Is Do Kwon about to do time? Interpol issued a ‘red notice’ for South Korean crypto founder Do Kwon. The news broke after weeks of South Korean authorities trying to track down the Terra founder. Shortly after the announced arrest warrant, it was discovered that the crypto founder transferred 3,313 Bitcoin ($BTC) from his wallet to 2 overseas cryptocurrency exchanges.
Terraform Labs spectacularly imploded earlier this year causing ripple effects throughout the crypto community and major firms to default on loans. Since then, charges of misleading retail, Ponzi schemes, and criminal behavior have been levied against Do Kwon. It now appears that the seriousness of the matter has increased as there is a near 200 country open search for Do Kwon.
Interpol Issues Red Notice For Do Kwon
Two weeks ago, prosecutors in Seoul issued an arrest warrant for Do Kwon on charges of violating financial laws in South Korea. The warrants are related to his dealings around Luna and TerraUSD which spectacularly blew up in May. Five of Do Kwon’s associates were also named as being wanted in the matter.
After Do Kwon evaded South Korean authorities, they reached out for help. Interpol has issued a red notice which makes Do Kwon a fugitive in over 190 countries.
Do Kwon has been tweeting that he is not ‘on the run’. Prosecutors responded that Mr. Kwon was, indeed, “obviously on the run”. South Korean authorities are also looking to invalidate Do Kwon’s passport as another measure to force him back. They claim he has refused to cooperate and his lawyers informed prosecutors that Do Kwon had no intention of appearing for questioning.
Do Kwon is also facing numerous class-action lawsuit in the USA for his protocol allegedly being a Ponzi scheme.
Do Kwon does appear to be mocking his pursues as well. Not only claiming that he is using an iPhone to tweet while walking around publicly in a mall, but also making jokes on the matter. First, by he claimed that he has continued to hold himself to ‘an extremely high bar of integrity’. He also tweeted “Tbh havent gone running in a while, need to cut some calories”. Immediately showing said integrity, as a man who cost investors $10s of billions makes light of the matter.
What Does A ‘Red Notice’ Mean?
A ‘red notice’ from Interpol informs worldwide law enforcement agencies to locate and arrest a fugitive. Once arrested, the fugitive faces extradition, surrender, or similar legal action. Therefore, if Do Kwon is found in one of the over 190 countries that honor Interpol, he will be repatriated to South Korea.
However, Singapore does not have an extradition treaty with South Korea leading to speculation that Do Kwon is hiding out in that country. Do Kwon does have a residence in Singapore as well. However, Singapore authorities claim that Do Kwon is no longer there.
In short, red notices are used to prevent a wanted individual from fleeing prior to extradition. Interpol spokespeople stated that just because a red notice isn’t made publicly available for review, does not mean that one wasn’t issued.
Who Is Do Kwon?
For those of you who weren’t following crypto till recent, Do Kwon was the founder of Terraform Labs. Terraform Labs was behind the ‘stable’ coin TerraUSD ($UST) as well as the sister coin Luna. Luna was a popular token for retail due to offering high 20% yields for staking while claiming to be part of a safe stablecoin protocol. In May, TerraUSD lost its dollar peg and the entire scheme blew up.
At one point, users could stake $LUNA and get a 20% return. The allure of high-yields pulled in a lot of money from retail investors and crypto investors alike. Fans of the Terra protocol nicknamed themselves Lunatics.
In one of the more famous examples of buying into the hype, crypto investor and Galaxy Digital CEO, Mike Novogatz, tweeted an image of a LUNA tattoo he got in January.
Shortly thereafter in February, Terraform Labs jumped on the crypto bandwagon of partnering with major sports teams when Terra and the MLB team the Washington Nationals teamed up.
However, both moves proved to be short lived as Terra blew up in May of 2022. In hindsight, the protocol was unsustainable and it was just a matter of time.
The protocol worked by allowing holder of the stablecoin, TerraUSD to redeem for $LUNA. $LUNA would be burnt or minted by the protocol to help stabilize the peg of $UST to the dollar. However, as $UST depegged more and more, the price of $LUNA tanked. This lead to a negative flywheel as the entire scheme was reliant on trust and new money.
Terraform Labs tried to stem the bloodshed by selling off some of its bitcoin reserves, but this only served to increase the panic.
In the end, the Luna/Terra protocol blew up. At its peak, $LUNA and $UST accounted for over $60 billion in value.
By blowing up, Terra exposed a lot of counterparty risk in the broader crypto ecosystem. Crypto investing firm Three Arrow Capital (3AC) was one of the biggest losers in the ordeal, losing billions of dollars. 3AC eventually defaulted on nearly $700 million loans. This lead to numerous bankruptcies across centralized exchanges and lending platforms.
The high-integrity Do Kwon has shown little public remorse.
Do Kwon Moves $60 Million in Crypto to Exchanges
On September 15, just one day after South Korea issued an arrest warrant for Do Kwon, 3,313 BTC were transferred from a wallet he controlled. The transfers were made from a Luna Foundation Guard (LFG) crypto wallet that was created on Binance. The 3,313 BTC were transferred from the virtual asset exchange to KuCoin and OKX wallets.
LFG is a non-profit organization who’s purpose was to protect the price of $LUNA.
South Korean prosecutors have asked both OKX and KuCoin to freeze the transferred funds. It is reported that KuCoin froze 1,354 BTC, but OKX did not, potentially due to the funds already being transferred off exchange.
Do Kwon tweeted it wasn’t him who made the transfer and he is enjoying walking around the mall and is not hiding.
Conclusion – Do Kwon Doing Time?
The saga of Luna/Terra & Do Kwon continues on but may be coming to its conclusion. From mega yachts and buying his infant an 8-figure home to being on Interpol’s red list and raiding his non-profits reserves (allegedly), this has been a movie–like story arc.
One thing is certain, the crypto community will ‘degen’ into anything. Even after Luna v1.0 lost $60 Billion in value, people are buying the 2nd version launched by the same team. On some exchanges you need to click through a warning that reads, “I understand this is a token launched by a fugitive”, and then can trade Luna v2.0.