LUNA’s Founder Do Kwon Extradited to the U.S. Following Legal Setbacks in Montenegro

• The Montenegro Ministry of Justice announced on Friday that Do Kwon is set to be extradited to the United States to face federal fraud charges.
• Do Kwon was arrested in Montenegro in March 2023 while attempting to flee to Dubai with a forged passport, he is accused of orchestrating a Ponzi scheme involving the TerraUSD stablecoin, which led to over $40 billion in investor losses.

A recent report from local media outlet Vijesti reveals that Bojan Bozovic, the Montenegrin Justice Minister, has signed the extradition orders for Do Kwon. This move may finally bring resolution to the uncertainties that have surrounded Kwon’s case since 2022.

Kwon co-founded Terraform Labs, which was responsible for two major cryptocurrency tokens: TerraUSD (UST), an algorithmic stablecoin aimed to maintain a peg to the U.S. dollar, and Luna, a token that users could allegedly exchange for UST at any time. This calamity resulted in an estimated $40 billion loss across the broader cryptocurrency market, triggering a series of bankruptcies among other digital asset firms.

Following a ruling by the Supreme Court, the Department of Justice carefully evaluated all pertinent factors before making their decision. Their assessment considered elements such as the severity of the alleged crimes, the location of the offenses, the chronological order of extradition requests, the nationality of the accused, the potential for further extradition to other jurisdictions, and additional relevant circumstances, as stated by the Department of Justice in a communication to Vijesti.

Although Kwon expressed a desire to be extradited to South Korea, where he may face up to 40 years in prison, the outcome of his case in the U.S. remains unpredictable as he will be tried separately for various charges.

Legal Background and Implications

In 2023, the Securities and Exchange Commission (SEC) initiated legal action against Kwon and Terraform Labs, accusing the company of artificially bolstering the stablecoin while deceiving investors. Subsequently, Terraform Labs consented to pay more than $4.5 billion in penalties earlier this year, thus reaching a settlement with the SEC.

Prosecutors in South Korea charged Kwon with violating the Capital Markets Act, while investors in Singapore launched a class-action lawsuit seeking $57 million against him and other Terraform Labs co-founders. Furthermore, Kwon has faced criminal charges in the Southern District of New York for securities fraud, wire fraud, and commodities fraud.

Months after the SEC’s lawsuit, Kwon was apprehended in Montenegro while attempting to escape using a forged Costa Rican passport. He received a four-month sentence in prison while extradition efforts from both the U.S. and South Korea were initiated. Initially, a Montenegrin court approved Kwon’s extradition to South Korea, but the Supreme Court of Montenegro intervened, overturning that decision and potentially facilitating his transfer to the United States.

A U.S. bankruptcy judge approved Terraform Labs’ plan to liquidate its remaining assets, with expected payments to investors ranging from $184.5 million to $442.2 million. This ruling allows for partial reimbursements to affected investors. Additionally, the Terra Classic community voted to increase the LUNC burn tax rate to 1.5% to speed up token burns and enhance its value. With Terraform Labs now defunct, the community looks to exchanges like Binance for support in determining its future growth strategy.