Reports suggest that the co-founder of Terraform Labs has lost his case against the US Securities and Exchange Commission (SEC). The SEC can now ask the Monetary Authority of Singapore (MAS) for data that could provide further insight into how the 31-year-old developer ran Luna Foundation Guard and whether he had a role in last year’s LUNA/UST collapse.
Kwon, who is accused of being the main culprit behind the billion-dollar crash, is under custody in Montenegro after being arrested by the local authorities in March.
The SEC’s Latest Move
A recent Bloomberg report suggests that US District Judge Jed Rakoff has dismissed Kwon’s request to stop the SEC from accessing his MAS data. The regulator reportedly has records that show how Luna Foundation Guard (the non-profit entity behind the collapsed Terra ecosystem) was set up and raised funds to maintain the algorithmic stablecoin – UST – at $1 in value.
The token lost its peg in May 2022 and fell sharply below its price target. As the native token was closely tied to UST, users started minting more LUNA to stabilise the fallout. This created an endless arbitrage loop, which resulted in both tokens hitting zero.
The collapse caused massive losses, with many seeking an explanation for what happened. Among the agencies that blamed Kwon and Terraform Labs was the SEC, which filed a complaint in February, stating that they orchestrated a multi-billion-dollar crypto fraud that resulted in significant losses for investors.
Could Kwon Face a Life Sentence in Prison?
At the time of the crash, the former crypto tycoon was uncooperative with regulators and fled the country. Sources suggested that Kwon had gone to Dubai, Seychelles, Russia, Mauritius, and Serbia in the past few months to hide. However, Kwon was eventually arrested at Podgorica Airport (the Montenegrin capital) last month with a forged Costa Rican passport while allegedly attempting to flee to another country.
He is likely to be in custody in the Balkan nation for 30 days before being extradited to either the US or South Korea. If found guilty in the US, Kwon could face over 100 years in prison, while the maximum penalty in his home country is 40 years.
