Do Kwon – the nefarious founder of the now failed stable coin company Terraform Labs – will spend the next four months behind bars in Montenegro after he was detained at one of the nation’s airports with forged documents and phony passports.
Do Kwon Heads to Prison
The passports allegedly held by Kwon at the time of his detainment included ones from Costa Rica and Belgium. He attempted to board a flight that was on its way to Dubai in the United Arab Emirates (UAE) from Montenegro’s capital city of Podgorica. He was found guilty and sentenced to four months in jail. His former chief financial officer Han Chang-joon was found guilty of the same thing and will serve the same amount of time behind bars.
Terraform Labs created an algorithmic stable currency known as Terra USD. The problem with an algorithmic stable coin is that it’s not backed by any physical collateral the way a standard stable coin (i.e., Tether, USD Coin, etc.) is. There is no fiat currency, gold, or other proven financial product supporting it. Rather, it’s simply up because the people investing in it believe it should be up. It’s backed by “spirit” or investor confidence if you will.
This is a dangerous situation because if that investor confidence ever goes down (which it clearly did), the currency in question runs the risk of vanishing overnight, and that’s exactly what happened with Terra USD, though the circumstances surrounding the token’s demise appear more complicated in their own ways.
The Terra USD asset ultimately collapsed over the course of about 24 to 48 hours. Within that time, more than $40 billion in wealth vanished. As it later turned out, Kwon and his fellow executives began taking their Terra reserves and placing them into bitcoin just weeks before the crash occurred, suggesting that Kwon and those behind the currency were engaged in a rug pull of sorts or some other form of malicious activity designed to hurt investors while they walked away without a scratch.
This raised serious suspicions with law enforcement officials in South Korea, where Terraform Labs was based. An arrest warrant for Kwon was issued after it was determined he was responsible for a multi-billion-dollar fraud scheme, though it was explained in news headlines that he eventually became a fugitive that sought to avoid capture and time in prison. Kwon was quick to deny this on social media, claiming he was coding in his living room and that he was willing to cooperate with law enforcement in any way he could.
Trying to Appeal
Following his detainment and prison sentence, a defense lawyer for Kwon named Goran Rodic explained:
Once we receive the verdict in writing, we will consult with our client about [a] possible appeal.
