SINGAPORE, March 26 : Terraform Labs co-founder Do Kwon, who’s wanted by the US over an alleged crypto fraud that erased at least $40 billion in market value, denies allegations he tried to leave Montenegro using a fake passport, his lawyer said Saturday.

Kwon and the company’s chief financial officer, Hon Chang Joon, were arrested Thursday in the capital Podgorica as they tried to fly to Dubai using falsified travel documents, according to Montenegro’s Interior Ministry. Kwon, who’s also wanted in his native South Korea, was charged hours later by US prosecutors with orchestrating a yearslong cryptocurrency fraud.

"They’ve been detained due to presumed flight risk, on the grounds of allegedly falsified passports” which both deny, their lawyer, Branko Andjelic, said by phone from Podgorica. "They insist that the passports are valid.”

Andjelic declined to comment about possible extradition of Kwon to South Korea or any other country. The two men were also found with Belgian and South Korean travel documents, according to Montenegrin authorities. The Belgian papers were falsified, according to Interpol.

US federal prosecutors have said they would seek Kwon’s extradition to New York to face charges. Prosecutors accuse Kwon of misleading purchasers of cryptocurrencies issued by Terraform and allege he engaged in market manipulation to alter the price of its TerraUSD stablecoin.

Meant to keep a constant value of US$1 via a complex mix of algorithms and trader incentives involving its free-floating sister token Luna, the collapse of Singapore-based Terraform’s TerraUSD shook the crypto world last spring.

 - Bloomberg