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Do Kwon in Double Jeopardy – US Challenges South Korea Claim in TerraUSD Debacle

Published March 8, 2024 12:14 PM
Teuta Franjkovic
Published March 8, 2024 12:14 PM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • Despite Montenegro sending Do Kwon to South Korea, the US is still pushing to extradite him due to the Terra collapse.
  • Do Kwon might face less severe punishment in South Korea compared to the US, where he also faces fraud charges.
  • His attempt to create a stablecoin without a dollar reserve led to the TerraUSD collapse and legal trouble.

American prosecutors are continuing their pursuit  of the extradition of former cryptocurrency mogul Do Kwon, even after Montenegro’s High Court ruled to send him back to South Korea.

This decision comes in light of charges related to the $40 billion collapse of the TerraUSD stablecoin in 2022.

U.S. Pursues Extradition of Do Kwon Amid Legal Challenges

The Justice Department announced  on Thursday the United States wasactively seeking the extradition of the Terraform Labs co-founder. This was, it said, in line with international agreements, bilateral treaties, and Montenegrin law, acknowledging Montenegro’s support for the rule of law.

This move follows a complex legal saga for Kwon. He evaded South Korean charges for months until his arrest in Montenegro in March 2023 for using a counterfeit passport. As a result, this sparked competing extradition claims from Seoul and Washington.

The Montenegrin court’s decision to extradite Do Kwon to South Korea represents a favorable outcome for him. This is because his legal team has indicated a preference for facing charges in his home country.

This development comes in the backdrop of another high-profile cryptocurrency figure, Sam Bankman-Fried, who is facing a lengthy prison sentence in the United States after being convicted of fraud in November. The same Manhattan US attorney’s office that prosecuted the FTX co-founder has also levied fraud charges against Kwon.

Criticism Arises Over Decision to Extradite Do Kwon to South Korea

Some legal experts in the cryptocurrency industry have raised concerns over the decision to extradite Kwon to South Korea rather than the United States.

Terrence Yang, managing director at Swan Bitcoin and a former counsel at Merrill Lynch, labeled  the move as “a travesty”.

He highlighted  the US’s track record in prosecuting significant cryptocurrency fraud cases, like that of FTX. He also pointed out that the United States most likely had the largest number of victims in terms of both numbers and financial impact.

Yang argued the Montenegrin court’s decision could lead to Kwon facing much lighter consequences in South Korea.

Do Kwon’s Unconventional Stablecoin Strategy Leads to Legal Woes

Do Kwon attempted to revolutionize stablecoin management by deviating from the traditional model of backing each stablecoin with an equivalent amount of dollars, opting instead for a method that did not require a one-to-one dollar reserve.

This innovation, however, did not last long, crumbling after Terra’s dramatic fall in May 2022. Following the collapse, Kwon became elusive, withdrawing from public discourse amid fraud allegations until his fugitive status was declared by Korean authorities in September.

His flight came to an end with a notable arrest in Montenegro when he attempted to leave for Turkey using a counterfeit Guatemalan passport. Now facing charges in Korea, Kwon has consented to expedited extradition, marking a significant turn in his legal saga.

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