Korean prosecutors to seek extradition of Terraform Labs' Do Kwon

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Korean prosecutors to seek extradition of Terraform Labs' Do Kwon

Published: 24 Mar. 2023, 17:57 Updated: 24 Mar. 2023, 18:27

Terraform Labs co-founder Do Kwon speaks in an interview with Coinage. The interview was released in August. [SCREEN CAPTURE]

Korean prosecutors will seek the extradition of Do Kwon, 32, the Terraform Labs co-founder behind a $40 billion implosion, after he was arrested in Montenegro on Thursday.

Prosecutors will quickly go through the formalities with the Ministry of Justice to locate Kwon. Korea and Montenegro both fall under the European Convention on Extradition, a treaty that grants extraditions for offences in connection with taxes, duties, customs and exchange.

Kwon, the mastermind behind cryptocurrencies TerraUSD and Luna, has been under investigation for alleged fraud and tax evasion after investors in his inventions filed complaints against the disgraced entrepreneur last May.

Prosecutors have sought an arrest warrant for Kwon on allegations that include providing false information to investors and the violation of the capital market law.

Montenegro’s interior minister said the country’s police had likely arrested Kwon, earlier Thursday, via a post on Twitter. Interpol confirmed on the same day the man arrested in Montenegro is Kwon through his fingerprints.

Kwon has been charged with fraud by U.S. prosecutors in New York. He faces eight criminal counts that include securities, commodities and wire fraud and repeated misleading claims on media, and is also accused of conspiring with an unnamed U.S.-based investment firm to use trading strategies for altering the market price of TerraUSD.

Kwon defrauded crypto customers by “deceiving those individuals about aspects of the Terra blockchain, including its technology and the extent to which it had been adopted by users,” according to the Thursday indictment from U.S. prosecutors.

Last month, the Securities and Exchange Commission filed a complaint that alleges Terraform and Kwon marketed crypto asset securities to investors to earn a profit, repeatedly claiming that the tokens would increase in value.

The next step for Kwon is unclear, as the United States is also likely to seek his extradition.

“Which country Kwon will be extradited to will depend on who first locates him, which will depend on who Montenegro negotiates with in advance,” said Cho Jung-hee, managing partner at Seoul-based D.CODE Law Group. “He could be punished in both countries if he isn’t indicted on the same charges.”

“The statute of limitations did not expire for Kwon because he fled overseas after his crime was certified,” said Park Po-jun, an attorney at the Kisung law firm.

Kwon co-founded Singapore-headquartered Terraform Labs with Daniel Shin in 2018.

He was once dubbed the “cryptocurrency king.” Luna used to be one of the 10 largest cryptocurrencies by market capitalization before it collapsed in value last May, wiping out around $40 billion in wealth.

The Terra ecosystem collapsed after the TerraUSD stablecoin lost parity with the dollar. The algorithmic design was pointed out by critics as a risk as its value isn’t based on a reserve of assets.

Terra launched a new version of its failed Luna cryptocurrency, which also lost value to reach $0.

Kwon insisted he wasn’t on the run last September. He said he was fully cooperating with any government agency that has shown interest to communicate and that he doesn’t have anything to hide.

Kwon was reportedly last seen in Serbia before the Thursday arrest in Montenegro. Kwon was arrested while trying to fly to Dubai using a forged passport at Podgorica airport, said the justice ministry.

BY JIN MIN-JI [jin.minji@joongang.co.kr]