Photo: The Canadian Press

South Korean prosecutors have asked Interpol to issue a fugitive alert for the founder of Terraform Labs as they investigate a $40 billion crash of the firm’s cryptocurrency that devastated retail investors around the world.

The Seoul Southern District Prosecutors’ Office asked Interpol on Monday to circulate the “red notice” for Do Kwon across the agency’s 195 member nations to find and apprehend him.

A South Korean court recently issued arrest warrants for Kwon and five other people connected to Terraform Labs as prosecutors to investigate allegations of fraud and financial crimes in relation to the implosion of its digital currencies in May. South Korea’s Foreign Ministry said Tuesday that it’s processing the prosecutors’ request to restrict or revoke the passports of Kwon and four other suspects who are South Korean.

Interpol had not publicized the red notice for Kwon on its website as of Tuesday morning, and South Korean prosecutors say the designation may take more than a week. Interpol describes such notices as requests to law enforcement worldwide to locate and provisionally arrest fugitives “pending extradition, surrender, or similar legal action.”

Kwon’s whereabouts are unknown.

South Korean authorities initially believed Kwon was in Singapore before the city-state’s police announced last week that he wasn’t there. Kwon, who has been accused of exaggerating the stability of his digital currencies before their collapse, insisted in a tweet Sunday that he wasn’t on the run from any “government agency that has shown interest to communicate.”

“We are in full cooperation and we don’t have anything to hide,” Kwon said in the tweet.

The collapse of Terraform Lab’s digital currencies, TerraUSD and Luna, affected an estimated 280,000 South Korean investors while causing broader turmoil in the global cryptocurrency market.

TerraUSD was designed as a “stablecoin.” Those are pegged to stable assets like the US dollar to prevent drastic fluctuations in prices. However, around $40 billion in market value was erased for the holders of TerraUSD and its floating sister currency, Luna, after the stablecoin plunged far below its $1 peg in May.

South Korean prosecutors launched the investigation following collective complaints filed by dozens of investigators.

The Bank of Korea, South Korea’s central bank, said in a report published in June that the collapse of TerraUSD and Luna was a major factor in the global cryptocurrency market shrinking by more than 40% compared to late 2021, when its market value reached over $2.3 trillion.