Do Kwon gets bail in Montenegro passport forgery case

A year after the algorithmic stablecoin Terra collapsed in a crypto bank run that destroyed tens of billions of dollars in value, its cofounder, Do Kwon, has been granted bail in Montenegro.


Kwon, 31, was indicted there for allegedly using a forged Costa Rican passport to try to fly to Dubai. He has pleaded not guilty.

After a court appearance on Thursday, a judge granted bail to Kwon and Han Chong-joon, the former chief financial officer of Terraform Labs, who also was apprehended at the airport with fake travel documents. Each paid 400,000 euros, or about $435,000, according to Bloomberg, and they were ordered to remain under house arrest with police supervision until a trial.

While Kwon’s fate plays out in Montenegro, where he faces up to five years in prison, both the U.S. and South Korea want him extradited. The lead South Korean prosecutor overseeing Kwon’s case, Dan Sung-han, told the Wall Street Journal earlier this month that it’s unclear how long a trial could drag out, especially if Kwon appeals the result.

Dan has argued that Kwon should be tried in South Korea because that’s where he was while allegedly committing most of his crimes. The prosecutor has been putting together his case against Kwon for months and collected evidence “that cannot be easily obtained in the U.S.,” he told the Journal. This likely includes materials gathered from raiding the home of Terraform Labs cofounder Daniel Shin and the offices of firms tied to the Chai payments app that Shin founded.  

If Kwon is tried in South Korea, he’ll likely face charges similar to those leveled against Shin, who earlier this year was charged with fraud, breach of duty, and embezzlement. Kwon could face more than 40 years in prison if convicted, Dan told the Journal, which would be the longest jail term for financial crimes in the nation’s history. 

South Korean prosecutors have charged Shin and other individuals linked to Terra of breaking the nation’s capital markets laws on the basis that Luna, the sister token of the Terra stablecoin, is a security. Dan told the Journal he sees no problem with this because of how Luna was structured, and he’s confident a judge will agree.

In the U.S., it’s less clear. The Securities and Exchange Action has brought a civil action against Kwon and Terraform Labs for alleged securities fraud, but it’s unknown whether a judge would agree that Terra and Luna are securities. Although SEC Chair Gary Gensler has often said the vast majority of cryptocurrencies are securities, the agency’s rules on the subject are hazy at best, and it’s mostly relied on acting through enforcement actions against industry players—and A-list celebrities.

In March, federal prosecutors in New York also charged Kwon with conspiracy to defraud, commodities fraud, securities fraud, wire fraud, and conspiracy to engage in market manipulation, according to CoinDesk. In recent months, the U.S. Attorney’s Office for the Southern District of New York, which is pursuing the charges against Kwon, has been largely successful in similar cases.

Last week, a former OpenSea employee was found guilty of using insider knowledge of which NFTs would be to be listed on the marketplace’s homepage to personally profit, and on Tuesday, a former Coinbase employee was sentenced to two years in prison in a crypto-tipping scheme. 

It’s unclear to which country Kwon will be extradited, assuming he is, and which potential outcome would most help Terra’s investors. Many on Crypto Twitter have pointed out that despite the magnitude of his alleged crimes, Kwon’s bail seemed comparatively low and that he is being treated lightly in Montenegro.

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