Terra's Do Kwon

Terra’s Do Kwon stands to face longest jail term over financial crime, South Korea says in extradition fight

South Korea believes it’s best placed to prosecute Do Kwon, the founder of the Terra ecosystem that collapsed a year ago. South Korean prosecutors say that if convicted, Kwon would face over 40 years in prison, the longest sentence ever handed in South Korea for a financial crime.

Kwon founded Terraform Labs, the company behind the Terra ecosystem, which included the LUNA token and the UST stablecoin. Both tokens collapsed last May after the algorithm that they depended on failed. The $40 billion collapse had a butterfly effect that culminated in the downfall of some of the largest firms in the digital asset industry.

Kwon was arrested in March in a Montenegro airport as he attempted to use a forged passport to travel to Dubai. The U.S. and South Korea have been locked in an extradition battle ever since, a battle that South Korean prosecutors now say favors them.

South Korea is best suited to investigate and prosecute Kwon, says Dan Sung-han, the head of the team of South Korean prosecutors charged with the Terra case. Speaking to the Wall Street Journal, Dan says South Korean courts best serve the victims of Kwon’s crimes.

“Given the nature of this incident, we think investigating the case in South Korea would be the most efficient way of bringing justice,” he claimed.

Dan’s team has been investigating Terra and Kwon for months, probing how he operated the business in detail. He says that while some crimes were committed in the U.S., most of the operations, victims, and crimes were in South Korea.

“We’ve collected a large swath of evidence pertaining to the TerraUSD case overall, much of which is information that cannot be easily obtained in the U.S.,” the prosecutor said.

The longest sentence for a financial crime

South Korea has accused Kwon and his team of knowingly making false and misleading statements about the two tokens. They also claim he launched the tokens while aware that the algorithms underpinning them wouldn’t deliver as advertised.

Two weeks ago, South Korean authorities indicted ten people, including Terra co-founder Daniel Shin, for fraud and violating capital market laws.

In the U.S., Kwon faces criminal charges from New York federal prosecutors. The SEC has also filed a civil lawsuit for securities violations, a charge that Kwon’s legal team fought against. They claim that the SEC has no jurisdiction over Terra tokens as they were developed overseas and were not directly marketed to American investors.

In the fight for extradition, some legal experts believe South Korea has the upper hand. The East Asian country has an extradition treaty with Montenegro and was the first to file an extradition request for Kwon.

“It’s ultimately a matter of which location is more efficient, and what is the best way of bringing justice, and I believe the U.S. is willing to cooperate,” Dan said.

If he is convicted in South Korea, the prosecutor reckons that Kwon could set the record for the longest prison sentence for a financial crime. This record is currently held by Kim Jae-hyun, the CEO of Optimus Asset Management, who was sentenced to 40 years in prison in 2022. Kim was alleged to have orchestrated a $1.1 billion Ponzi scheme.

Watch: Why blockchain regulatory oversight is important

YouTube video

New to blockchain? Check out CoinGeek’s Blockchain for Beginners section, the ultimate resource guide to learn more about blockchain technology.