The ongoing saga involving Do Kwon, co-founder of Terraform Labs, has taken a new turn as a court in Montenegro has approved his extradition to either South Korea or the United States.
The High Court of Podgorica has satisfied the legal prerequisites for Kwon’s extradition, as indicated in an official statement posted on the court’s website on November 24.
While the court has granted approval for Kwon’s extradition to either the U.S. or South Korea, the ultimate decision on the extradition rests with Montenegro’s Minister of Justice.
The Balkan country has been detaining the South Korean cryptocurrency executive since June when he attempted to leave the country using a forged passport . Kwon became the subject of an international manhunt after fleeing an investigation in South Korea related to the sudden collapse last year of TerraUSD and its sister token, Luna, which triggered a crypto market crash affecting various lenders like Voyager Digital and Celsius Network.
Kwon was apprehended at Podgorica airport with a Costa Rican passport and subsequently sentenced to four months in prison in Montenegro. Both the U.S. and South Korea are seeking his extradition on fraud charges. The decision on Kwon’s extradition priority between the two countries will be determined by the Minister of Justice in Montenegro.
In the U.S., Kwon faces eight criminal charges , including securities, commodities, and wire fraud, along with civil charges from the Securities and Exchange Commission (SEC) for allegedly orchestrating a cryptocurrency fraud that resulted in substantial losses in April 2018 and May 2022. The charges involve misleading individuals about various aspects of the Terra blockchain.
Kwon and his company, Terraform Labs, operated the TerraUSD stablecoin, designed to facilitate the connection between traditional and crypto markets. The stablecoin’s value was intended to be algorithmically controlled, eliminating the need for backing by hard assets.
Following the collapse of TerraUSD, Kwon’s reputation in the crypto industry took a hit, leading to an Interpol red notice, a global request for his arrest. South Korea also issued an arrest warrant, and his South Korean passport was revoked due to alleged violations of capital market rules.
The failure of TerraUSD brought increased regulatory scrutiny on stablecoins, which play a significant role in crypto trading. U.S. Treasury Secretary Janet Yellen emphasized the growing risks associated with stablecoins following the token’s collapse.
The final decision on Do Kwon’s extradition destination, either the U.S. or South Korea, lies with Montenegro’s Minister of Justice. Both the U.S. and South Korea have charged Kwon in connection with an alleged cryptocurrency fraud that led to a $40 billion market value loss. Prosecutors from both countries have expressed their intention to request Kwon’s extradition.
The determination of which country gets Do Kwon into a courtroom first on crypto fraud charges will likely involve legal and political considerations. Factors such as the gravity of the crimes, the location where the offenses were committed, the sequence of extradition requests, and citizenship may play a role in the final decision.
Legal crypto expert David Lesperance explains the extradition process as a legal process between two countries which involves one country, in this case either South Korea and/or the United States, making a formal extradition request now to another country, in this case Montenegro.
“It is a long process. In some cases, extradition can be done simply by agreement between two governments. It’s a long process that allows apeals, etc, and for those reasons governments try to often circumvent extradition,” he said.
Lesperance told CCN that the preferred method is simply for one government, in this case Montenegro, to say: “We’re just kicking him out! He’s not working, he has no status here, he’s not a Montenegrin citizen, he’s not a resident, he has no status here as a visitor. We’re done with him now. So now we’re going to kick him out.”
“It then really becomes a question of the Koreans versus the Americans. The Montenegrins will probably direct him to one or the other way. There are certainly discussions going on between the Korean and American governments and the Montenegrin governments, and there are probably discussions going on between the Americans and the Koreans,” said Lesperance.
He added the discussions will be at a governmental level, and that he highly suspects, given his extreme flight risk that either the Koreans or the Americans would be, open to give him pretrial release.
“Do Kwan is retained and, at one point he did retain a pretty high-powered Korean law firm who, I’m sure have advised him on that. And you’d be nuts to have lost or retained top U.S. criminal counsel to advise him on that. And so if he had any input into this, they were probably able to advise him,” Lesperance concluded adding that we have to wait a MoJ to give its final word.
Neither the U.S. nor South Korea has a direct extradition treaty with Montenegro, but both can utilize alternative legal mechanisms to secure Do Kwon’s extradition. Montenegro’s Law on International Legal Assistance in Criminal Matters has been used before to send fugitives to the U.S. Additionally, South Korea and Montenegro are signatories to the European Convention on Extradition.
While South Korea may have a stronger legal claim, the final decision could involve political and diplomatic considerations. Both Montenegro and South Korea may seek to avoid direct challenges to the U.S., given their respective alliances .
It’s possible for the countries involved to reach a deal. The U.S. could argue its ability to prosecute Kwon effectively and seize global assets, sharing the proceeds with South Korean victims. They could also agree on the order of trials. Even if Kwon goes from Montenegro to South Korea, South Korea could decide to send him to the U.S. for the first trial, as seen in previous cases.