According to the Supreme Prosecutors’ Office’s financial crimes unit, a South Korean court has issued an arrest warrant for Do Kwon, the co-founder of the now-defunct stablecoin issuer Terraform Labs.
The warrant also named five additional people, according to Bloomberg News, citing a text message from the prosecutors’ office. According to the report, they have been charged with violating the Capital Markets Act.
The warrant comes four months after the $40 billion Terra ecosystem and its algorithmic stablecoin (UST) collapsed, which was the first domino to fall during this year’s crypto winter.
The ensuing contagion wreaked havoc on the industry, with crypto lender Celsius Network and crypto broker Voyager Digital declaring bankruptcy as the value of digital assets fell by more than 50% from their highs.
Three Arrows Capital, based in Singapore, was another firm that declared bankruptcy after the extent of its exposure to the Terra network was revealed. The implosion of Three Arrows left a trail of troubled loans across the crypto industry, with creditors owed billions of dollars.
Kwon stated in his first public interview last month that he is cooperating with authorities.
Terra did not immediately respond to a comment request.
Do Kwon went on to create a new version of Luna after the crash. According to CoinGecko data, the price of the new token fell as much as 45% to $2.40 following news of the warrant. The coin’s market capitalization dropped 42% to $413.2 million.
Terra’s demise prompted investigations in South Korea and the United States, as well as renewed regulatory scrutiny of stablecoins, which are digital tokens tied to an asset such as the dollar. Stablecoins are a popular option for investors looking to diversify their holdings away from more volatile coins, and they make it easier to transfer funds to crypto exchanges.
Prosecutors raided the home of Terraform Labs co-founder Daniel Shin in July, as the investigation into allegations of illegal activity behind the TerraUSD collapse deepened.