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South Korean Law Firm Confirms Do Kwon Paid Them $7 Million Before Terra Collapse

2 mins
Updated by Geraint Price
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In Brief

  • South Korean law firm Kim & Chang confirm earlier reports by KBS that Do Kwon paid them $7 million before the Terra collapse.
  • Prosecutors in South Korea want to know whether Kwon paid the lawyers because he knew that Terra might collapse.
  • While the embezzlement charge could potentially favor South Korea's extradition request, the process is politically and legally fraught.
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South Korean law firm Kim & Chang confirmed today that Terraform Labs co-founder and CEO Do Kwon paid them $7 million before TerraUSD and its sister coin LUNA collapsed.

The confirmation follows an earlier report by the Korean news outlet KBS news that Korean prosecutors and Singapore law enforcement were tracing funds sent to the firm in multiple payments.

Do Kwon Could Face Charges of Embezzlement

According to KBS, prosecutors could charge Kwon with embezzlement if he used customers’ cryptocurrencies to pay Kim & Chang. Kwon could also face fraud charges if he anticipated legal risk from an imminent collapse.

The former Terraform Labs’ co-founder is currently detained in Montenegro after being apprehended for passport fraud. South Korean prosecutors and the U.S. Department of Justice have requested Kwon’s extradition, which his lawyer said could take up to a year.

After Kwon’s arrest at an airport in Podgorica, prosecutors said they would decide whose request to honor based on Kwon’s charges. Montenegrin authorities have detained Kwon for nearly a month, with his lawyer saying that the court may only consider extradition requests in one year.

The lawyer said that Kwon’s criminal trial could take four to five months, with a possible jail time of between six months and five years.

Authorities have engaged in a months-long search for the disgraced CEO after the TerraUSD stablecoin he created collapsed in May 2022.

Some $45 billion was estimated to have evaporated due to the subsequent crash of global crypto markets. Estimates indicate that roughly 200,000 South Koreans had invested in TerraUSD.

On Friday, the cryptocurrency market capitalization topped $1 trillion for the first time since the collapse. The increase has been partly fueled by rallies in Bitcoin and ETH over the past week.

New Charge Unlikely to Speed Up Extradition

Upon his arrest in Montenegro, the U.S. Justice Department charged Kwon with eight criminal fraud counts. In February, the U.S. Securities and Exchange Commission (SEC) charged Kwon with securities fraud, which the founder vehemently denied. He said: “There is a difference between failing and running a fraud.”

Before the U.S. charges, Korean prosecutors charged Kwon and other Terraform employees with violating its capital markets law in September last year.

While an embezzlement charge could strengthen South Korea’s extradition argument, with the nation having filed a request before the U.S., Kwon could prolong his stay in Montenegro by focusing on the differences between the two countries’ extradition laws.

In addition, Montenegro only allows extradition for offenses considered criminal in both the requesting country and in Montenegro itself. The European nation, also a North Atlantic Treaty Organization member, may also want to avoid fighting against the United States.

The U.S. and Korea could also agree to have Kwon extradited to South Korea. He could then initially travel to the U.S. to face trial there.

This situation would be similar to that of the former Goldman Sachs head of Asian investment banking, Roger Ng, who was deported to New York after being accused of misappropriating funds from the 1Malaysia Development fund to earn $600 million for Goldman.

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David Thomas
David Thomas graduated from the University of Kwa-Zulu Natal in Durban, South Africa, with an Honors degree in electronic engineering. He worked as an engineer for eight years, developing software for industrial processes at South African automation specialist Autotronix (Pty) Ltd., mining control systems for AngloGold Ashanti, and consumer products at Inhep Digital Security, a domestic security company wholly owned by Swedish conglomerate Assa Abloy. He has experience writing software in C,...
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