Fallen Crypto Mogul Do Kwon Could Face Jail in South Korea and the US, Prosecutor Says

Fallen Crypto Mogul Do Kwon Could Face Jail in South Korea and the US, Prosecutor Says

SEOUL – Disgraced former crypto titan Do Kwon may spend most of his life behind bars, first in his native South Korea and then in the United States, according to a scenario laid out by a senior prosecutor in the Asian nation.

Both countries are seeking Kwon’s extradition on charges linked to the collapse of digital tokens he created, an implosion that blew up at least US$40 billion (S$54 billion).

The 31-year-old was arrested in Montenegro in March, ending a spell as a fugitive.

It is possible for a person to be tried and sentenced in both jurisdictions on distinct charges, starting with South Korea, said Mr Dan Sunghan, who heads the probe into the fallen entrepreneur.

Mr Dan is the director of the financial crime investigation bureau at the Seoul Southern District Prosecution Service.

That person could then “be extradited to the US and face trial there, and then have the sentence executed in South Korea and the US after that”, Mr Dan said in an interview with Bloomberg News.

He added that he expects Kwon to get a record domestic sentence for a financial fraud case, exceeding four decades.

Terra, Luna wipe-out

Kwon co-founded Terraform Labs, which developed a stablecoin called TerraUSD that was meant to have a constant US$1 value via a mix of algorithms and trader incentives involving a sister token, Luna.

The edifice fell apart in May 2022, exacerbating a crypto-market rout and contributing to the downfall of a range of digital-asset outfits.

The US Securities and Exchange Commission in February accused Kwon and Terraform Labs of fraud.

US prosecutors later followed up with an indictment. South Korean charges include breaches of capital markets law.

“This is the largest financial fraud or financial securities fraud case that has ever happened in South Korea,” said Mr Dan, adding that Kwon should be extradited to the Asian nation first.

The SEC’s lawsuit said Kwon and Terraform Labs transferred more than 10,000 Bitcoin out of their doomed project and turned some of the tokens into cash via a Swiss bank.

The tokens were put into a so-called cold wallet that does not sit on any digital-asset exchange, according to the complaint.

The agency said Kwon and Terraform Labs periodically tapped the wallet since May 2022.

Wallet Mystery

“We can see that it’s coming out of the wallet, but we are not aware who might be in possession of the cold wallet or how they’re withdrawing it, on what methods,” Mr Dan said.

Prosecutors have seized 246.8 billion won (S$255 million) in relation to the case and are about to gain control of a further 31.6 billion won, he added.

Kwon co-founded Terraform Labs in 2018 with Daniel Shin, who has also been indicted in South Korea but has rejected involvement in the TerraUSD and Luna implosion.

Mr Kim Ki-dong, a lawyer for Shin, previously said that his client “has nothing to do with the Terra, Luna collapse as he left the company two years before the fallout.”

Kwon has denied Montenegrin charges of using forged travel documents.

Last week, a court there again approved bail for him.

There is no clarity yet on whether Montenegro will end up extraditing Kwon to South Korea or the US.

“It’s our understanding that the extradition process can take up to nine months, depending on how long the suspect has been in custody and so forth,” Mr Dan said.

 

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