Do Kwon Escapes US Extradition, as SEC Lawsuit Clouds Terraform Labs’ Future

The legal hassle surrounding Do Kwon, co-founder of Terraform Labs, unfolds as Montenegro’s court system once again overturns a decision regarding his extradition to the United States.

On March 5, the Appellate Court of Montenegro nullified the High Court of Podgorica’s previous ruling approving Kwon’s extradition to the U.S., citing significant violations of local criminal procedure laws.

The appellate panel highlighted flaws in the earlier decision, emphasizing the lack of clear and valid reasoning regarding crucial aspects of the extradition request.

This latest development adds another chapter to the prolonged extradition saga that began with Kwon’s arrest in Montenegro in March 2023. Both the U.S. and South Korea sought Kwon’s extradition, sparking debates over whether he should be sent to his home country.

This isn’t the first time Montenegro’s courts have intervened in Kwon’s extradition process. In December 2023, the Appellate Court canceled the extradition approval, arguing for a retrial at the Podgorica Basic Court.

In November 2023, the High Court of Podgorica established the legal grounds for Kwon’s extradition, deferring the final decision to Montenegro’s Minister of Justice.

Terraform Labs, the company Kwon co-founded, is renowned for the Terra blockchain, which includes the Terra stablecoin and Luna token. However, the company faced allegations of fraud, with the U.S. Securities and Exchange Commission accusing Terraform Labs and Kwon of orchestrating a fraudulent scheme that resulted in significant market losses.

In fact, during a court hearing in Wilmington, Delaware, Terraform Labs’ lawyers expressed concerns about the newly appointed creditors’ committee in its bankruptcy case, alleging alignment with the SEC’s efforts to undermine the company through a lawsuit over two digital currencies that collapsed in 2022.

Terraform’s attorney, Ronit Berkovich, urged U.S. Bankruptcy Judge Brendan Shannon to proceed with approving the hiring of the law firm Dentons for Terraform’s defense in the upcoming SEC trial, despite the committee’s request to delay the hearing. Berkovich argued that the creditors aligned with the SEC’s securities fraud theory could jeopardize Terraform’s legal defense. However, the judge appeared surprised by these claims and suggested discussing differences before making a decision.

The creditors’ committee, appointed on February 29, includes individuals who claim losses from Terraform’s collapse, raising concerns about Terraform’s spending decisions and its actual worth.