Last Wednesday, the Seoul Southern District Prosecutor’s Office issued arrest warrants for Kwon and five others who worked at Terraform Labs, a company that Money and Kwon co-founded. Prosecutors did not list the charges, but investors said he defrauded them when he marketed the coins. TerraUSD — which uses a computer program that claims to peg its value to the U.S. dollar — and a related token called Luna have both taken off over the past year and doubled in value before crashing in May dozens of times.
A spokesperson for Terra did not respond to a request for comment. Quan also did not respond to a request for comment. “We are defending ourselves in multiple jurisdictions – we hold ourselves to a very high standard of integrity and look forward to getting the truth out in the coming months,” he tweeted on Sunday.
The red notice request was first reported by the Financial Times.
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The Kwon case is under scrutiny, and it shows how aggressively law enforcement will go after those involved in suspected illegal activities in the cryptocurrency space. Last month, the U.S. Treasury Department imposed sanctions on Tornado Cash, which facilitates anonymous crypto transactions, in a powerful example of the crackdown on technology-based financial instruments.
But with far less personal pursuits in the crypto space, Kwon’s case could serve as a bellwether for how other projects that have lost huge amounts of value are being targeted by courts — if ultimately, some investors may get their money back.
Kwon, 31, graduated from Stanford University and briefly worked at Apple before returning to his home country a few years ago to found several crypto projects, including Luna. Before the Spring Crash, Kwon was hailed as a visionary and even attracted a group of everyday fans known as “Mad Men.”
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It’s not just retail traders — Terraform has also raised capital from respective financiers such as Silicon Valley venture capital firm Lightspeed Venture Partners.
But a rapid sell-off began in May for reasons not yet known, leading to losses worth more than $40 billion, as the price of Luna plummeted to almost zero and TerraUSD fell from $1 to $0.11, according to analytics firm Elliptic. The crash sparked a broader cryptocurrency crash that affected dozens of other assets and companies.
Since the Terra crash, Bitcoin has fallen from nearly $40,000 to below $20,000, while the total cryptocurrency market capitalization has plunged by more than a trillion dollars in just a few months.
Soon after, Kwon attempted to relaunch Luna, drawing the ire of many investors.
Law enforcement experts say they believe prosecuting the entrepreneur is possible but challenging given the vagaries of cryptocurrency and the often blurred lines between fraud and venture capital in the industry.
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“If someone walks into a bank and takes a videotape of the whole thing and takes a lot of money, that’s a very clear case,” said William Callahan III, a former DEA agent who now works for a company called Blockchain Intelligence Group Director of Government and Strategic Affairs for a crypto company. “Investigating and prosecuting things like this requires a more unique set of skills.”
He said the case against Quan could turn to whether it can be shown that he deliberately misled investors into buying tokens, or whether he was launching a goodwill campaign for a risky but legitimate business.
Some of the evidence South Korean investigators have gathered so far includes allegations that Kwon and other Terraform executives decided to close their South Korean offices a week before the currency crash, local media reported. Kwon said the shutdown of work was long.
The manhunt for Kwon took a surreal turn on social media on Sunday when he bluntly denied on the platform that he was a fugitive on Twitter.
“I’m not ‘on the run’ or anything like that – we’re fully cooperating with any government agency that is interested in communicating, we have nothing to hide,” he said. post.
But Seoul prosecutors were quick to deny that. He was “apparently on the run,” the office said in a statement, according to local news outlet Yonhap news agency.
Kwon quipped that he only leaks his coordinates when “1) we’re friends, 2) we have plans to meet 3) we’re in a gps-based web3 game.