US and Montenegro Formally Charge Do Kwon With Fraud and Forgery

Montenegrin prosecutors charged crypto fugitive Do Kwon Friday with forgery after he was arrested in the capital Podgorica with fake traveling documents. The South Korean was detained alongside his executive aide while attempting to travel to Dubai.

The prosecutors in the Balkan country are now seeking Kwon’s detention for at least 30 days, pending the completion of the court proceedings, and later extraditing him to face charges in the relevant jurisdiction.

Kwon’s arrest also prompted the US to swiftly charge the crypto entrepreneur with fraud. According to the US District Court in Manhattan, Kwon stands accused of “orchestrating a multi-billion-dollar crypto asset securities fraud.”

The charges against Kwon include fraud allegations: two each for securities fraud, wire fraud, conspiracy, and commodities fraud. Last month, the US opened civil charges against Kwon and Terraform Labs, his co-founded crypto company.

A fugitive since the catastrophic TerraUSD and LUNA crash

Do Kwon has been on the run following the catastrophic collapses of Terraform stablecoin TerraUSD and cryptocurrency LUNA in May last year. The South Korean authorities have, since September 2022, been pursuing him with an arrest warrant. Kwon has, however, insisted via his Twitter account that he wasn’t hiding and was ready to cooperate with investigators.

Authorities believe there are sufficient grounds to charge Kwon. He is accused of fraudulently marketing TerraUSD as a stablecoin pegged to stable currencies like the US dollar. However, as revealed later, TerraUSD was pegged to its floating cryptocurrency, LUNA. As the stablecoin depegged, it took with it the cryptocurrency.

Further, authorities believe Kwon could have been aware of the eventual collapse. He is said to have fled South Korea to Singapore days before the catastrophic failure. Kwon also moved over 10,000 Bitcoin from his failed crypto project, converting them into cash through a Swiss Bank, according to a report by Blomberg.

It remains to be seen if the other jurisdictions would press charges against Kwon. The collapse of his stablecoin project and LUNA has since sparked a discussion about the need for a crypto regulatory framework.

Last month, the French Financial Action Task Force agreed on an action plan to drive the global cryptocurrency standards implementation. It would be interesting to see how the law evolves in this space, with the events of Terra-LUNA and other high-profile collapses of 2022, such as FTX, sparking the conversations.