South Korea Wins Extradition Battle for Do Kwon

The Montenegro Appellate Court has ruled that Terraform Labs co-founder Do Kwon will be extradited back to his home country of South Korea, not the United States.

According to a court statement seen by Bloomberg, this ruling is final and cannot be appealed.

Do Kwon’s lawyer, Goran Rodic, said that the Montenegrin authorities will work with Interpol to organize the extradition “as soon as possible.” However, no specific date has been set for Kwon’s extradition.

Originally from South Korea, Do Kwon studied computer science at Stanford University. After graduating, he worked at Apple and Microsoft. In 2018, Kwon co-founded Terraform Labs with Daniel Shin, aiming to create a decentralized stablecoin ecosystem.

Terra Collapse

In 2019, Terraform Labs launched the Terra blockchain, featuring two key cryptocurrencies — TerraUSD (UST) and LUNA. UST was an algorithmic stablecoin that sought to maintain a dollar peg through a complex mechanism that involved burning LUNA when demand for UST rose and vice versa. The idea was to create a stable cryptocurrency outside traditional financial systems.

The system collapsed in early May 2022 when UST lost its peg to the U.S. dollar, falling below $1. This triggered a crisis, as the arbitrage mechanism failed, leading to a massive selloff of both UST and LUNA. Within days, LUNA’s value plummeted from over $80 to mere cents, wiping out around $60 billion in market value. The contagion spread to the overall cryptocurrency market and marked the abrupt end of the last bull market.

Investigations later revealed that Terraform Labs had tried to prop up UST’s value using its Bitcoin reserves through the Luna Foundation Guard, but those efforts failed.

South Korean authorities issued an arrest warrant for Kwon, accusing him of violating capital markets laws. Although Kwon initially denied being “on the run,” his whereabouts became a subject of international speculation.

In February 2023, the U.S. Securities and Exchange Commission (SEC) charged Do Kwon and Terraform Labs with orchestrating a multi-billion dollar fraud. The SEC alleged that Kwon misled investors from April 2018 until the collapse in May 2022 by offering unregistered securities and making false claims about the stability and profitability of TerraUSD and LUNA.

In March 2023, Montenegrin authorities arrested Kwon for attempting to travel with forged documents. Soon after, South Korea and the United States filed extradition requests.

Following his arrest, U.S. prosecutors filed additional criminal charges against Kwon, including wire fraud, conspiracy to commit fraud, and conspiracy to manipulate the market price of UST. The criminal charges stem from alleged deceptive practices and market manipulation strategies aimed at maintaining the UST peg.

In April 2024, a New York jury found Kwon and Terraform Labs liable for civil fraud, aligning with the SEC’s accusations. This led to a $4.4 billion settlement agreement. Despite the settlement, the U.S. continues to press for Kwon’s extradition.