Montenegro’s Justice Minister, Bojan Božović, recently approved the extradition of Terraform Labs co-founder Do Kwon to the United States. This is the culmination of a year-long international legal battle involving multiple countries, severe allegations, and the collapse of a cryptocurrency empire that left billions of dollars in investor losses.
The Minister of Justice explained that the decision to extradite Do Kwon to the United States was made after carefully considering all legal and factual details. These included the seriousness of the crimes he is accused of, where the crimes were committed, when the extradition requests were made, his citizenship, and the possibility of sending him to another country later.
After reviewing these points, the Ministry concluded that most of the legal conditions favoured the U.S. request. As a result, the Minister approved extradition to the United States and denied South Korea’s request.
The beginning of the fall of Do Kwon
Do Kwon rose to prominence as the co-founder of Terraform Labs, a blockchain company that developed TerraUSD (UST), an algorithmic stablecoin, and its sister cryptocurrency, LUNA on their native Terra blockchain.
Both tokens were central to his vision of decentralized finance. UST was marketed as a stablecoin meant to maintain parity with the U.S. dollar, unlike traditional cryptocurrencies with fluctuating values.
In May 2022, the Terra ecosystem collapsed spectacularly when UST lost its peg to the dollar, leading to a massive sell-off of LUNA. This financial disaster erased over $40 billion in market value, causing significant losses to retail and institutional investors alike. The fallout was so severe it led to broader scrutiny of the cryptocurrency sector.
This led Do Kwon to face accusations of financial fraud, securities violations, and market manipulation. Authorities in South Korea and the U.S. alleged that Kwon misled investors and used deceptive practices to inflate the value of his cryptocurrencies. In addition, Kwon and other key executives were accused of hiding assets and avoiding accountability.
In March 2023, Kwon was arrested in Montenegro for attempting to use forged travel documents. This arrest ignited a legal tug of war between South Korea and the U.S., both of which sought his extradition. After months of court proceedings, Montenegro ultimately decided in favor of the United States, emphasizing the gravity of the allegations.
Following the allegations, Terraform Labs also faced devastating consequences. The company settled with the U.S. Securities and Exchange Commission (SEC), agreeing to pay over $4.5 billion in penalties. It also decided to shut down operations, handing over control of the Terra blockchain to its community.
Despite these efforts, the company could not escape bankruptcy proceedings. A U.S. court recently approved the liquidation of its remaining assets, estimated to be worth up to $442 million, to partially compensate defrauded investors.
Other employees of Terraform Labs have also faced legal challenges. Several executives were questioned regarding their roles in the company’s collapse. Authorities accused some staff members of collaborating in concealing funds or enabling fraudulent activities, though not all charges have been substantiated.
What Happens Next?
Do Kwon will now face trial in the U.S., where he is expected to answer charges of securities fraud and market manipulation.
