Co-founder of Terraform Labs, Do Kwon, who is expected to be extradited to the authorities of the United States, where he is expected to face criminal charges, will stay in the custody of Montenegrin authorities until February of 2024.
A recent update was provided in the blog post by Bloomberg, which stated that the authorities of the United States and South Korea had requested the Montenegrin authorities to continue holding Do Kwon for an additional two months after his prison sentence was concluded.
Kwon was arrested in Montenegro after he fled South Korea following the spectacular collapse of TerraLUNA. He was on the run from not only the South Korean authorities but was also sought by the authorities in the U.S. He was found and arrested in Montenegro for traveling with forged passports, for which he pleaded not guilty but ultimately was sentenced to four months behind bars.
Both South Korean and U.S. authorities have charged Kwon for his alleged role in the collapse of Terra blockchain. There is an ongoing discussion of which country will have the first crack at charging Kwon for the list of crimes he has committed. However, popular opinion is prevailing that the Montenegrin authorities are inclined to extradite him to the U.S.
If brought to the United States for extradition, Kwon would confront eight criminal allegations, encompassing commodities fraud, securities fraud, wire fraud, and conspiracy to deceive and participate in market manipulation during his tenure at Terraform Labs. Additionally, the U.S. Securities and Exchange Commission has accused Kwon of misleading investors in cryptocurrency schemes.
South Korean officials have, however, said that if justice is to prevail, then the investigation and trial of Do Kwon should take place in South Korea.
Dan Sunghan, the South Korean prosecutor, asserted that the primary investigation into the Terra ecosystem’s collapse was predominantly conducted in South Korea. He emphasized that local authorities possess a more extensive array of evidence compared to their American counterparts.
Sunghan highlighted that South Korean officials have already brought charges against several individuals alleged to be co-conspirators with Kwon.
However, when questioned about the possibility of Kwon facing legal proceedings in both the U.S. and South Korea, Sunghan indicated that such a scenario is plausible. He explained that an individual could be subjected to multiple cross-border trials if they have not been prosecuted for certain crimes in one of the jurisdictions.
Why did TerraLUNA implode?
TerraUSD (UST), the algorithmic stablecoin of the Terra ecosystem, was designed to maintain a peg with the U.S. dollar. In May 2022, the UST suffered a dramatic crash. This event, known as the “TerraUSD crash,” resulted in $40 billion in losses for investors and raised serious questions about the safety and sustainability of algorithmic stablecoins.
On May 7, over $2 billion worth of UST was unstaked from the Anchor Protocol, resulting in rapid liquidations amounting to hundreds of millions. The reasons behind this incident are a subject of debate, with some attributing it to a response to escalating interest rates. In contrast, others suspected a malicious attack on the Terra blockchain. The substantial sell-offs caused a decline in the price of UST from $1 to $0.91. Consequently, traders began exchanging 90 cents worth of UST for $1 value of Luna.
As the offloading of UST continued, the stablecoin started to lose its peg. This triggered a panic, leading to further UST sell-offs and, in turn, the minting of more Luna, contributing to an expansion in the circulating supply of Luna.
In the aftermath of this crash, cryptocurrency exchanges took measures to delist Luna and UST pairings. The collapse of Luna is believed to have had a ripple effect, significantly impacting the price of Bitcoin and resulting in an estimated loss of approximately $300 billion in overall cryptocurrency market value.
Do Kwon’s stance on charges filed against him
Do Kwon has vehemently denied all allegations of wrongdoing concerning the TerraUSD crash, attributing its occurrence to external factors such as market downturns and coordinated attacks.
He claimed that his actions were taken in good faith and with the best interests of investors at heart, emphasizing the transparency of Terraform Labs regarding risks and mitigation measures.
Do Kwon believes he is being unfairly targeted by regulators and media seeking scapegoats, arguing that the charges against him are politically motivated and lack sufficient evidence.
It will be very interesting to see whether authorities will prove that Do Kown was indeed one of the worst instigators of the crypto market crashes in history or whether he was actually innocent of any wrongdoings.
