Do Kwon, co-founder of Terraform Labs, has been arrested in Montenegro and faces possible extradition to both South Korea and the United States for numerous fraud charges. Kwon has been in custody since March of this year, and the Montenegrin authorities are considering extending his detention for another six months to decide on his extradition.
Kwon is accused of having a hand in last year’s LUNA/UST collapse, which caused multi-billion dollar losses and undermined the entire digital asset sector. The authorities of South Korea have insisted on his deportation, while the US Securities and Exchange Commission (SEC) has accused Kwon and Terraform Labs of orchestrating a massive crypto scam by offering and selling unregistered securities through the use of digital currencies.
Kwon’s legal problems do not stop there. Upon his arrest at the Podgorica airport in March, he was carrying a falsified passport and forged travel documents. A hearing on the matter is scheduled for June 16. In addition, Kwon will have to answer questions regarding his possible connection with Milojko Spajic, former Minister of Finance of Montenegro and current leader of the political party Europe Now. The National Security Council disclosed that the individuals had been friends for years, and Kwon financed some of Spajic’s political campaigns.
The law firm Dentons, which represents Terraform Labs, has recently attempted to alleviate some of Kwon’s troubles by eliminating its legal battle with the US SEC. The attorneys filed a motion claiming that UST, the algorithmic stablecoin developed by the blockchain firm, is not a security, meaning the regulator should dismiss charges.
The defense represented by Douglas Henkin maintained that the asset was designed for “practical purposes and commerce, not as an investment.” Henkin also compared the stablecoin to Bitcoin, suggesting UST was “controlled by a decentralized group through the LUNA token.”
Devon Staren, a representative of the SEC, said the agency has been “simply enforcing existing laws.” She noted that the analysis of tokens expands beyond them and touches upon the ecosystems they are part of. Staren also gave her two cents on LUNA, claiming it is “merely a piece of code.”
Judge Rakoff’s decision on whether the motion will be approved or dismissed is expected in mid-July.
The Montenegrin authorities have not yet made a decision on Kwon’s possible extradition, but his custody may be extended for another six months to decide on the matter. The accusations against Kwon involve serious charges of fraud and deception, and his legal troubles are not limited to just one country. The fate of Kwon and Terraform Labs remains uncertain, and the outcome of their legal battles will have a significant impact on the future of the digital asset sector.