Do Kwon, the founder of the collapsed blockchain project Terra, is expected to remain in custody for up to six months as Montenegro’s courts review a request for his extradition from South Korea. Kwon has been detained since March on charges of using forged travel documents.
The recent decision by a Montenegro court to extend his custody follows the approval of bail in a separate document forgery case.
Kwon’s arrest came after he evaded authorities and fled South Korea and subsequently Singapore before the project’s downfall in May last year.
Do Kwon, the co-founder and CEO of Singapore-based Terraform Labs, is facing a series of legal challenges in multiple jurisdictions.
In the United States, he has been charged with eight counts of fraud, including securities fraud and wire fraud. The US Securities and Exchange Commission (SEC) has also filed a lawsuit against Kwon and Terraform Labs, accusing them of orchestrating a multibillion-dollar cryptocurrency fraud.
Meanwhile, South Korean prosecutors are targeting Kwon’s cryptocurrency assets, alleging that he funneled millions of dollars out of Luna Foundation Guard (LFG), a defense fund established to protect the stability of TerraUSD’s peg to the US dollar.
TerraUSD, a stablecoin created by Terraform Labs, aimed to maintain a peg to the US dollar through algorithmic mechanisms and trader incentives involving its sister token, Luna.
However, in May last year, the stablecoin lost its peg as a result of market sell-offs. Terraform Labs attempted to restore the peg by purchasing $2 billion worth of TerraUSD, but continued sell-offs depleted the funds, causing hyperinflation of Luna and crashing the prices of both Luna and TerraUSD.
As Do Kwon awaits potential extradition to South Korea, the legal proceedings will shed further light on the allegations against him and the fate of Terra and its associated cryptocurrencies.
The outcome of the ongoing investigations and lawsuits will have significant implications for the broader cryptocurrency industry, highlighting the importance of regulatory compliance and the potential consequences of fraudulent activities. Investors, regulators, and industry participants will closely monitor the developments surrounding Terra and its founder, Do Kwon.