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Korean prosecutors have reportedly frozen $40 million of funds Kwon had attempted to conceal on crypto exchanges KuCoin and OKX.
The seizure reportedly occurred with the help of the two crypto exchanges, with whom Kwon claims he had no business dealings.
Kwon lashed out at what he calls “falsehood,” questioning the motive behind the reporting. He also added that he has no time to trade:
I don’t get the motivation behind spreading this falsehood – muscle flexing? But to what end?
Once again, I don’t even use Kucoin and OkEx, have no time to trade, no funds have been frozen.
I don’t know whose funds they’ve frozen, but good for them, hope they use it for good 🙏 https://t.co/gSucKfqsxj
— Do Kwon 🌕 (@stablekwon) October 5, 2022
According to Korean prosecutors, the frozen funds belong to the Luna Foundation Guard, a pool of BTC and other funds used by Kwon and Terraform Labs to defend the peg of the TerraUSD stablecoin.
When a South Korean court issued an arrest warrant for Kwon on Sep. 14, 2022, the Luna Foundation moved 3,313 BTC to a Binance wallet. 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 UST lost its peg in May 2022. Users of Curve Finance 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.
Following the freezing of assets, crypto researcher FatManTerra advised Kwon to do a little introspection:
SEC: “You may be breaking the law, please attend our hearing”
Do: “No I’m not, you’re lying”Korean government: “You have committed a crime, here is a warrant for your arrest”
Do: “Nah, you just made those charges up”Um… At what point do you realize maybe you’re the problem? pic.twitter.com/2mnmdQHVfl
— FatMan (@FatManTerra) October 5, 2022
FatManTerra refers to an investigation by 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,
Leave Do Kwon alone. I’m so sick of these false narratives and specifically targeting of Asian men.
— 🌈the gay Satoshi $GOGE➐ (@EATOSHINAKAMOTO) October 5, 2022
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. A red notice is issued to 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 an arrest warrant for Kwon and five other individuals with links to Terraform Labs for falling afoul of the country’s capital markets law.
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