A U.S. federal judge is seeking clarification regarding the legal ramifications Do Kwon, the co-founder of Terraform Labs, might face in South Korea and Montenegro, potentially impacting his sentencing in the United States. Kwon is scheduled to be sentenced on Thursday after pleading guilty to two felony counts of wire fraud and conspiracy to defraud.
Judge Paul Engelmayer of the U.S. District Court for the Southern District of New York, in a filing on Monday, requested information from Kwon's legal team and the U.S. government's attorneys concerning the charges and possible sentences Kwon could receive in South Korea. Kwon is expected to be extradited to South Korea after potentially serving prison time in the U.S.
In addition to the inquiry about potential prison time in South Korea, Judge Engelmayer questioned whether any agreement existed regarding the crediting of Kwon's time in custody in Montenegro towards a potential U.S. sentence. Kwon previously served a four-month sentence in Montenegro for using falsified travel documents while contesting extradition to the U.S. for over a year.
The judge's concerns stem from the possibility that South Korean authorities might release Kwon early if the U.S. grants extradition for him to serve the latter part of his sentence. Some reports indicate that Kwon could face up to 40 years in prison in South Korea, and the judge is likely seeking to understand if a U.S. sentence would be considered by the South Korean authorities.
Do Kwon's legal troubles stem from the 2022 collapse of the Terra ecosystem, an event that triggered a significant downturn in the cryptocurrency market, leading to bankruptcies and substantial investor losses. Kwon, who was a prominent figure in the crypto industry, faces charges related to schemes to defraud investors by fraudulently inflating the value of Terraform's cryptocurrencies.
In August, Kwon pleaded guilty to conspiring to commit commodities, securities, and wire fraud and is expected to forfeit over $19 million. As part of his plea agreement, Kwon admitted to conspiring to commit commodities, securities, and wire fraud. He will also relinquish his stake in Terraform and its cryptocurrencies. While sentencing guidelines initially suggested a roughly 25-year prison term, the plea deal indicates Kwon will face no more than 12 years in prison if he abides by the agreement. If Kwon serves half of his sentence and meets all conditions of the plea bargain, the U.S. Justice Department will support his request to transfer to South Korea under the International Prisoner Transfer Program.
Kwon's extradition to the U.S. from Montenegro occurred in late 2024. He was initially indicted for misleading investors and laundering the proceeds of his crimes, with the collapse of Terraform's cryptocurrencies in May 2022 allegedly erasing over $40 billion in investor assets. Attorney General Merrick B. Garland stated that Kwon would be held accountable in an American courtroom for his schemes involving Terraform's cryptocurrencies, which resulted in over $40 billion in investor losses.
