According to reports in local media, Do Kwon the South Korean cofounder of Terraform Labs was extradited by Montenegro and sent to the US. This ended months of court proceedings.
The Montenegrin authorities transferred Kwon on December 31 at the Podgorica International Airport. Kwon is expected to be charged with crimes related to TerraLUNA’s collapse in 2022. This led the TerraLUNA market value down by $40 billion.
Kwon’s arrest in Montenegro in March of 2023 was for using a fake travel document. He has fought against extradition and sought to be repatriated to South Korea.
However, Montenegro’s judiciary repeatedly denied his appeals, and Justice Minister Bojan Bozovic signed the extradition order to the US last week.
TerraLUNA collapse
TerraUSD, which was designed as a stablecoin to keep parity with US dollars, suddenly devalued, wiping over $40 billion from its market value, and causing massive losses for thousands of investors. This crash caused shockwaves in the crypto-market, prompting regulator scrutiny and fraud allegations.
Kwon founded Terraform Labs with Kwon in 2018. The company promoted TerraUSD, a decentralized revolutionary financial tool. However, critics warned that the algorithmic model underpinning TerraUSD’s stability was unsustainable.
When the stablecoin’s value plummeted, the accompanying collapse of Luna exacerbated the losses, with the total market value of the two tokens declining by an estimated $33.9 billion.
Following the crash, South Korean authorities issued a warrant for Kwon’s arrest on charges including fraud and tax evasion. Investors filed suits alleging Kwon’s company and him operated a Ponzi scam, deceiving them as to the viability TerraUSD or Luna.
Kwon’s arrest
Interpol sent a “red notice” to Kwon, marking him a very high-priority internationalfugitive in September 2022. Kwon, however, was still elusive, and reportedly traveled between multiple countries for many months before he was apprehended by Montenegro.
Kwon’s arrest was accompanied by the discovery that he had been using fake passports from Costa Rica and Belgium. This added to his criminal charges for document fraud.
While South Korea has sought Kwon’s extradition to face charges domestically, Montenegrin authorities prioritized extraditing him to the United States. In the US, Kwon is expected to face trial for securities fraud, wire fraud, and conspiracy related to the implosion of Terraform Labs’ cryptocurrencies.
Kwon’s case has become emblematic of the risks and regulatory challenges within the crypto industry. TerraUSD’s collapse led to global calls for tighter regulation of digital assets. Regulators warned against systemic risks that poorly managed stablecoins pose.
The extradition signals a new chapter in the international pursuit of accountability within the crypto sector, as Kwon’s trial in the US is expected to scrutinize his role in one of the largest financial collapses in crypto history.
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