Figure behind Luna-Terra crypto crash fiasco to be extradited to US, not Korea

Posted on : 2024-02-23 17:29 KST Modified on : 2024-02-23 17:41 KST
A Montenegrin court ruled that Do Kwon, originally from South Korea, be sent to the US to face multiple fraud charges
Terraform Labs CEO Do Kwon after being arrested in Montenegro in March 2023. (Reuters/Yonhap)
Terraform Labs CEO Do Kwon after being arrested in Montenegro in March 2023. (Reuters/Yonhap)

Terraform Labs founder Do Kwon will likely be extradited to the US, although he is a South Korean citizen. Kwon was the key figure behind the collapse of the cryptocurrencies Luna and TerraUSD stablecoin, identified by the ticker UST. Kwon was arrested in Podgorica, Montenegro, in March of last year after being on the run for several months. 

According to the local daily Pobjeda, the Podgorica High Court ruled on Wednesday that Kwon, whose full name is Kwon Do-hyung, will be extradited to the US to face charges related to crimes committed in financial operations.

The verdict comes 11 months after his arrest at Podgorica’s airport last year for using a forged passport. 

Court spokesperson Marija Rakovic told the Associated Press that Kwon’s lawyers have three days to appeal. The Wall Street Journal reported that Goran Rodić, Kwon’s local attorney called the extradition illegal and vowed to appeal. 

Kwon fled South Korea for Singapore in April 2022, shortly before the collapse of the Terra ecosystem. He then traveled to the United Arab Emirates and Serbia before arriving in Montenegro. He was arrested on March 23 of last year after being caught trying to use a fake Costa Rican passport to travel to Dubai. He was arrested with Han Chang-joon, former Terraform Labs CFO, but Han was extradited to South Korea this past Feb. 6, and his trial began on Wednesday. 

Kwon and Terraform Labs asserted that UST would maintain its value at $1 through an algorithmic mechanism tied to Terra’s native cryptocurrency Luna. Essentially, the algorithm was based on the assumption that the price of and demand for Luna would remain stable and gradually increase over time. In May 2022, the price of Luna tanked, leading to the crash of TerraUSD, and both currencies became virtually worthless within two weeks. The Wall Street Journal estimates that the crash erased around US$40 billion in value from crypto markets. 

If Kwon is extradited to the US, he is likely to stand trial in a lawsuit filed by the US Securities Exchange Commission, which is scheduled to begin on March 25. The SEC filed an official complaint on Feb. 16 accusing Kwon and Terraform Labs of securities fraud and of repeatedly misleading and deceiving investors.  

Kwon is also being charged with fraud and market manipulation by federal prosecutors in New York. If he is convicted in US courts, he could be sentenced to up to 100 years behind bars.

By Shin Gi-sub, senior staff writer

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