Do Kwon to be Extradited to the US Over Terra/Luna Collapse

In a landmark decision for the cryptocurrency industry, South Korean entrepreneur Do Kwon, the central figure behind the collapse of the TerraUSD and Luna tokens, will be extradited to the United States from Montenegro, BBC News reported over the weekend.

This marks the culmination of an 18-month legal battle following the dramatic implosion of the tokens in May 2022, which wiped out approximately $40 billion in investor funds and sent shockwaves through global crypto markets.

The Montenegrin Ministry of Justice confirmed the decision, stating that Justice Minister Bojan Bozovic approved Kwon's extradition to the US. The Ministry’s statement emphasized that “the majority of the criteria prescribed by law favour the extradition request from the competent authorities of the United States of America.”

Notably, Kwon had reportedly consented to extradition to both the US and South Korea.

This decision comes despite Montenegro not having extradition treaties with either the US or South Korea, requiring the matter to be resolved through the country's court system.

The US and South Korea have been vying for Kwon's extradition for months, alleging fraud in connection with the collapse of Terraform Labs, the company behind the tokens. In February, US regulators, including the Securities and Exchange Commission (SEC), formally charged Kwon and Terraform Labs with “orchestrating a multi-billion dollar crypto asset securities fraud.” SEC Chairman Gary Gensler stated that Kwon and his company failed to provide adequate disclosures regarding Luna and TerraUSD.

US authorities allege that Kwon misled investors about the stability of TerraUSD, a stablecoin designed to maintain a 1:1 peg with the US dollar, and made false claims about the tokens' potential for growth. The algorithmic stablecoin, along with its sister token Luna, entered a catastrophic "death spiral" in May 2022, triggering a broader market downturn.

Following the collapse, Interpol issued a red notice for Kwon's arrest in September 2022. He had fled Singapore, where his company was based, and subsequently moved to Serbia before being apprehended in Montenegro. Kwon was arrested in March 2023 at Podgorica Airport while attempting to board a flight to Dubai. He was later sentenced to four months in a Montenegrin prison for forging official documents.

The extradition of Kwon follows the extradition of Terraform Labs' former finance officer, Hon Chang-joon, to South Korea in February after serving a similar sentence in Montenegro for fraud charges.