Montenegro extradits Terraform Labs CEO Do Kwon to US on fraud charges

Montenegro finally extradited Do Kwon, the former CEO of Terraform Labs, to the United States on December 31, in a crucial development. Kwon, a South Korean national, was handed over to US law enforcement, including FBI agents, at Podgorica airport.

He faces charges of conspiracy to commit fraud related to the collapse of Terraform Labs, TerraUSD and Luna cryptocurrencies, which caused approximately $40 billion in investor losses and destabilized global crypto markets in May 2022.

Do Kwon extradited to the US

The latest news comes after Montenegro’s Constitutional Court unanimously rejected Kwon’s appeal challenging his extradition ruling last week.

Kwon’s arrest in March 2023 at Podgorica airport came after months of evasion that included stops in South Korea and Singapore. He was caught trying to fly to Dubai with a fake Costa Rican passport.

Terraform Labs rose to prominence in 2021 as its Luna and TerraUSD cryptocurrencies rose in popularity. Kwon, on the other hand, earned a reputation as a controversial figure and a brash entrepreneur, calling his 2018 cryptocurrency his “great invention.” Backed by prominent investors like Lightspeed Venture Partners and Galaxy Digital, he cultivated a devoted “Lunatics” fan base while openly ridiculing critics.

However, the catastrophic failure of the ecosystem in May 2022 wiped out more than 99% of its value in two days, causing a ripple effect that wiped hundreds of billions of dollars out of the broader crypto sector. This accident eroded confidence in the industry and led to massive regulatory scrutiny around the world.

Legal problems

Beyond the current US proceedings, Kwon also faces charges in South Korea, which had also sought his extradition. Despite Montenegro’s lack of formal extradition treaties with either country, the justice ministry determined that the US request met the necessary legal criteria.

Kwon, who denies wrongdoing, has been accused by US authorities of orchestrating a large-scale securities fraud that misled investors about the stability of TerraUSD and its integration with the Terraform blockchain.

In February 2023, the United States Securities and Exchange Commission (SEC) filed a lawsuit against Kwon and Terraform Labs, where the agency cited their role in the market turmoil. They later agreed to a $4.5 billion settlement with the SEC.

The extradition concludes an 18-month legal battle and sets the stage for Kwon to face charges that could redefine accountability in the volatile cryptocurrency industry.

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