A court in Montenegro’s capital, Podgorica, has approved the extradition of Do Kwon, the founder of Terra, to either South Korea or the United States. The final decision on the country of extradition will be taken by the Montenegrin Justice Minister.
Legal Troubles and Charges
Before the extradition process, Kwon will serve a four-month prison sentence in Montenegro for the crime of document forgery. His arrest occurred in March at Podgorica’s airport, where he was apprehended with falsified documents.
Kwon’s legal troubles go beyond Montenegro. He also faces charges of document falsification and multiple counts of fraud brought by U.S. federal prosecutors. The U.S. government alleges that Kwon made false and misleading statements about the adoption of the Terra blockchain by users during a TV interview. Additionally, he purportedly made deceptive claims about the effectiveness of the TerraClassicUSD stablecoin in maintaining its peg with the US dollar, as well as engaging in trading strategies to manipulate asset prices.
Furthermore, Kwon is dealing with civil charges in the U.S. and is the subject of an ongoing investigation in South Korea related to the collapse of TerraUSD last year.
Court Decision and Extradition Possibilities
The Montenegro High Court recently upheld Kwon’s four-month prison sentence, rejecting his appeal. After serving his sentence in Montenegro, Kwon faces the possibility of extradition to either South Korea or the U.S.
In a related development, Daniel Shin, co-founder of Terraform Labs, has been indicted in South Korea for violations of capital markets laws. Prosecutors have frozen $185 million in assets. Shin, however, denies any involvement in the collapse of the company, stating that he left two years prior to the incident.
Shin is the founder of Chai, which had a business partnership with Terra. Although he claims the partnership ended in 2020, a 2022 interview on a YouTube channel suggests otherwise. In the video, Shin discusses how Chai products could be “topped up” at Terra “stations,” indicating an ongoing partnership. However, Shin maintains that the video was misinterpreted and clarifies that he has not been involved in Terra’s management since parting ways with Kwon in 2020.
Terra’s algorithmic stablecoin, TerraUSD, used a combination of algorithms and trader incentives to maintain its peg with the US dollar. However, the stablecoin lost its peg in May last year due to significant sell-offs in the crypto market.
