South Korea's Do Kwon, co-founder of the US$40 billion Singapore-based Terraform Labs, has gone from digital finance success to an Interpol fugitive in just a few years. Currently in a Montenegro jail, he faces extradition to the US and South Korea on charges of securities fraud. Here's a timeline of his journey so far.

Before Terra-Luna

Do Kwon, 31, whose full name is Kwon Do-hyung, was born in South Korea and graduated from Daewon Foreign Language High School in the capital city, Seoul. It is one of the country's most prestigious private schools, with alumni such as Lee Boo-jin, the 52–year-old eldest daughter of former Samsung Group chairman Lee Kun-hee.

In 2015, Kwon completed his bachelor’s degree in computer science at California’s Stanford University, regarded as the most selective of all U.S. colleges with a 5% acceptance rate, similar to Harvard University. It also boasts the most winners of the Turing Award, known as the Nobel Prize of computer science.

Kwon reportedly spent three months in a software engineer internship at Apple Inc. In 2012 during his studies and then another three months at Microsoft Corp. in 2015 after graduating from Stanford.

It is not clear if Kwon was offered a job at the companies, but in January 2016 he founded a peer-to-peer telecommunications company known as Anyfi Inc., according to his LinkedIn profile. He was also working on a cryptocurrency white paper with college classmate Nicholas Platias, who later became head of research at Terraform Labs.

At some point, Kwon formed a partnership with established South Korean entrepreneur Daniel Shin, 38, who would become a co-founder with Kwon of Terraform Labs.

Terra-Luna

Terraform Labs was founded in 2018 in South Korea by Kwon and Shin and in April 2019, the company released the TerraUSD (UST) stablecoin and the sister Luna cryptocurrency.

Unlike other stablecoins that are presented as backed 1-1 by the U.S. dollar or other "real-world" assets, TerraUSD was a so-called algorithmic stablecoin, or pegged to the U.S. dollar but backed by a coding algorithm that involved "burning and minting" the Luna cryptocurrency to keep parity with the U.S. currency.

Subsequently, Terraform Labs moved headquarters to Singapore from South Korea in November 2020.

The company also started to provide various decentralized finance (DeFi) services on the Terra blockchain, most notably the Anchor Protocol. This offered TerraUSD holders who staked, or deposited, the stablecoin on the blockchain an annual percentage yield of as much as 19.5%, attracting over 226,000 depositors by April 2022.

The Luna token was priced at around US$3 when it was introduced in May 2019 according to CoinGecko. It rose to a high of US$119.18 by April 2022, which along with the TerraUSD stablecoin gave a valuation to the growing Terraform Labs empire of upwards of US$40 billion, minting a tribe of millionaires who bought in early and elevating Do Kwon into an icon of the brave new world of crypto and how this time it was different. Except it wasn't.

Earthquake

The death spiral of the Terra-Luna empire started on May 7, 2022, when more than US$2 billion of the TerraUSD stablecoin was pulled from Anchor Protocol, destabilizing the stablecoin and causing it to lose its peg to the U.S. dollar.

This in turn sparked a run on the stablecoin as more holders sold the token, massively increasing the supply of its algorithmically collateralized token Luna.

Luna's value dropped from $116 to near zero in just 10 days, prompting massive withdrawals from Anchor. The cause of this decline remains unclear, as Terraform Labs has reported deliberate attacks from unidentified adversaries.

Hundreds of thousands of investors around the world were caught in the implosion — crypto investors worldwide have claimed to have lost their life savings, police in some cases have reportedly linked cases of suicide to the collapse.

South Korea estimates that the crash resulted in US$58 billion worth of damages to 280,000 people in the country. Nearly 230,000 Indian investors lost their investments in Luna, India’s tech media outlet Inc42 reported.

Accounting for the fact Luna had the seventh largest market capitalization in the global crypto market and TerraUSD was the third most-used stablecoin at their peak, the number of victims and the amount lost in the collapse likely exceeds estimates.

Tsunami

The Terra-Luna stablecoin caused a corporate earthquake, leading to panic selling by investors in crypto-related companies.

Crypto lender Celsius Network halted withdrawals and transfers on the platform on June 13, citing "extreme market conditions," and filed for bankruptcy exactly a month later in the U.S. It was one of the largest crypto lenders, with nearly US$12 billion in assets under management and around 2 million customers in May 2022.

Singapore-based Three Arrows Capital, once a prominent crypto hedge fund that managed as much as US$10 billion, was also exposed and faced a liquidity crunch that forced it to file for Chapter 15 bankruptcy in the U.S. on July 1, 2022.

Crypto brokerage Voyager Digital, which claimed to have 3.5 million customers with US$1.3 billion in crypto assets on its platform, filed for Chapter 11 bankruptcy on July 6, 2022, again running out of cash after Three Arrows Capital failed to service a loan from Voyager worth US$665 million.

The next most prominent crypto business failure of 2022 came on Nov. 11 when Sam Bankman-Fried's FTX exchange filed for bankruptcy after it failed to fulfill withdrawals. Blockchain analytics firm Nansen has said Terra-Luna’s collapse also played a part in the FTX failure.

By the end of the year, some of the biggest and most trusted crypto projects and businesses had crumpled in the wake of the Terra-Luna crash, and cryptocurrency prices dived in the process, with Bitcoin falling nearly 65% in the year.

Noose Tightens

As the Terra-Luna earthquake destabilized the cryptocurrency industry, fingers started to point and investors as well as legal authorities wanted answers.

On May 12 2022, Kwon's wife sought emergency police protection after an angry Luna investor broke into their Seoul apartment complex and stood outside Kwon's door demanding to see him, though he was believed to be in Singapore at the time.

South Korean investors filed a lawsuit against Kwon and Shin alleging fraud. Local law firm LKB & Partners filed the complaint at the Seoul Southern District Prosecutors' Office, which has a financial and securities crime team that took up the investigation.

Later, Seoul prosecutors banned former employees of Terraform in South Korea from leaving the country. The prosecutors then raided the private home of Daniel Shin as well as seven local cryptocurrency exchanges, including Upbit and Bithumb.

By September 2022, prosecutors had issued an arrest warrant for Kwon and five other employees of Terraform, including former head of research Nicholas Patias. Kwon, who was still believed to be living in Singapore, was accused of fraud and violation of the Capital Markets Act, alleging Terraform issued an unregistered financial security in the form of the Luna cryptocurrency.

In the same month, Interpol issued a red notice on Kwon at the request of South Korean authorities. A red notice requests global law enforcement agencies to locate and provisionally arrest an individual. Korean prosecutors also requested the Foreign Affairs Ministry to nullify Kwon's South Korean passport.

"I am not 'on the run' or anything similar – for any government agency that has shown interest to communicate, we are in full cooperation and we don't have anything to hide," Kwon tweeted on Sept. 17.

No Ponzi

Kwon expressed remorse about the crash of Terra-Luna on cryptocurrency writer Laura Shin's Unchained podcast, stating mistakes were made but insisting it was not a fraud or ponzi scheme.

On Oct. 19 2022, South Korea’s Foreign Affairs Ministry confirmed that Kwon's passport will be nullified in two weeks, suggesting he would be unable to leave Singapore where he was presumed to be still living. However, the following day, South Korean prosecutors said they had confirmed Kwon had left Singapore the prior month and transited through Dubai, United Arab Emirates.

The following month Kwon made a brief appearance on UpOnlyTV Podcast, commenting on the woes of the FTX exchange and Sam Bankman-Fried. Former hedge fund manager Martin Shkreli, who pleaded guilty to securities fraud in 2017 was also on the podcast and told Kwon that life in jail is "not the worst.”

In December 2022, Daniel Shin attended a court hearing in South Korea where prosecutors requested an arrest warrant. The court dismissed the request, saying Shin was not a flight risk and is cooperating with the investigation. In the same month, South Korean prosecutors confirmed that Kwon went to Europe from Dubai and now lives in Serbia.

In February 2023, South Korea prosecutors said they had sent a team to Serbia and that the authorities will "actively cooperate" in the investigation into Kwon and charges of fraud.

Arrested

March brought a flurry of legal activity, with Singaporean police reportedly opening an investigation into Terraform Labs, and former employees of the company questioned by the Federal Bureau of Investigation and prosecutors from New York.

South Korea’s prosecutors again requested an arrest warrant for Daniel Shin, which was rejected by the court for a second time. On March 23, Kwon and Terra's CFO, Han Chang-joon, were arrested at Podgorica airport in Montenegro. They were attempting to travel to Dubai with forged Costa Rican passports.

On April 20, Kwon and Han were charged with using false travel documents in Montenegro. If convicted, they could face a prison term of three months to five years. Kwon's lawyer plans to fight the case in the Montenegro Supreme Court, arguing that the travel papers are valid.

Kwon now faces further time in a Montenegro jail, assuming he isn’t granted bail, but in the meantime South Korea and the U.S. are both clamoring for his extradition to face the raft of charges both countries have lined up against him, ranging from market manipulation to wire, commodities, and securities fraud.

Montenegro Justice Minister Marko Kovac said at the end of March that Washington requested the extradition of the South Korean national before Seoul.

If Kwon does end up in the U.S. to face charges, he will join Sam Bankman-Fried as the other former crypto superstar who fell from grace. Bankman-Fried is out on a US$250 million bail and faces a likely October court date over accusations that if proven could send him to jail for decades, a fate that may also await Kwon.