Kwon, whose full name is Kwon Do-hyung, was arrested Thursday at an airport in Montenegro in possession of forged Costa Rican travel documents.

The 31-year-old has been accused of fraud since the implosion in 2022 of his company Terraform Labs, which caused investors to lose some $ 40 billion (37 billion euros) and shaken the cryptocurrency markets.

Shortly after his arrest, the United States brought several charges against Do Kwon for orchestrating a "multi-billion dollar crypto asset fraud". South Korea, where Do Kwon is wanted, has also said it wants to repatriate him.

Terra, its so-called stable cryptocurrency, was actually based on a Ponzi scheme, according to experts.

As recently as March 2022, Kwon was called a "genius" in glowing South Korean media reports, as thousands of private investors rushed to pump funds into his company.

"Kwon and its history are a product of our time," Cho Dong-keun, professor of economics emeritus at Myongji University, told AFP.

"He knew how to win the hearts of those desperate to make a fortune at once. He also knew how to harness their anxiety and turn it into huge profits."

Links with the elite

Born in 1991, Mr. Kwon is a student at Daewon Foreign Language High School, popular with South Korea's elite. He then studied computer science at Stanford University and apparently interned at Apple and Microsoft. He then returned to Asia to start his own business.

In 2018, he founded Terraform Labs with Daniel Shin – linked by his uncle to the family controlling the giant Samsung – and developed the cryptocurrencies Terra (TerraUSD) and Luna.

He quickly became famous, thanks in particular to Mr. Shin's connections, establishing himself as a young figurehead in the sector.

Terra is presented as a "stablecoin", a type of crypto asset whose price is usually backed by stable assets such as the dollar to avoid too large price fluctuations.

In 2019, he is among the 30 Asians under 30 listed by Forbes which points out that his "stablecoin pushed 40 million (people) to work with the company at its launch in January 2018" and that "Terra raised $ 32 million from crypto giants like Binance".

- Parallel with Elizabeth Holmes -

Experts had long warned that Mr. Kwon's model was fundamentally flawed, with some even calling it a Ponzi scheme.

Unlike other asset-backed stablecoins like gold or traditional currencies, Terra was algorithmic, tied to its sister cryptocurrency Luna, through mathematics and incentive mechanisms.

"Algorithmic stablecoins like Terra/Luna were doomed from the start," Christian Catalini, founder of MIT's Cryptoeconomics Lab, told AFP.

"Things may work for a while, while the ecosystem is developing, but are doomed to a fatal spiral in the long run."

A thorough investigation into Mr. Kwon should clarify the circumstances of the collapse of Terra and Luna, he argues, deeming it necessary to make improvements to the entire cryptocurrency sector.

"We need to ensure that bad actors can't use technology to design scams and perpetuate other forms of fraud or financial crimes," he said.

The spectacular rise of Do Kwon and its vertiginous fall are now compared to the adventures of Elizabeth Holmes, founder of the blood test start-up Theranos convicted of fraud in 2022.

Do Kwon "is simply like Holmes, another member of the elite who went through Stanford," for the Korea Economic Daily.

Cory Klippsten, boss of the cryptocurrency buying application, also drew parallels with the American on Twitter in 2022, arguing that "frightening levels of arrogance (...) mean fraud in 99.99% of cases".

Do Kwon had left South Korea before Terra collapsed in May 2022, having so far managed to evade South Korean authorities.

Seoul eventually cancelled his passport, asking Interpol to issue a red notice against him.

"A responsible adult and entrepreneur would have stayed and provided explanations," according to Cho Dong-keun.

"The fact that he tried to evade the authorities by even using false passports is a testament to his character."

© 2023 AFP