The creator of the failed TerraUSD stablecoin, Do Kwon, has been arrested in Montenegro after being in hiding for several months. Do Kwon was known to have travelled considerably since the epic crash of TERRA LUNA and its algo stable TerraUSD.
The arrest was made in the airport of the country’s capital, Podgorica, as Do Kwon was apprehended carrying false documents. Montenegro’s interior minister, Filip Adzic, confirmed the arrest on Twitter and said that they were awaiting official confirmation of his identity.
In case this disaster somehow missed you, TerraUSD was an algorithmic stablecoin that aimed to maintain the price of $1 USD through a simple balance mechanism: 1 UST can always be redeemed for $1 worth of LUNA, and vice versa.
- If UST < $1, arbitrageurs can buy 1 UST, burn it and mint $1 worth of LUNA, and then sell that LUNA to earn a profit
- If UST > $1, arbitrageurs can buy $1 worth of LUNA, burn it and mint 1 UST, and then sell that UST to earn a profit
A large liquidity dump in $UST destabilized the mechanism, and people would buy $LUNA with $UST, and mint more $LUNA, which dropped the price and prompted people to keep minting $LUNA until it lost its entire value, and so did $LUNA. This unprecedented collapse caused a loss of approximately $40 billion in the digital currency market. The crash affected thousands of investors globally, many of whom lost their life savings. You can read all about it here, as I covered the topic at length at the time.
Back to Do Kwon, whose personality is arguably as bad as the mess that he created, this isn’t his first rodeo. South Korean authorities issued an arrest warrant for Kwon in September. The U.S. Justice Department is investigating the collapse of TerraUSD and has already questioned former Terraform Labs team members. The Securities and Exchange Commission (SEC) also sued Kwon and Terraform for alleged securities fraud last month in connection with the TerraUSD collapse.
Police in Singapore are also investigating Terraform Labs, where the company is based. Kwon was residing in Singapore until he disappeared from public view six months ago. According to South Korean prosecutors, he left Singapore in September and traveled to Dubai and then to Serbia, which neighbors Montenegro. Kwon has denied committing fraud, and his lawyer and Terraform plan to dismiss the SEC’s lawsuit.
It’s never an easy task to become the most wanted man in crypto. But Do Kwon somehow managed to snatch both Most Wanted and Most Hated man in crypto with multiple organisations actively investigating him or looking to apprehend him.
Follow me as I will continue to cover any additional developments into the Do Kwon story such as his pending extradition and trial. All I’m going to say for now is strap in, because the trial is going to be a wild ride.
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