Montenegro’s High Court said former cryptocurrency mogul Do Kwon should be handed over to his native South Korea rather than the US for prosecution over the US$40 billion (S$53.3 billion) collapse of the TerraUSD stablecoin in 2022.
It is the latest twist in the legal journey for the Terraform Labs co-founder, who was a fugitive from the South Korean authorities for months before he was arrested in Montenegro in March 2023 for travelling on a fake passport. Kwon’s arrest set off duelling extradition requests by prosecutors in Seoul and New York.
The ruling is a win for Kwon, whose lawyers have expressed a preference for him to go to South Korea. Penalties for white-collar crimes are lower there than in the United States.
Kwon’s fellow former crypto mogul, Sam Bankman-Fried, is now facing potentially decades in prison after he was convicted of fraud in New York in November. The FTX co-founder was prosecuted by the Manhattan US Attorney’s Office, which also indicted Kwon on fraud charges.
A spokesman for that office declined to comment on March 7.
But it is unclear if this ruling is the final word. The Montenegrin court in February 2024 ordered that Kwon be sent to the US, a decision that was overturned this week.
Court spokeswoman Marija Rakovic said Kwon could be extradited soon unless prosecutors appeal. Mr Goran Rodic, a lawyer for Kwon in the Montenegrin capital of Podgorica, said extradition could proceed after Kwon finishes serving his sentence on the passport charges later in March.
On the other hand, the geopolitical situation facing the tiny Balkan nation, a North Atlantic Treaty Organisation member, favours extradition to the US, and it is possible the government is contemplating measures to ensure that happens.
Terraform chief financial officer Han Chang-joon, who was arrested with Kwon in Montenegro, was extradited to South Korea in February.
The collapse of Terra was a seismic event in the crypto markets and set off a downturn that went on to engulf other players like FTX. Meant to keep a constant value of US$1 via a complex mix of algorithms and trader incentives involving its free-floating sister token Luna, Terra was designed as a refuge from the volatility of other cryptocurrencies. But both unravelled when confidence in Kwon’s project evaporated during a few chaotic days in early May 2022.
Losses from Terra’s collapse caused a public outcry in South Korea, where Kwon was charged with breaching capital markets law a few months later. Manhattan federal prosecutors did not file their charges against Kwon until after his arrest. According to the indictment, he misled investors about the blockchain technology behind the stablecoin.
Even if Kwon is extradited to South Korea, the government there could still reach a deal to have him tried in New York first. The US could argue that it has a stronger ability to seize Kwon’s assets around the world and agree to share them with South Korea.
In the 1Malaysia Development Berhad case, Malaysia released former Goldman Sachs banker Roger Ng from custody so that he could be prosecuted – and sentenced – in New York first. Despite receiving a 10-year prison term, Ng is currently free in Malaysia assisting in that country’s investigation into the looting of the sovereign wealth fund.
Kwon and Terraform are also facing a US Securities and Exchange Commission (SEC) lawsuit over Terra’s collapse. Such civil cases are often put on hold while prosecutions go forward, but with Kwon’s extradition still uncertain, the SEC suit is going to trial in Manhattan federal court at the end of March. Unlike in a criminal trial, Kwon’s presence in the courtroom is not required. BLOOMBERG
