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Do Kwon, co-founder and former CEO of Terraform Labs, has been sentenced to four months in prison by a court in Montenegro on charges of forging passports. This was announced on Monday by the Basic Court of Podgorica.
The sentencing follows Kwon's arrest in March when he was caught trying to use a forged Costa Rican passport to travel from Podgorica to Dubai. He was accompanied by Terraform Labs' ex-CFO, Han Chang-Joon, who also received a four-month sentence. The authorities confiscated additional fake passports for Belgium and two identity cards from the pair following the verdict.
In court, Kwon denied having forged the documents, stating that he received the Costa Rican passport from an agency in Singapore, recommended by a friend. The Belgian passport, he said, came from a different agency. He admitted to traveling worldwide using the Costa Rican passport and insisted that if any punishment were to be given, it should be directed solely at him, in an attempt to shield his colleague.
The sentencing comes after Kwon and Chang-Joon had already served six months in custody detention as extradition requests from both South Korea and the U.S. were being considered by Montenegro.
Kwon's sentencing in Montenegro is just one chapter in a series of legal woes. The co-founder of Terraform Labs is also facing serious charges in the United States and his home country, South Korea.
Charged with Securities Fraud
In the United States, financial regulators have charged Kwon and Terraform Labs with "orchestrating a multi-billion dollar crypto asset securities fraud". The company is behind the Terra Luna and TerraUSD tokens, which collapsed spectacularly, causing estimated losses of over $40 billion for investors. The U.S. Securities and Exchange Commission (SEC) alleges that Kwon and his company raised billions from investors by selling them an "interconnected suite of crypto asset securities" through many unregistered transactions. Investors were misled about the stability of TerraUSD and the potential increase in the value of the tokens, the SEC stated.
Arrest Warrant in South Korea
South Korean authorities, on the other hand, have issued an arrest warrant for Kwon over charges of fraud and violations of capital markets law. An investigation was initiated by the Seoul Southern District Prosecutors’ Office on Terraform Labs following the collapse of Luna and TerraUSD that erased billions from investors' pockets worldwide. The case was assigned to the Financial and Securities Crime Joint Investigation Team, a special financial crimes unit. Kwon and his Terraform co-founder Daniel Shin are facing criminal complaints filed by five Korean-based crypto investors who suffered a combined loss of about $1.1 million. The complaint accuses Kwon and Shin of defrauding investors by failing to properly inform them about the flaws in Luna and Terra and the unrestricted issuance of Luna.
Additionally, Kwon is reportedly facing a tax fine of 100 billion won ($78 million) for evasion of corporate and income tax payments in South Korea.
As Kwon and Chang-Joon start their four-month sentence in Montenegro, the pair remain in custody, despite inconsistent rulings on their request for bail. With legal battles in multiple jurisdictions, the saga of the disgraced Terraform Labs co-founders continues.
