In May 2022, the collapse of Terraform Labs’ stablecoin, Terra USD (USDT), sparked a fire that is still burning. It was the first significant event of the crypto crash in early 2022, eventually leading to the collapse of FTX. It’s been nearly a year since the USDT collapse and six months since Interpol issued a red notice for his arrest. Now, in March 2023, The Verge reports authorities arrested Terra Labs founder Do Kwon in Montenegro.
The collapse of the Terra stablecoin wiped out $40 billion and caused the demise of a slew of crypto startups. In September 2022, South Korean prosecutors issued an arrest warrant for Kwon, and Interpol subsequently issued an international red notice. The disgraced former CEO quickly fled from Singapore, where he resided after Terra’s collapse. Though, he infamously tweeted he wasn’t “‘on the run’ or anything similar.”
Following his arrest, federal prosecutors in the Southern District of New York charged Kwon with eight counts of fraud. The charges include wire fraud, commodities fraud, securities fraud, and conspiracy to defraud and engage in market manipulation.
Additionally, U.S. federal prosecutors seek Kwon’s extradition. However, Forbes reports authorities in the United States aren’t sure they can secure the extradition. As mentioned, South Korea, Kwon’s native country, also issued a warrant for his arrest for violating their capital market law.
The collapse of USDT sparked the fire that burned down FTX.
When USDT collapsed, it started a spectacular domino effect, killing several other companies and causing billions of dollars in losses. The demises of Voyager Digital, Three Arrows Capital, and Celsius Exchange all lead back to Terra Labs and Do Kwon.
Then, just before the wildfire that was FTX’s downfall, the company purchased Voyager’s assets for $1.4 billion at a bankruptcy auction. Though not directly responsible, much of the FUD the crypto industry experiences today is traceable back to USDT’s collapse.