 "Police officers escort Terraform Labs co-founder Do Kwon after he served a sentence for document forgery, in Podgorica, Montenegro, March 23, 2024. Reuters")
South Korean cryptocurrency entrepreneur Do Kwon will be extradited to the United States following a Montenegrin court decision over his alleged role in the collapse of two digital tokens, TerraUSD and Luna, which wiped out $40 billion in investor funds.
Kwon’s extradition follows the February extradition of Terraform Labs’ former finance officer, Hon Chang-joon, to South Korea. Hon had also served four months in Montenegro for fraud-related charges, according to BBC.
Interpol had issued a red notice for Kwon’s arrest in September 2022, signalling international law enforcement to locate and detain him.
His extradition to the US marks a significant step in holding him accountable for one of the most high-profile financial collapses in cryptocurrency history.
Who Is Do Kwon?
Do Kwon, the founder of Terraform Labs, gained prominence as a key figure in the cryptocurrency world with his development of the Terra blockchain platform and its associated stablecoin, TerraUSD, and token, Luna.
At its peak, the Terra ecosystem was valued at billions of dollars, attracting significant global investments.
However, the collapse of TerraUSD and Luna in May 2022 triggered one of the largest financial failures in cryptocurrency history, leading to widespread investor losses and a sell-off in major cryptocurrencies like Bitcoin.
After the crash, Kwon fled Singapore and later travelled to Serbia before being apprehended in Montenegro in March 2023 while attempting to board a flight to Dubai using forged documents.
Impact Shorts
More ShortsWhat are the allegations against him?
US and South Korean authorities accuse Kwon of orchestrating a multibillion-dollar securities fraud tied to Terraform Labs. The US Securities and Exchange Commission (SEC) alleges Kwon made misleading claims about the stability of TerraUSD, a so-called stablecoin, and misrepresented the potential value of Luna to investors.
“We allege that Terraform and Do Kwon failed to provide the public with full, fair, and truthful disclosure as required for a host of crypto asset securities, most notably for Luna and TerraUSD,” SEC Chairman Gary Gensler said in February when charges were announced.
Kwon’s company promised stability for TerraUSD, pegged to the US dollar, but the tokens entered a “death spiral” in 2022, destabilising global crypto markets and eroding investor confidence.
Extradition decision and legal battles
Montenegro’s Justice Minister Bojan Bozovic announced the decision to extradite Kwon to the US, citing legal criteria favouring the American request. The country, which has no formal extradition treaties with the US or South Korea, required the matter to be resolved through extensive legal proceedings over 18 months.
Kwon had consented to extradition to both countries, but Montenegro opted to fulfill the US request. He was previously sentenced to four months in Montenegrin prison for using forged documents.