- South Korean officials reportedly freeze funds from two exchanges allegedly used by the Luna Foundation Guard.
- Terraform Labs CEO Do Kwon has called the reports fake news.
- South Korean prosecutors issued an arrest warrant for Kwon and five others with links to Terraform Labs.
Korean prosecutors have reportedly frozen $40 million of funds Kwon had attempted to conceal on crypto exchangesKuCoinand OKX.
The seizure reportedlyoccurredwith the help of the two crypto exchanges, with whom Kwon claims he had no business dealings.
Kwon decries claims of frozen assets
Kwon lashed out at what he calls “falsehood,” questioning the motive behind the reporting. He also added that he has no time to trade:
According to Korean prosecutors, the frozen funds belong to theLunaFoundation Guard, a pool of BTC and other funds used by Kwon and Terraform Labs to defend the peg of the TerraUSDstablecoin.
When a South Korean court issued an arrest warrant for Kwon on Sep. 14, 2022, the Luna Foundation moved 3,313 BTC to aBinancewallet. After that, approximately $27 million was transferred to KuCoin, while an additional $40 million was moved to OKX. According to reports, both exchanges froze funds at the request of South Korean prosecutors.
Prosecutors are baying for Kwon’s blood, suspecting the Terraform Labs co-founder of being involved in fraud after receiving complaints from 81 investors that lost big when Terraform Labs’ stablecoin USTlost its pegin May 2022. Users ofCurveFinance withdrew TerraUSD liquidity, causing the price of TerraUSD to spike, which in turn led to a drop in the price of LUNA, a sister coin designed to help UST keep its dollar peg. Once LUNA collapsed to almost zero, TerraUSD soon followed.
The de-pegging event sent shockwaves rippling through the crypto markets, the effects of which are still being felt today. Crypto lender Celsius declared bankruptcy in July 2022, while Three Arrows Capital, an embattled Singaporean hedge fund with $200 million exposure to LUNA, is currently undergoing liquidation.
Twitter responds to Kwon’s denial
Following the freezing of assets, crypto researcher FatManTerra advised Kwon to do a little introspection:
FatManTerra refers to aninvestigationby the U.S. Securities and Exchange Commission into Terraform Labs’ marketing of the TerraUSD stablecoin.
To protect funds from future seizure, FatManTerra advocates the use of self-custodial crypto wallets.
Another Twitter user, EATOSHINAKAMOTO, responsible for developing the first LGBTQ+ token, defended Kwon,
On Sep. 19, 2022, the Korean Prosecutor’s office asked Interpol to intervene in the Terraform Labs saga, citing Kwon’s lack of cooperation with their investigation into the company and its practices. Ared notice isissuedto grant law enforcement the power to provisionally arrest a suspected criminal in preparation for extradition or legal action. The prosecutors also revoked Kwon’s passport.
A week earlier, Korean authorities had issued anarrest warrantfor Kwon and five other individuals with links to Terraform Labs for falling afoul of the country’s capital markets law.