Extradition war ensues over Do Kwon of Luna fiasco

Posted on : 2023-03-27 18:13 KST Modified on : 2023-03-27 18:13 KST
With the passport forgery charges taking precedence, deportation or criminal extradition procedures are likely to be delayed
Do Kwon, the CEO of Terraform Labs, is brought to court by police in Podgorica, the capital of Montenegro, on March 24. (Reuters/Yonhap)
Do Kwon, the CEO of Terraform Labs, is brought to court by police in Podgorica, the capital of Montenegro, on March 24. (Reuters/Yonhap)

Do Kwon, the 32-year-old CEO of Terraform Labs and key figure implicated in the Luna and TerraUSD coin crashes, appears likely to be tried first on passport forgery charges in Montenegro, where he was recently apprehended.

With not only South Korea but also the US and Singapore pushing to extradite him, it is expected to take some time before he is brought home.

On Saturday, the Montenegrin daily Vijesti quoted Kwon’s attorney as saying he planned to “appeal the decision to extend Mr. Kwon’s detention period.” On Thursday, Kwon was arrested at the international airport in the Montenegrin capital Podgorica while attempting to board an airplane to Dubai with a forged Costa Rican passport.

After delivering him for trial on charges of forging an official document, prosecutors in Montenegro filed a request for the court to extend his 72-hour detention period, which was set to expire. The court agreed to extend the period by 30 days, acknowledging the flight risk and the fact that Kwon’s identity had not been proven.

With the passport forgery charges taking precedence, Kwon, whose full name is Kwon Do-hyung, appears likely to appear in a local court in Montenegro before authorities there begin deportation or criminal extradition procedures. Kwon has declared plans to appeal the detention period extension decision, and if a trial on passport law violations does proceed, it is expected to take some time before a final ruling emerges.

If Montenegro opts to extradite Kwon to the US or Singapore, his return to South Korea may end up delayed indefinitely. The South Korean Ministry of Justice filed a criminal extradition request with Montenegrin authorities last Friday.

Upon his arrest, US prosecutors referred him for trial on charges including fraud according to the Securities Exchange Act and sale of unregistered securities. They suspect him of having colluded with a US investment company to manipulate the coins’ prices a year before the Terra and Luna crash occurred.

According to an indictment against Kwon submitted Friday by federal prosecutors in the Southern District of New York, he is accused of contacting representatives of a US investment company around May 2021 to enlist their help in manipulating the price of his TerraUSD (UST). UST is a dollar-linked stablecoin (a form of virtual asset designed to be linked to the dollar or another legal currency).

After the stablecoin design went awry, the investment company — listed on the indictment as “Firm-1” — is alleged by prosecutors to have adopted a transaction strategy meant to manipulate UST prices at Kwon’s request, while he deceived investors in promoting the coin through social media.

Based on his indictment in the US on Securities Exchange Act violations, analysts are predicting a greater likelihood that he will also be punished on related charges in South Korea. Indeed, South Korean prosecutors had intended to charge him with violating the Capital Market Acts, viewing the virtual assets (cryptocurrency) as equivalent to securities.

“In light of global trends, the fact that US prosecutors have recognized [cryptocurrency] as securities in their indictment of Kwon appears likely to help South Korean courts in making a determination on whether they are securities,” said an official with the Seoul Southern District Prosecutors’ Office, which is investigating his case.

By Park Ji-young, staff reporter

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