November 28, 2022

EUNews24

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South Korea seeks to freeze $93m of Bitcoin linked to Terra founder Do Kwon

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SINGAPORE – The South Korean authorities have asked two cryptocurrency exchanges to freeze some US$65 million (S$93 million) worth of Bitcoin linked to entrepreneur Do Kwon, the founder of the company behind two now-collapsed digital coins.

Kwon is the founder of Terraform Labs, the company behind algorithmic stablecoinTerraUSD, or UST, and its sister token Luna. Combined, these coins were worth around US$60 billion before they collapsed in May, sending shockwaves through the crypto industry.

On Thursday, Terraform Labs rejected South Korean charges over the collapse and said the case against Kwon had become “highly politicised”.

A spokesman for the firm said in a statement that prosecutors had demonstrated “unfairness and a failure to uphold basic rights guaranteed under Korean law”, adding that there is “no reasonable basis” for their accusation of breaches of capital markets law.

The prosecutors’ office said in a text message it won’t comment on every one-sided claim from a “fleeing suspect” and added it would be appropriate for Kwon to make a prompt appearance before them to make his position clear.

South Korea has sought help from Interpol to find Kwon after a court last month issued a warrant for his arrest. Terraform Labs had a base in Singapore, but his location is unknown after the police earlier this month said he is no longer in the city-state.

Officials have previously suggested that Kwon is evading their probe. The Terraform Labs spokesman said the 31-year-old via lawyers “is in contact with all government agencies that have asked to communicate with him”.

The spokesman said Kwon “is not on the run and remains actively involved in the management and oversight of Terraform Labs”.

The statement followed controversy over a Bitcoin reserve – the Luna Foundation Guard – connected to Kwon.

Kwon and the reserve denied transferring digital tokens after a trail of coin movement prompted South Korea to take steps to freeze assets.

Prosecutors sent requests to crypto exchanges KuCoin and OKX to freeze a total of 3,313 bitcoins, worth about US$65 million at current prices.

TerraUSD was meant to be pegged to the United States dollar. The system relied on a complex mix of algorithms and trader incentives involving Luna. But it unravelled when confidence in Kwon’s project evaporated.

The Terraform Labs statement rejected categorising Luna as a security under South Korea’s capital markets legislation. Just how to classify digital tokens remains a highly vexing issue for regulators the world over.

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