U.S. prosecutors indicted Terraform Labs founder on eight counts

U.S. prosecutors indicted Terraform Labs founder on eight counts

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Author: Robert Strickland (crypto expert)
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U.S. prosecutors indicted Terraform Labs founder on eight counts

U.S. authorities filed fraud charges against Terraform Labs founder hours after his arrest in Montenegro

U.S. authorities have charged Do Kwon, the founder of Terraform Labs, with eight counts of fraud and will seek his extradition to the United States, Bloomberg reports. The fraud charges by federal prosecutors in New York were filed against him hours after his arrest in Montenegro.

Kwon, whose whereabouts have remained unknown for months, is also under investigation in South Korea and Singapore and is wanted by Interpol in connection with last year's TerraUSD (UST) and Luna token crash. He was indicted by the U.S. Securities and Exchange Commission (SEC) in February, alleging that he misled investors.

Kwon, who hails from South Korea, founded the blockchain platform Terraform Labs and was the primary developer of the UST algorithmic stablecoin and its US dollar-linked cryptocurrency, Luna (LUNA). Both tokens depreciated in May 2022, resulting in a $40 billion loss for the entire market. Specifically, hedge fund Three Arrows Capital closed, and cryptocurrency lenders Voyager Digital and Celsius Network declared bankruptcy.

Kwon is charged with eight counts, including conspiracy to defraud, securities fraud, and conspiracy to manipulate the market, according to the U.S. prosecutors' suit.

Law enforcement authorities in Korea confirmed his identity.

The Montenegrin Interior Ministry later disclosed details of Kwon's detention. He was arrested along with Terraform's CFO Han Chang-Jun for trying to fly to Dubai with fake Costa Rican documents. They were also found in possession of South Korean documents and fake Belgian ones. Police seized three laptops and five cell phones from the couple.

U.S. authorities will seek the extradition of the Terraform co-founder, the report said. South Korean police also said they have asked Montenegro to extradite Kwon to an Asian country.

Hours after Kwon's arrest, the New York prosecutor's office filed charges against him. According to Michael Zweibak, a lawyer who specializes in extradition cases, the country that files the charges first usually has priority in legal proceedings when detaining defendants.

The lawyer believes that U.S. authorities acted on an agreement with their South Korean counterparts that Kwon would be tried in New York first. Zweibak noted that the U.S. has a great capacity to seize assets and property in criminal cases and can share the proceeds with South Korea, such deals between the countries are quite common.

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