Terraform Labs Co-Founder Do Kwon Facing Extradition to U.S. from Montenegro

Do Kwon, the co-founder of Terraform Labs, is set to be extradited to the United States following a decision by the High Court in Montenegro. The court rejected South Korea's extradition request for Kwon, according to reports from local media outlet Pobjeda.

Kwon is facing fraud charges related to significant losses incurred by U.S. investors associated with an algorithmic stablecoin. Despite South Korea's attempt to extradite him, the court in Montenegro ruled in favor of the U.S. extradition request.

The charges against Kwon and Terraform Labs were brought by the U.S. Securities and Exchange Commission (SEC) in 2023, alleging a multibillion-dollar fraud. The case revolves around the collapse of TerraUSD, a stablecoin aimed at maintaining a constant $1 value, and the traditional token Luna, which was closely associated with TerraUSD.

The failure of TerraUSD to maintain its peg to the dollar resulted in substantial losses estimated at over $40 billion for investors holding both TerraUSD and Luna. The SEC accuses Terraform Labs and Kwon of misleading investors regarding the stability of TerraUSD and its integration with a popular Korean mobile payment app on the Terraform blockchain.

Previously, Kwon had been arrested in Montenegro in March 2023 for allegedly using a counterfeit passport while attempting to leave the country. Initially, he had agreed to be extradited to South Korea. However, a court in Podgorica approved his extradition to the United States late last year.

In June, Kwon was sentenced to four months in prison by a Montenegro court for document forgery. Despite appealing the decision, he ultimately lost the appeal and was sentenced to serve the four-month term.

The jury trial for the fraud claims against Kwon had been postponed from January 29 to late March due to challenges in facilitating his release from Montenegro, as reported by his lawyer.