It’s starting to look like a game of cat and mouse. And it’s a bad look for the crypto industry.
Do Kwon, the founder of Terraform Labs, the ecosystem whose native tokens were Luna and UST (aka TerraUSD), seems amused by the statements of the authorities who are looking for him and accusing him of fraud.
Kwon, a citizen of South Korea, is at the center of an investigation by local authorities seeking to shed light on the collapse of Luna and UST last May. The rout swallowed up at least $55 billion and caused what would then become an unprecedented liquidity crisis in the crypto industry.
Hedge fund Three Arrows Capital, or 3AC, was forced into liquidation, while prominent lenders and crypto platforms were forced to file for Chapter 11 bankruptcy protection.
The list of victims includes the firms Celsius Network and Voyager Digital as well as thousands of small investors who are currently gathering on social networks in hopes of recovering even a tiny part of their investments.
Red Notice
South Korean authorities recently issued an arrest warrant for Kwon. On Sept. 27, they added that they reached out to global law enforcement agency Interpol, which for its part issued a so-called Red Notice for Kwon.
A Red Notice is a request to law enforcement agencies worldwide to locate a person and provisionally arrest them pending extradition, surrender or similar measure in accordance with the law, the agency said.
The notices generally are issued for fugitives. Interpol issues them at the request of a member country and must comply with the organization’s statute and rules.
“A Red Notice is an international wanted persons notice, but it is not an arrest warrant,” the agency says.
Kwon, who was in Singapore when the South Korean authorities issued their arrest warrant, was no longer in the city-state, according to Singaporean police. This led South Korean authorities to say he was on the run. At the time, Kwon disputed this statement denying that he was on the run.
‘Come Visit’
Nine days later Kwon responded on Twitter to a user who asked him where he was hiding: “I’m writing code in my living room hbu.” (HBU is “how ’bout you?”)
“Watching breaking bad and having a cigarette,,,might have a line or two depending on market conditions. Did you long gbp last night with me bro?” the user responded referring to the fall of the British pound.
“Missed this one,” Kwon quipped. “Come visit, we’ll share a cig soon!”
Kwon’s Twitter bio continues to say that he is in Singapore, despite statements from Singaporean police claiming he is not in the city-state.
In an exchange with another Twitter user, Kwon says that no Red Notice has been issued for him.
“For something that has notice in the name it sure gives no notice. Tried to search it here, found nothing: https://interpol.int/en/How-we-work/Notices/View-Red-Notices,” he said.
At that time a user pointed out to him that his replies aimed at ridiculing the authorities were arrogant.
“I am literally just conveying the results of a publicly available internet search query. Not sure what part of that conveys arrogance,” Kwon responded. “Maybe observer bias?”
Where Is Do Kwon?
When another Twitter user points out that people can determine where he is based on his Twitter communications, Kwon seems to agree.
“Yeah as i said im making zero effort to hide. I go on walks and malls, no way none of CT hasnt run into me the past couple weeks,” he said.
In all these exchanges with users on Twitter, which show him defying the authorities, Kwon never says exactly where he is.
According to the Straits Times in Singapore, Kwon has a Singaporean work permit — an Employment Pass — which expires on Dec. 7. His request for renewal is under review, but it’s said to be in jeopardy because South Korean authorities have moved to invalidate his passport to force him to return to the country.
Kwon has already been denied an application for a pass allowing foreign entrepreneurs to start and operate a business in Singapore, the Straits Times also reported.
The First Dominoes
Luna and UST were the first dominoes to crumble in what would later turn into a liquidity crunch for the crypto sector.
The two tokens crashed after UST lost its peg to the dollar, the foundation of its qualification as a stablecoin. Such cryptocurrencies are tied to more stable assets, like the U.S. dollar or gold. From May 9 to May 13, at least $55 billion of market cap disappeared, causing many investors to sustain colossal losses.
UST was an algorithmic stablecoin, which was backed not by dollar reserves but rather by its sister asset, Luna. Algorithmic stablecoins are different from centralized alternatives like tether or USD coin, which are backed by actual dollars or equivalent assets stored in a bank.
Last June, employees of Terraform Labs reportedly told the U.S. Securities and Exchange Commission that Do Kwon was cashing out $80 million a month before the UST and Luna tokens crashed.
