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The Terra co-founder reportedly attempted to leave Montenegro and fly to Dubai using Costa Rican travel documents.
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<h4>Table of Contents</h4>
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 <li><a href="https://coinmarketcap.com/alexandria/article/new-york-charges-do-kwon-with-fraud-hours-after-his-arrest#header-0" rel="noopener noreferrer nofollow">The Winds of Crypto Winter</a></li>
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Hours after the fugitive founder of the collapsed UST stablecoin was arrested in Montenegro, federal prosecutors in New York charged him with eight counts of fraud and market manipulation.
Terraform Labs co-founder Do Kwon has been on the run for months after being <a href="https://coinmarketcap.com/alexandria/article/south-korea-issues-arrest-warrant-for-do-kwon" rel="noopener noreferrer nofollow">charged criminally</a> in his native South Korea and <a href="https://coinmarketcap.com/alexandria/article/sec-targets-ust-developer-do-kwon-for-securities-violations-fraud" rel="noopener noreferrer nofollow">sued for defrauding investors</a> by the U.S. Securities and Exchange Commission in February.
At the time, SEC Chairman Gary Gensler accused Terraform Labs and Kwon of committing "fraud by repeating false and misleading statements to build trust before causing devastating losses for investors."
Kwon and former Terraform CFO Han Chang Joon, Terraform's chief financial officer, <a href="https://coinmarketcap.com/alexandria/article/breaking:-do-kwon-reportedly-arrested-in-montenegro" rel="noopener noreferrer nofollow">were arrested</a> at the airport in Podgorica, Bloomberg reported. It said they were attempting to board a flight to Dubai using falsified Costa Rican travel documents, according to the Montenegrin Interior Ministry.
<h2 id="header-0">The Winds of Crypto Winter</h2>
The TerraUSD stablecoin, or UST, had quickly become the third-largest stablecoin when it depegged in what amounted to a week-long, <a href="https://coinmarketcap.com/alexandria/article/terra-halts-its-blockchain-binance-suspends-luna-trading" rel="noopener noreferrer nofollow">bank run-style collapse</a> in May 2022. An <a href="https://coinmarketcap.com/alexandria/article/are-algorithmic-stablecoins-dead-already-a-full-breakdown-of-the-terra-crash" rel="noopener noreferrer nofollow">algorithmic stablecoin</a>, it used an arbitrage mechanism with a free-floating partner token, LUNA, to maintain its dollar peg.
The UST/LUNA ecosystem collapse destroyed an estimated $48 billion in value and was responsible for many of the other industry bankruptcies that worsened the crypto winter.
Do Kwon has been charged with conspiracy to defraud, two counts of commodities fraud, securities fraud, wire fraud, and conspiracy to defraud and engage in market manipulation by Damian Williams, the U.S. Attorney for the Southern District of New York.
Williams' office has reportedly said it intends to seek his extradition. If it succeeds, Williams will be prosecuting both Kwon and <a href="https://coinmarketcap.com/alexandria/article/everything-we-know-about-the-ftx-saga-so-far" rel="noopener noreferrer nofollow">FTX</a> founder <a href="https://coinmarketcap.com/alexandria/article/sam-bankman-fried-and-top-execs-drained-dollar3.2b-from-ftx" rel="noopener noreferrer nofollow">Sam Bankman-Fried</a> — far and away the two largest criminal cases to come out of the crypto winter.
South Korea is expected to seek Do Kwon's extradition as well. It previously had an <a href="https://coinmarketcap.com/alexandria/article/clearly-on-the-run-south-korea-wants-interpol-red-notice-against-do-kwon" rel="noopener noreferrer nofollow">Interpol Red Notice</a> issued seeking his arrest.
While short on details, the U.S. indictment cites "false and misleading statements" made during interviews on Oct. 14 and Oct. 30, 2020 "about the extent to which the Terra blockchain had been adopted by users.
It also alleged that in May 2021, which Do Kwon and a representative of an unnamed "U.S. trading and investment firm" with staff in the Southern District — which includes Wall Street and Manhattan — agreed to deploy trading strategies designed to alter the market price of UST.
In exchange, Kwon "agreed to modify an existing loan" between Terraform Labs and that firm to compensate it for its assistance in manipulating the price of UST, the charges claim.
The indictment cites "false and misleading statements concerning the effectiveness and sustainability of the algorithmic mechanism that purportedly ensured the stability of UST's price" made in a Terraform Labs social media post on May 24, 2021, and in an interview on March 1, 2022.

New York Charges Do Kwon with Fraud — Hours After His Arrest

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