Fugitive South Korean cryptocurrency entrepreneur Do Kwon, accused of orchestrating a multi-billion-dollar fraud that shook global crypto markets last year, has been arrested in Montenegro and faces fresh criminal charges in the United States.

Kwon was arrested along with another South Korean national, Montenegro's interior ministry said on Thursday, adding that the tycoon was apprehended on a South Korean warrant.

"Kwon Do-hyung and Han Chang-joon were arrested and brought to the state prosecutor's office in Podgorica for the criminal act of document forgery," an interior ministry statement said.

During passport control for a flight to Dubai the two "used falsified travel documents from Costa Rica, which was established also by Interpol checks", it said.

Inspection of their luggage also found travel documents from Belgium and South Korea, while Interpol checks discovered that the Belgian documents were forged, the ministry added.

Police seized three laptop devices and five mobile phones.

South Korea asked Interpol in September to circulate a "red notice" for the 31-year-old across the agency's 195 member nations.

Kwon and five others connected to Terraform are wanted for fraud and the implosion of its digital currencies in May 2022.

The US federal indictment charged the 31-year-old Kwon with eight counts, including securities fraud, commodities fraud and wire fraud. The charges follow a lawsuit a month ago from the US Securities and Exchange Commission.

Kwon's TerraUSD was designed as a "stablecoin," which are pegged to stable assets like the US dollar to prevent drastic fluctuations in prices.

However, around US$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 US$1 peg in May last year.

Kwon is accused of "orchestrating a multi-billion-dollar crypto asset securities fraud", according to the US Securities and Exchange Commission.

Many investors lost their life savings when Luna and Terra entered a death spiral, and South Korean authorities have opened multiple criminal probes into the crash. (AFP)