US judge seeks clarification on Do Kwon’s overseas charges

As Do Kwon is scheduled to be sentenced Thursday after pleading guilty to two charges, a U.S. federal judge is questioning prosecutors and defense attorneys about the Terraform Labs co-founder’s legal troubles in his native South Korea and Montenegro.

In a filing Monday in the U.S. District Court for the Southern District of New York, Judge Paul Engelmayer request Kwon’s attorneys and attorneys representing the U.S. government on the charges and “maximum and minimum sentences” the Terraform co-founder could face in South Korea, where he is expected to be extradited after potentially serving a U.S. prison sentence.

Kwon pleaded guilty to two counts of wire fraud and conspiracy to defraud in August and is expected to be sentenced by Engelmayer on Thursday.

In addition to the judge’s questions about the possibility of Kwon serving time in South Korea, he asked if there was an agreement that “none of Mr. Kwon’s time in custody in Montenegro” — where he served a four-month sentence for using falsified travel documents and fought extradition to the United States for more than a year — would be credited toward a possible U.S. sentence.

Judge Engelmayer’s questions reflected concerns that if the United States granted his extradition to South Korea to serve “the second half of his sentence,” the country’s authorities might release him sooner than expected.

Kwon was one of the most prominent figures in the crypto and blockchain industry in 2022 before the collapse of the Terra ecosystem, which many experts believe contributed to a stock market crash that led to the bankruptcy of several companies and significant losses for investors.

Defense lawyers asked Kwon serves no more than five years in the United States, while prosecutors put pressure for at least 12 years.

Related: There’s More to Crypto Crime than Meets the Eyes: What You Need to Know

The US government’s sentencing recommendation said Kwon “caused losses that dwarfed those caused” by former FTX CEO Sam Bankman-Fried, former Celsius CEO Alex Mashinsky and OneCoin’s Karl Sebastian Greenwood combined. All three men are serving multi-year sentences in federal prison.

Will Do Kwon serve his sentence in South Korea?

The Terraform co-founder’s lawyers said that even if Engelmayer sentenced Kwon to prison, he “would immediately be remanded into custody pending his criminal charges in South Korea” and would potentially face up to 40 years in prison in the country of which he holds citizenship.

Thursday’s sentencing hearing could mark the beginning of the end of Kwon’s chapter in Terraform’s collapse in 2022. His plight amid the crypto market downturn was not public until he was arrested in Montenegro and held in custody pending extradition to the United States, where he was indicted in March 2023 for his role at Terraform.