Kwon Do-hyung, CEO of Terraform Labs, who was arrested in Montenegro, has been indicted by the New York prosecutor's office on charges including securities fraud and market manipulation.
On the 23rd (local time), Bloomberg reported that the New York prosecutor indicted CEO Kwon on a total of eight charges including securities and commodities fraud and market manipulation. According to the U.S. prosecutor's indictment, CEO Kwon is accused of deceiving investors regarding the technology and user adoption level of the Terra blockchain.
Earlier, the U.S. Securities and Exchange Commission (SEC) also charged CEO Kwon with fraud, alleging that he embezzled and cashed out more than 10,000 bitcoins and deposited them in a bank located in Switzerland.
The Montenegro Ministry of Interior announced that a person suspected to be CEO Kwon was apprehended in the capital, Podgorica, on the same day. The individual believed to be CEO Kwon and an associate named Han were caught attempting to board a flight to Dubai using forged passports from Costa Rica and Belgium.
The Financial Crime Joint Investigation Team of the Seoul Southern District Prosecutors' Office also judged in September last year that Terra and Luna could be considered securities, applied charges of violating the Capital Markets Act against CEO Kwon, and obtained an arrest warrant. Subsequently, they tracked CEO Kwon, requested cooperation from Interpol, and issued a red notice.
CEO Kwon is accused of providing false information by continuously issuing cryptocurrencies despite knowing the high likelihood of a simultaneous crash of the cryptocurrencies Terra and Luna without informing investors. Terra, a stablecoin designed to be pegged to fiat currencies such as the dollar, was designed to maintain a 1:1 fixed exchange rate with the dollar through exchanges with its sister coin Luna.
However, in May last year, the related system became inoperable, triggering a massive sell-off of Terra and Luna, which caused a significant shock to the global cryptocurrency market. As a result, Terraform Labs collapsed, leading to the bankruptcy of major cryptocurrency exchanges such as FTX.
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