Do Kwon of Terraform Labs Receives Four Month Prison Sentence in Montenegro
Do Kwon, the founder of Terraform Labs, is currently being held in a Montenegrin prison after being found guilty of forging official documents. Kwon was arrested in late March while attempting to board a flight to Dubai from Podgorica Airport with fake Costa Rican passports. Along with Terraform Labs’ former finance officer, Han Chang-joon, Kwon was also found to have Belgian passports and computers sought by authorities in both South Korea and the US. Kwon is wanted in both countries for his involvement in a scheme that caused investors to lose $40 billion when the company’s cryptocurrency plummeted last year.
Kwon and his associates marketed TerraUSD and Luna as stablecoins pegged to the US dollar, which allegedly gave them more, well, stability. They collapsed in May 2022, taking many of their investors’ life savings with them, and these individuals later filed complaints that Kwon had run a Ponzi scheme. South Korea first announced the arrest warrant against Kwon and five associates last September, but he, his family and some of Terraform Labs’ financial management employees had already fled to Singapore, where the company was registered. Interpol soon placed Kwon on a “red notice” list at the request of Korean authorities and notified law enforcement agencies worldwide to arrest him. Montenegrin authorities cite this as another reason for Kwon’s detention.
The U.S. Securities and Exchange Commission accused Kwon in February of failing to “provide full, fair and truthful disclosure to the public about several crypto-asset securities, particularly LUNA and Terra USD. We also allege they committed fraud by making false and misleading statements to create confidence before you will cause disastrous losses to investors.” The U.S. District Court in Manhattan publicly released an indictment against Kwon on eight counts, including securities fraud and conspiracy, following his arrest.
Although Montenegro does not have an extradition treaty with the United States or South Korea, the idea is still on the table. The four-month prison sentence came shortly after Montenegrin authorities extended their detention by six months as they decide whether and how to proceed with extradition requests from the two countries.
