In May, Terraform Labs witnessed a sharp decline in the value of its tokens, losing $40 billion and playing a role in the 2022 'cryptocrash.' Co-founder Do Kwon is presently incarcerated in Montenegro, having been convicted of document forgery. Facing charges of defrauding investors by US regulators, he awaits extradition, with additional fraud charges pending in South Korea, his home country. Simultaneously, a third legal case is unfolding in Singapore, where the company is registered.
A Cryptocurrency Tale
In December 2021, Terraform Labs' Luna token gained prominence, soaring from $5 to a peak of $116 by April 2022. Enthusiastic Luna supporters earned the moniker "Lunatics," with co-founder Do Kwon affectionately dubbed their "king."
However, the euphoria came crashing down on May 9, 2022, as Luna plummeted, losing 99% of its value within 48 hours. Linked algorithmically to stablecoin TerraUSD, valued at $1, the crash ensued when TerraUSD tumbled to around $0.02. The resulting shockwaves reverberated throughout the crypto market, prompting investors to withdraw billions in fear of a widespread crash, wiping an estimated $400 billion from the value of cryptocurrencies like Bitcoin.
Amid this turmoil, Terraform Labs filed for bankruptcy. CEO Chris Amani asserted, "This action is necessary to allow us to continue working toward our collective goals while resolving the legal challenges that remain outstanding." Terraform, with assets between $100 million and $500 million, plans to meet all financial obligations during the Chapter 11 case.
Do Kwon, holding 92% of Terraform's shares, faces legal challenges globally, including charges in the US, South Korea, and an ongoing case in Singapore. Co-founder Daniel Hyunsung Shin owns the remaining 8% of the company.
Terraform Labs Co-founder Do Kwon Faces Legal Turmoil After Arrest in Montenegro
In March 2023, Mr. Kwon encountered legal troubles as he attempted to board a plane to Dubai in Montenegro. Three months later, he was convicted of document forgery, a charge he vehemently denied, and subsequently sentenced to imprisonment. Han Chang-joon, the former finance officer of Terraform Labs, faced a parallel fate with a conviction on identical charges.
During the investigation, law enforcement discovered manipulated Costa Rican passports and a separate set of Belgian passports among their belongings, as reported by Reuters. In November 2023, a Montenegro court sanctioned Kwon's extradition, yet the destination—whether to South Korea or the US—remained undetermined.