South Korean cryptocurrency entrepreneur Do Kwon is set to be extradited to the United States following a decision by Montenegro’s Ministry of Justice. The ruling brings an end to a protracted legal battle over his role in the collapse of two cryptocurrencies—TerraUSD and Luna—that erased $40 billion (£31.7 billion) of investor wealth and sent shockwaves through the global crypto market.

Legal Victory for US Authorities

Montenegro’s Justice Minister, Bojan Bozovic, announced the decision, stating that the majority of legal criteria favoured the US extradition request. While Montenegro does not have formal extradition treaties with the US or South Korea, Kwon’s case was resolved through court deliberations. Kwon consented to extradition to both nations, but the US request prevailed.

This marks a significant development in the multi-jurisdictional pursuit of Kwon, who had been on the run since TerraUSD and Luna’s catastrophic collapse in May 2022. An Interpol red notice had been issued for his arrest, leading to his detention in Montenegro in March 2023 while attempting to travel to Dubai with falsified documents.

Charges of Fraud and Misrepresentation

Kwon, the co-founder of Terraform Labs, and his company face allegations of orchestrating a multi-billion-dollar crypto fraud. In February 2023, the US Securities and Exchange Commission (SEC) accused Kwon of misleading investors about the stability of TerraUSD and exaggerating the growth potential of the tokens.

SEC Chairman Gary Gensler stated that Terraform and Kwon failed to provide investors with fair and truthful information. Despite claims of TerraUSD being a “stablecoin,” its collapse triggered a chain reaction, severely impacting other major cryptocurrencies, including Bitcoin.

TerraUSD and Luna’s interconnected mechanism relied on maintaining a fixed $1 value for TerraUSD through a complex algorithm. However, this system failed in May 2022, causing both tokens to plummet. The crash not only wiped out billions but also eroded investor trust in cryptocurrencies, contributing to a broader market downturn.

The fallout was immense, with regulators worldwide scrutinising stablecoins and questioning the reliability of algorithm-based digital assets.

Global Manhunt and Arrest

Following the collapse, Kwon fled from Singapore to Serbia and then Montenegro, evading authorities. His arrest in Montenegro came after a months-long global manhunt. In June 2023, Kwon was sentenced to four months in prison in Montenegro for using forged documents.

His former colleague, Terraform Labs finance officer Hon Chang-joon, was also arrested in Montenegro and extradited to South Korea earlier this year after serving a similar sentence.

What’s Next for Do Kwon?

The extradition to the US signals the next chapter in Kwon’s legal troubles. If convicted, he could face severe penalties, potentially setting a precedent for how authorities handle crypto-related fraud cases.

The outcome of Kwon’s trial will likely influence global regulatory approaches to digital assets, as governments work to mitigate risks and restore confidence in the volatile cryptocurrency market.