Do Kwon, the controversial co-founder of Terraform Labs, will likely soon be extradited to the United States from Montenegro to face criminal charges related to the dramatic collapse in 2022 of the TerraUSD stablecoin he created.
- Do Kwon, co-founder of Terraform Labs, will reportedly be extradited from Montenegro to the US instead of South Korea
- Montenegro’s Justice Minister Andrej Milović privately said he plans to approve the US extradition request
- Kwon faces 8 charges in the US including securities fraud related to the collapse of TerraUSD which wiped out $40 billion
- Kwon was arrested in Montenegro in March 2022 for using falsified travel documents and has been in custody since
- The decision on Kwon’s extradition is still pending final approval from Montenegro’s courts
Kwon has been in custody in Montenegro since March 2022 when he was arrested at the airport for attempting to travel on falsified documents. This set off a legal battle between US and South Korean authorities over who would have first rights to charge and try Kwon for his role in the implosion of TerraUSD. Now, reporting suggests Montenegro’s Justice Minister Andrej Milović has privately decided to approve the US extradition request.
TerraUSD, an algorithmic stablecoin that was supposedly pegged 1:1 to the US dollar, experienced a severe “death spiral” depegging event in May 2022. This also brought down Luna, an affiliated token, resulting in around $40 billion being wiped out overnight. The collapse rattled the broader crypto market and kicked off a chain reaction of firms declaring bankruptcy.
US authorities allege that Kwon perpetrated fraud by making false claims about TerraUSD’s stability and levels of reserve assets backing the token. In February 2022, the Securities and Exchange Commission charged Kwon with “masterminding fraudulent schemes and market manipulation.” If extradited and convicted in the US, he could face over 50 years in prison across 8 criminal charges including commodities fraud, securities fraud, and conspiracy to commit fraud.
The final decision around Kwon’s extradition apparently still rests with Montenegro’s courts who need to rule on his appeal of last month’s court approval. But Justice Minister Milović has supposedly confirmed in private that he intends to send Kwon to the US regardless.
Kwon continues to maintain his innocence, but TerraUSD’s collapse has seriously eroded trust in algorithmic stablecoins. It also kicked off a chain reaction contributing to crypto exchange FTX’s bankruptcy and the downfall of its CEO Sam Bankman-Fried, who now also faces US criminal charges. The back-to-back implosions of these two major crypto shining stars has prompted intensified calls for regulation of digital assets.
Where Kwon will end up facing justice remains to be seen. But it seems increasingly likely he could soon be on his way to the United States to confront the criminal accusations around TerraUSD’s spectacular failure that vaporized fortunes and further tarnished the reputation of cryptocurrencies.