A person suspected of being Do Kwon, creator of the failed TerraUSD stablecoin, has been arrested in Montenegro after months of being in hiding, the interior minister of the Balkan country said Thursday.

Montenegro Interior Minister Filip Adzic said on Twitter that the suspect was detained in the airport of the country’s capital of Podgorica with false documents, and that the local authorities were awaiting official confirmation of his identity.

Mr. Adzic and representatives of Mr. Kwon’s company, Terraform Labs Pte. Ltd., didn’t immediately respond to requests for comment.

TerraUSD, a so-called algorithmic stablecoin that sought to maintain a price of $1, lost its dollar peg in May of last year, setting off a chain reaction that wiped out some $40 billion in value from the digital-currency markets. The crash hurt thousands of investors worldwide, including some who lost their life savings.

South Korean authorities issued a warrant for Mr. Kwon’s arrest in September. The Wall Street Journal reported last week that the U.S. Justice Department was investigating the collapse of TerraUSD and had questioned former Terraform Labs team members.

The Securities and Exchange Commission sued Mr. Kwon and the company for alleged securities fraud last month in connection with the TerraUSD collapse. A lawyer for Mr. Kwon and Terraform has said in court that they would seek to dismiss the SEC’s lawsuit. Mr. Kwon has previously denied committing fraud.

Police in Singapore have also said they are investigating Terraform Labs, where the company is based. Mr. Kwon was living in Singapore until he disappeared from public view half a year ago. According to South Korean prosecutors, he left Singapore in September, traveling to Dubai and then to Serbia. Montenegro neighbors Serbia.

Write to Alexander Osipovich at alexo@wsj.com and Bojan Pancevski at bojan.pancevski@wsj.com