South Korean cryptocurrency entrepreneur Do Kwon, the co-founder of Terraform Labs, is set to be extradited to the United States from Montenegro. This follows a court ruling and months of legal battles after the collapse of his two digital tokens, TerraUSD and Luna, which wiped out approximately $40 billion (£31.7 billion) of investor wealth and shook the global cryptocurrency market.
Legal Saga Ends with Extradition Decision
Montenegro’s Minister of Justice, Bojan Bozovic, confirmed the extradition decision, stating that the majority of legal criteria favoured the US’s request. Despite the lack of formal extradition treaties between Montenegro and the US or South Korea, the courts ruled in favour of the US. The Ministry of Justice’s statement revealed that Kwon had consented to be extradited to both countries but prioritised the US request.
The decision concludes a complex legal journey that included rulings and reversals over 18 months. Kwon was arrested in March 2023 at Podgorica Airport while attempting to board a flight to Dubai using forged documents. In June, he was sentenced to four months in prison in Montenegro for document fraud.
Charges of Fraud and Misrepresentation
The US Securities and Exchange Commission (SEC) charged Kwon and Terraform Labs in February 2023 with orchestrating a multi-billion-dollar crypto asset securities fraud. SEC Chairman Gary Gensler accused Kwon of misleading investors about the stability of TerraUSD and making false claims about its potential for value growth.
TerraUSD, designed as a stablecoin pegged to the US dollar, and its sister token Luna, experienced a catastrophic collapse in May 2022, plunging into a “death spiral.” The crash triggered a broader sell-off across major cryptocurrencies, including Bitcoin.
Following the collapse, Kwon faced international scrutiny. Interpol issued a “red notice” for his arrest in September 2022. Initially located in Singapore, Kwon fled to Serbia before being apprehended in Montenegro. His former colleague and Terraform Labs’ finance officer, Hon Chang-joon, was extradited to South Korea earlier this year after serving a four-month prison sentence in Montenegro for fraud charges.
Impact on the Crypto World
The downfall of TerraUSD and Luna underscored the vulnerabilities in the cryptocurrency market, especially around stablecoins. Their failure erased billions in investor wealth and sparked calls for stricter regulations worldwide. US regulators allege that Kwon’s lack of transparency and misleading assurances to investors contributed significantly to the disaster.
Kwon’s extradition to the US marks a pivotal moment in the global effort to hold crypto entrepreneurs accountable for misconduct. It sends a clear message that legal and regulatory oversight will intensify as the crypto market evolves.
With his extradition now imminent, Do Kwon faces a legal reckoning that could have far-reaching consequences for the cryptocurrency industry.
