The Higher Court in Montenegro has approved requests by South Korean and United States authorities to extradite disgraced Terraform Labs Founder Do Kwon, according to a court ruling issued on November 24.
It will now be up to Montenegro’s Minister of Justice to make the final decision on which country gets the first crack at Kwon, who is currently in detention in Montenegro.
Kwon’s Terraform Labs issued the (supposedly) stablecoin TerraUSD, which was to be pegged to the value of the U.S. dollar via an algorithm tied to other Terraform Labs’ tokens. In 2022, the algorithm broke down and led to an enormous loss in value for TerraUSD—a loss so big that it snowballed into broader market turmoil.
Kwon, who co-founded Terraform Labs alongside Daniel Shin, is sought by multiple authorities over the collapse of the Terralabs ecosystem. The U.S. Department of Justice (DoJ) filed criminal charges against the co-founder for securities fraud, commodities fraud, and conspiracy. In addition to potential prison time, U.S. prosecutors are seeking the forfeiture of all assets and proceeds gained by Kwon due to the Terra fraud—or their equivalent value if the assets are unrecoverable.
The U.S. Securities and Exchange Commission (SEC) has also filed civil charges against Kwon. According to the complaint, the Terralabs empire amounted to a multi-billion dollar fraud based on illegal securities issuances. Terralabs initially tried to have the case thrown out on the basis that the digital assets in the Terralabs ecosystem were not securities, but that was rejected by the Judge.
Meanwhile, South Korean prosecutors are pursuing Kwon for making false and misleading statements about the TerraUSD and LUNA tokens, in particular, that Terralabs issued the tokens despite knowing that the algorithm intended to keep TerraUSD pegged to the U.S. dollar would collapse. In South Korea, Kwon faces up to 40 years imprisonment.
When authorities were about to move on Kwon, he attempted to flee to Dubai on forged travel documents. Kwon and former Terraform Labs CFO Han Chang-Joon were arrested as they tried to board a flight to Dubai in Montenegro; both men were sentenced to four months imprisonment.
Kwon had earlier tried to leverage his incarceration in Montenegro to avoid being hauled before a court to answer for the alleged fraud. He had his lawyers tell the court in the U.S. that he would not be able to attend depositions scheduled by the SEC for October due to his detention.
Now that Kwon is cleared for extradition, all that remains to be seen is whether he’s sent to South Korea or the United States.
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