Kwon Do-hyung at Korea-US Extradition Crossroads... "Life Imprisonment Possible Under Current Law Even If Returning to Korea"

As the extradition of Kwon Do-hyung, CEO of Terraform Labs and the main culprit behind the cryptocurrency 'Terra·Luna crash incident' that caused damage to numerous investors, draws near, our Ministry of Justice and prosecution are closely monitoring the situation in preparation for the possibility of extradition to South Korea.

With the extradition options narrowed down to South Korea and the United States, there is a growing sentiment domestically that Kwon should be sent to the U.S., where he could face heavier punishment, to ensure strict punishment. On the other hand, some in the legal community argue that even if he is brought to South Korea, a 'life imprisonment' sentence is possible, and thus Kwon should be extradited here for thorough investigation and proper compensation for investors' losses.

Kwon Do-hyung, CEO of Terraform Labs. Photo by Yonhap News

According to foreign media and the legal community on the 28th, Montenegro judicial authorities will decide the extradition destination around March next year when Kwon’s sentence ends. The decision rests with Andrija Milovic, Montenegro’s Minister of Justice. Kwon was caught attempting to leave the country with a forged passport and was indicted by the Montenegrin court on charges of forgery of official documents. On the 17th, he was sentenced to four months in prison in the second trial, and this verdict was confirmed as is. On the 24th, the Podgorica High Court of Montenegro announced that the legal requirements for Kwon’s extradition had been met, opening the path for extradition.

Among the countries that suffered damage from the cryptocurrency operated by Kwon, only South Korea and the U.S. have requested extradition, narrowing the choices to these two. Currently, many analyses suggest that Kwon would face heavier punishment if extradited to the U.S. Unlike South Korea, the U.S. follows the principle of 'consecutive sentencing,' where sentences for all proven charges are added together, allowing for sentences exceeding 100 years. South Korea, on the other hand, follows the principle of 'concurrent sentencing,' where if multiple charges of the same type are sentenced, the heaviest sentence is increased up to half of the statutory maximum for that charge, generally resulting in sentences not exceeding 50 years. Currently, five charges such as securities fraud and breach of trust apply in South Korea, while eight charges including financial fraud and market manipulation apply in the U.S., indicating more charges in the U.S. However, there is a possibility that additional charges may be added after further investigation following extradition.

According to projections from lawyers familiar with the U.S. legal system, the expected sentence for Kwon if extradited to the U.S. is between 90 and 110 years. There is also an analysis that life imprisonment is possible in South Korea. If Terra·Luna, the cryptocurrency, can be considered 'investment contract securities' as defined in Article 4, Paragraph 6 of our Capital Markets Act, then Kwon’s actions that influenced the value of Terra·Luna could be regarded as market manipulation. South Korean courts impose a maximum penalty of life imprisonment for market manipulation charges. Given the Ministry of Justice’s current efforts to introduce a 'life sentence without parole' in the Criminal Act, Kwon could potentially become the first subject of this provision.

If Kwon is indicted in South Korean courts, the recognition of Terra·Luna’s securities status will clearly be a key issue in the trial. However, a legal insider commented, "The U.S. broadly recognizes investment contract securities, but we tend to take a very strict view. It will not be easy to have Terra·Luna’s securities status recognized." Concerned about the side effects of indiscriminate investment in cryptocurrencies if securities status is recognized, South Korean courts apply a stricter standard. A representative example is the Seoul Southern District Court’s dismissal of all 13 arrest warrants requested by the prosecution for 11 key figures, including former Chai Corporation CEO Shin Hyun-sung, who were involved in the Terra·Luna crash incident. The prosecution applied charges under the Capital Markets Act, considering Terra·Luna to have securities characteristics, but the court dismissed the warrants, stating "there is room to dispute the charges."

However, some believe that the court’s stance could change. Public perception of cryptocurrencies in South Korea has shifted significantly recently, and with about 280,000 investors suffering trillions of won in damages from the Terra·Luna incident, there is strong social demand for severe punishment of those involved, which the court may find difficult to ignore.

The prosecution reportedly plans to additionally apply charges of market manipulation under the Capital Markets Act if Kwon is extradited to South Korea. It is said that detailed investigations have been conducted to prove the market manipulation charges. In early November last year, the Seoul Southern District Prosecutors’ Office’s Joint Financial and Securities Crime Investigation Team obtained messenger conversations between Kwon and Terraform Labs employees. These conversations reportedly contain specific instructions from Kwon to manipulate Terra’s market price. Based on these conversations, the prosecution believes that while Kwon publicly promoted Terra as a 'stable coin' linked to actual asset value to minimize price volatility, he manipulated the market behind the scenes to maintain certain prices.

This content was produced with the assistance of AI translation services.