The TerraUSD stablecoin and its sister token Luna collapsed in May 2022, with losses prosecutors put at more than $40 billion. Terraform Labs founder Do Kwon was found liable in an SEC civil case, arrested in Montenegro and extradited to the United States after a long fight between US and South Korean requests. He pleaded guilty to two fraud counts in 2025 and was sentenced to 15 years in prison.
Kwon is serving a 15 year US federal sentence imposed on 11 December 2025 after pleading guilty to two counts. South Korean prosecutors have said he would face a separate trial there if returned, and no transfer or Korean trial date had been reported in sources reviewed as of 1 November 2026.
The SEC alleged that Terraform Labs and its chief executive Do Kwon raised billions of dollars from investors from April 2018 until the collapse in May 2022. Kwon co-founded the Singapore based company in 2018, according to the SEC and prosecutors.
Prosecutors alleged that when the Terra Protocol failed to restore UST's one dollar peg in May 2021, Kwon arranged for a high frequency trading firm to buy large amounts of UST to prop up the price, and misrepresented the protocol's effectiveness. Kwon later pleaded guilty to charges tied to the Terraform schemes.
UST lost its peg to the dollar and UST and LUNA crashed, causing more than $40 billion in investor losses, according to the Justice Department. At their peak in spring 2022 the two tokens had a combined apparent market value above $50 billion, prosecutors said.
The joint financial crimes unit of the Seoul Southern District Prosecutors' Office obtained an arrest warrant for Kwon, the Korea Times reported. South Korea asked Interpol the same month to issue a red notice, the AP reported.
A South Korean court rejected prosecutors' requests for arrest warrants against Terraform co-founder Daniel Shin and several early investors and developers, saying he was unlikely to flee or destroy evidence, Bloomberg reported, citing Yonhap. A Terraform spokesperson called the prosecutors' claims baseless.
The SEC charged Terraform and Kwon in the Southern District of New York with fraud and with offering unregistered crypto asset securities. It alleged they misled investors about UST's stability and falsely claimed a Korean payment app used the Terra blockchain.
Police arrested Kwon and another South Korean citizen at Podgorica Airport as they tried to fly to Dubai on fake Costa Rican passports, the AP reported. The Justice Department later said he was arrested in Montenegro while trying to use a fraudulent passport.
An eight count indictment charging Kwon with two counts each of securities fraud, wire fraud, commodities fraud and conspiracy was made public in federal court in Manhattan hours after his arrest, Reuters reported.
The Korea Times (Reuters)US authorities submitted a request to Montenegro for Kwon's arrest and extradition, the Justice Department said. South Korea also sought his extradition.
South Korean prosecutors indicted Daniel Shin for fraud and other charges, Reuters reported, citing Yonhap. Reuters said Kwon had been indicted in South Korea in late 2022 on similar charges under the Capital Markets Act.
Kitco (Reuters)The Basic Court in Podgorica sentenced Kwon and the other South Korean to four months in prison for using forged documents, with time already served counted, the AP reported.
The High Court in Podgorica first ruled to hand Kwon over to the United States, The Block and the AP reported. The Court of Appeals then annulled that decision over procedural questions about which country filed its request first, the AP said.
The High Court then ruled that Kwon should be handed over to South Korea, the AP reported. A court spokeswoman said the ruling could be appealed.
A unanimous jury in New York found Terraform and Kwon liable for securities fraud after a nine day trial and less than two hours of deliberation, the SEC said.
Montenegro's Supreme Court overturned an appeals court's 20 March decision to extradite Kwon to South Korea and ordered a lower court to repeat the procedure, the AP reported.
Terraform agreed to pay about $4.47 billion in disgorgement, interest and penalties, and Kwon agreed to pay $80 million in penalties plus $124 million jointly with Terraform, the SEC said. Terraform agreed to wind down and distribute remaining assets through a liquidation plan needing bankruptcy court approval in Delaware.
Montenegro's Supreme Court found that the conditions were met for extradition to either country and left the final choice to the justice minister, the AP reported. The Block said the court ruled in September 2024 and nullified the transfer to South Korea.
Montenegro's Constitutional Court rejected Kwon's appeal against the Supreme Court ruling in the week before the minister's decision, The Block reported.
Justice Minister Bojan Bozovic signed an order to extradite Kwon to the United States, saying more legal criteria favoured the US request, the AP reported. Kwon's lawyers called the minister's conduct illegal.
Kwon was extradited from Montenegro and arrived in the United States, the Justice Department said.
Kwon appeared in federal court in Manhattan on a superseding indictment with nine counts including commodities fraud, securities fraud, wire fraud and money laundering conspiracy, carrying a combined maximum of 130 years. The Justice Department noted that all defendants are presumed innocent until proven guilty.
Kwon pleaded guilty before Judge Paul A. Engelmayer to conspiracy to commit commodities, securities and wire fraud and to wire fraud, and agreed to forfeit more than $19 million, the US Attorney's Office said. The two counts carry a combined maximum of 25 years.
Judge Engelmayer sentenced Kwon to 15 years in prison and ordered him to forfeit more than $19 million, the US Attorney's Office said. Under the plea deal, prosecutors will not oppose a potential application to be transferred abroad after he serves half his US sentence, Reuters reported, and the AP said the judge rejected his request to serve the sentence in South Korea.
Government officials and prosecutors, who were not named, told the Korea Times that Kwon would face a separate trial on charges including Capital Markets Act violations if returned, and a senior prosecutor said a conviction could bring more than 30 years. The paper said ten alleged accomplices had been on trial in Korea for nearly three years.
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ABC News (Associated Press) · abcnews.go.com Kitco (Reuters) · kitco.com
Arab News Pakistan (Associated Press) · arabnews.pk The Korea Times (Reuters) · koreatimes.co.kr
Korea JoongAng Daily · koreajoongangdaily.comLast updated 1 November 2026. Spotted an error? See corrections. Every event links to the record it comes from. Allegations are attributed to whoever made them.