Terraform Labs co-founder Do Kwon is already serving time in a Montenegran prison for using falsified travel documents, but the worst may be yet to come. South Korea and the U.S. have both sought the extradition of Kwon from Montenegro, threatening him with significantly stricter sentencing for multiple counts of fraud, conspiracy and market manipulation. The first trial in the U.S. was scheduled for the end of this month, but the court has now postponed it for two months to potentially accommodate Do Kwon in person.
The Montenegrian court initially approved Do Kwon’s extradition in late November, this was allegedly to be to the U.S. rather than his native South Korea, despite the fact that he had given consent to be extradited to his homeland under a simplified procedure. The final decision rested with Minister of Justice Andrej Milovic and hasn’t yet been officially announced.
Instead, in December, the Montenegran court extended his detention until mid-February, reportedly at the request of the U.S. and South Korean authorities. A week later, the court accepted Do Kwon's appeal against the extradition decision and annulled it, stating that it was “affected by a significant violation of the provisions of criminal procedure.”
The U.S. trial was initially scheduled for January 29, but Do Kwon’s legal team made a request to postpone it, stating that the defendant is interested in attending the trial in person but first has to resolve extradition issues.
“Mr. Kwon wishes to attend his trial. Counsel had hoped the extradition proceedings in Montenegro would proceed more quickly than they have. Unfortunately, it now appears that Mr. Kwon is not likely to be extradited until February or March at the earliest,” - says the request.
The U.S. SEC also joined the request to delay the trial, to start no earlier than March 18. The Court suggested splitting the SEC’s cases against Kwon and Terraform Labs so that the trial against Terraform Labs can go forward without waiting for Kwon's extradition, but the SEC opposed this, saying that the claims are ill-suited for severance as they are overlapping and arose from the same transactions.
“The SEC joins in Kwon’s request for a modest adjournment so that he may participate in the trial... [and] respectfully requests that trial commences on April 15, 2024… Holding two trials would unnecessarily require witnesses, including SEC whistleblowers and retail investors with limited financial means, to testify twice about identical facts in different trials.”
On January 16, the court ruled that the trial should be moved to March 25 and outlined that it cannot be further postponed even if the defendant is not released in time.
At the moment, Do Kwon remains in Montenegro. According to the latest filings, he has consented to extradition to the United States and is now waiting for the legal proceedings to come to an end so he can leave the country and testify at his trial.
Although the trial was delayed, pretrial proceedings are moving fast. At the end of December, the court granted summary judgment on some of the claims. The court sided with the SEC in finding that the collapsed company and Do Kwon had indeed offered and sold unregistered securities. The federal judge ruled that he and his company had violated U.S. law by failing to register its digital currencies. However, the court sided with Terraform Labs in dismissing claims concerning unregistered security-based swaps. The SEC later asked to use this ruling in the ongoing Binance and Coinbase cases as a precedent to argue that the two exchanges traded unregistered securities.
