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Montenegro’s Constitutional Court has officially rejected an appeal by Kwon Do-hyeong (commonly known as Do Kwon), co-founder of Terraform Labs. The decision marks a significant setback for Kwon as he fights extradition following his involvement in the collapse of the TerraUSD (UST) stablecoin and its linked token, Luna.
Court Upholds Justice Minister’s Authority on Extradition
The Constitutional Court, as reported by local media outlet Vijesti on December 24, confirmed the authority of Montenegro’s Minister of Justice, Bojan Božović, to oversee extradition matters. This ruling upheld a prior Supreme Court decision that invalidated Kwon’s transfer to South Korea, leaving the extradition decision in the hands of the Justice Ministry.
Key Legal Arguments by Kwon’s Team
- Violation of Procedural Fairness: Kwon’s legal team argued that the ruling infringed on his rights to a fair trial and family life.
- Court’s Response: The Constitutional Court dismissed these claims, allowing the extradition process to proceed.
Extradition Likely to the United States
Reports suggest Montenegro may favor extraditing Kwon to the United States rather than South Korea. Analysts believe this decision could be influenced by national interests.
Kwon, accused of causing over $34 billion in financial losses from the Terra-Luna collapse, fled South Korea in 2022. He traveled through Singapore, the UAE, and Serbia before being arrested in Montenegro for using a forged passport.
- U.S. Extradition: Kwon faces multiple charges in the U.S., including securities fraud.
- South Korea’s Concerns: South Korean authorities have urged Montenegro to expedite the process, raising concerns about potential human rights violations if the proceedings are delayed.
$4.5 Billion SEC Settlement Adds to Legal Woes
In June 2024, U.S. District Judge Jed Rakoff approved a $4.5 billion settlement between the SEC and Terraform Labs.
Settlement Terms
- Terraform Labs and Kwon are required to pay $4.5 billion in disgorgement and civil penalties.
- They are permanently banned from engaging in transactions involving crypto asset securities, including those linked to the Terra ecosystem.
The settlement follows an earlier SEC proposal of $5.3 billion, which Terraform Labs contested.
Challenges for Terraform Labs
- Operating under Chapter 11 bankruptcy protection, Terraform Labs faces a daunting task in meeting the settlement’s financial demands.
- According to testimony from current CEO Chris Amani, the company holds approximately $150 million in assets, leaving a significant gap to cover the imposed fines.
Impact on Kwon’s Legal Battle
Despite the ruling, Kwon’s legal team is expected to continue challenging his extradition to the U.S. The court’s decision, however, significantly limits his options and accelerates the extradition timeline.
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