Korean prosecutors are targeting the cryptocurrency assets of Do Kwon, the founder of failed blockchain project Terra.
Kwon allegedly funneled tens of millions of dollars out of Luna Foundation Guard (LFG), which he set up to help defend his now-defunct stablecoin TerraUSD’s peg to the dollar, according to Dan Sunghan, director of the financial crime investigation bureau at the Seoul Southern District Prosecution Service.
The whereabouts of Kwon’s $29 million worth of digital tokens, which were transferred from a crypto wallet belonging to LFG, are currently unclear, Sunghan said in a recent interview with Bloomberg News.
He added that the funds his unit is tracing are in addition to more than 10,000 Bitcoin that Kwon had already diverted from his entities.
Alongside this, he and his associates still hold just over $13 million at Swiss crypto-focused lender Sygnum Bank AG.
“We’re assuming that Do Kwon, or someone under his direction, took out the amount and moved it to another wallet, not to Sygnum, and cashed it out somewhere else,” after his arrest, Sunghan said.
South Korean prosecutors are attempting to have the remaining $13 million held at Sygnum frozen.
The funds were transferred from LFG’s crypto wallet to a separate one before moving via an over-the-counter service to the bank.
South Korean prosecutors are also attempting to trace the whereabouts of Kwon’s assets, which were likely moved by Kwon personally or at his direction.
Kwon Could Serve Time in Both South Korea and the US
Sunghan also said that Kwon’s extradition to South Korea makes more sense but adds that the Terraform Labs co-founder could serve time in the United States as well.
Kwon was arrested in Montenegro in March for allegedly using forged travel documents.
In addition to this, Kwon was charged with eight counts of fraud in New York, which include two counts each of securities fraud, wire fraud, commodities fraud, and conspiracy.
US prosecutors alleged that Kwon made a series of false and misleading statements during a TV interview about the extent to which the Terra blockchain had been adopted by users.
The US Securities and Exchange Commission (SEC) has also sued Terraform Labs and CEO Kwon for allegedly orchestrating a multibillion-dollar cryptocurrency fraud.
The commission said that Terraform and Kwon raised billions of dollars from investors during the period between 2018 to May 2022 by selling “crypto asset securities” in the form of synthetic assets or “mAssets,” algorithmic stablecoin Terra USD (UST), and its sister cryptocurrency LUNA.
Moreover, the SEC claimed that Kwon transferred more than 10,000 Bitcoin from the LFG reserves to a cold wallet, and has been cashing out via a Swiss financial institution.
Kwon’s project, TerraUSD, formerly a centerpiece of the Terra blockchain ecosystem, collapsed in early May 2022, causing crypto markets to tumble.
Following this, Kwon disappeared from public view, leading to speculation regarding the whereabouts of crypto held with LFG.