The saga surrounding fallen crypto billionaire Do Kwon took another twist this week as a Montenegro court ordered a review of the Terra founder’s extradition to the United States. A temporary reprieve for the disgraced crypto mogul.
Kwon, who was arrested in Montenegro on March 23, 2023 for traveling on a fake passport, faces fraud charges in his native South Korea and the US related to the collapse in May of TerraUSD (USTC) and its sister token LUNA, which vaporized $60 billion in investor funds overnight.
The 31-year-old Stanford graduate was set to be handed over to US authorities last month after a Podgorica court had previously considered his extradition at the request of Korean prosecutors. But this week, upon appeal from Kwon’s defense team, Montenegro’s Appellate Court revoked that decision , saying the original ruling contained “unclear reasons” and violated criminal procedure rules.
As a result, Kwon will remain in detention in Montenegro pending a retrial by the lower court. The Appellate Court also rescinded an earlier decision to postpone the extradition until Kwon served a four-month sentence for traveling on forged documentation. Judges determined such matters fall strictly under the Justice Minister’s jurisdiction.
It’s the latest twist in a saga that has fixated the crypto world for months. Kwon founded Terraform Labs in 2018 and oversaw the creation of the Terra blockchain and its algorithmic stablecoins. Using a complex system of minting and burning tokens, the protocol was designed to maintain the UST token’s 1:1 peg to the US dollar. Dubbed “South Korea’s Warren Buffet” and “Genius Coder”, Kwon attracted billions in investments from major venture funds.
Kwon looked to have pioneered a novel method for managing stablecoins. Unlike the traditional approach where each stablecoin is backed by an equal amount of dollars, his method did not rely on having a dollar for every stablecoin issued. That illusion was quickly squashed.
Following the catastrophic collapse of Terra in May 2022, Kwon initially went silent on Twitter even as he faced accusations of fraud. In September of that year, Korean officials announced Kwon was on the run. He had allegedly been spotted in Serbia, Dubai, and Montenegro.
Then came news of his dramatic arrest in Montenegro as he was about to board a private jet to Turkey on a fake Guatemalan passport. Facing charges in Korea, Kwon agreed to expedited extradition.
However, in March, American prosecutors also stepped in with fraud allegations , arguing some of Kwon’s schemes targeted US investors. Kwon now faces up to 20 years behind bars if convicted Stateside. He has pleaded not guilty, maintaining the charges are “politically motivated.”
As crypto watchers continue monitoring the case, many wonder whether Kwon will end up serving time. If so, where? Legal experts say it’s likely he will be extradited first to South Korea before potentially facing American justice.
Kwon is one of several high profile crypto entrepreneurs who have come into serious legal trouble over the past couple of years. Alongside the Terraform Labs founder, he is also joined by Sam Bankman-Fried, founder of the cryptocurrency exchange FTX, and the founder and now-former CEO of Binance, Changpeng “CZ” Zhao. All three men have been accused of distinct crimes.
Bankman-Fried was found guilty last month while, a few weeks later, Zhao pleaded guilty a few weeks later.
Many in the industry point to Kwon and others for the wider damage to the industry’s reputation. This perception has proven hard to shake, despite significant price rallies across much of the crypto market in 2023.