions that would accrue value to LUNA.”

The complaint also alleges that Kwon and others at Terraform “misled investors about UST’s stability before it ultimately depegged from the U.S. dollar and became nearly worthless.

"We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for LUNA and Terra USD," SEC Chair Gary Gensler said. "We also allege that they committed fraud by repeating false and misleading statements to build trust before causing devastating losses for investors."

The complaint was filed in the U.S. District Court for the Southern District of New York, and it charges the defendants with violating the registration and anti-fraud provisions of the Securities Act and the Exchange Act.

Kwon has attempted to portray his travels as innocent even after his South Korean passport was revoked. On Sept. 17, he tweeted “I am not “on the run” or anything similar - for any government agency that has shown interest to communicate, we are in full cooperation and we don’t have anything to hide.”

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