Kwon Do-hyung Extradited to US, Trial in New York Court Where FTX Founder Received 25-Year Sentence

Southern District of New York Prosecutor's Office Indicted Kwon Do-hyung Last Year

On the 31st (local time), Kwon Do-hyung (33), who caused over 50 trillion won in damages to global investors with the virtual assets 'Terra·Luna', has been extradited to the United States. He is expected to face a criminal trial under the jurisdiction of the prosecutor's office and court that handled the FTX founder's case.

Previously, the Southern District of New York Prosecutor's Office indicted Kwon in March 2023, shortly after he was arrested in Montenegro, on eight charges including securities fraud, wire fraud, commodities fraud, and market manipulation conspiracy. He is accused of deceiving investors about the blockchain technology of the virtual asset TerraUSD issued by Terraform Labs, which he founded, and spreading false information through TV interviews and social media. He is also accused of conspiring with a U.S. investment firm to manipulate prices.

The Southern District of New York Prosecutor's Office is renowned as the top elite prosecutor's organization in the U.S., handling various major cases. The head of the Southern District of New York Prosecutor's Office oversees New York Manhattan, where major financial firms are located, and is sometimes called the 'Grim Reaper of Wall Street' due to its leadership in white-collar crimes.

Crimes related to virtual assets are no exception. The founder of the virtual asset exchange FTX, Bankman-Fried, who was indicted for embezzling billions of dollars in customer funds, was also handled here and received a 25-year sentence in the first trial at the Southern District of New York Court. Kwon's trial is also expected to be held at the Southern District of New York Court, which handled Bankman-Fried's trial.

If Kwon is found guilty in the U.S., it is anticipated that he could receive a heavy sentence along with astronomical asset forfeiture. Former Southern District of New York Prosecutor Damian Williams emphasized, "Web3 (blockchain-based web) is not a lawless zone," and "Fraud is fraud, whether it occurs on the blockchain or on Wall Street."

In Korea, the maximum sentence for economic criminals is about 40 years in prison, but the U.S. adopts a cumulative sentencing system that imposes sentences for each individual crime, theoretically allowing for sentences exceeding 100 years. However, due to the flexible sentencing guidelines of the U.S. federal courts, the actual sentences vary greatly depending on the case.

Bankman-Fried was also expected to face up to 115 years in prison after being found guilty on all seven criminal charges, but the actual sentence was 25 years. Elizabeth Holmes, the founder of the biotech venture Theranos, which perpetrated the largest fraud in Silicon Valley history, received an 11-year sentence. Financial criminal Bernard Madoff, who committed the largest Ponzi scheme in history, amounting to $64 billion (about 94 trillion won), was sentenced to 150 years in prison.

Before the criminal trial, Kwon had already lost a lawsuit filed by the U.S. Securities and Exchange Commission (SEC). After losing, Kwon agreed to pay $4.47 billion (about 6.5 trillion won) in restitution and fines to the SEC. The SEC filed a civil lawsuit in 2021, alleging that Kwon and Terraform Labs misled investors about the stability of Terra, causing significant investment losses.

According to local Montenegrin newspapers Vijesti and Pobjeda, the Montenegrin police handed over Kwon to the U.S. authorities on this day. It has been about 1 year and 9 months since he was arrested at Podgorica International Airport in Montenegro. Kwon is a co-founder of Terraform Labs, which once gained attention by issuing the virtual assets Terra·Luna.

Oh Se-seong, Hankyung.com reporter sesung@hankyung.com