MONTENEGRO’S High Court said former cryptocurrency mogul Do Kwon should be handed over to his native South Korea rather than the US for prosecution over the US$40 billion collapse of the TerraUSD stable-coin in 2022.

It’s the latest twist in the legal journey for the Terraform Labs co-founder, who was a fugitive from South Korean charges for months before he was arrested in Montenegro in March 2023 for traveling on a fake passport. Kwon’s arrest set off dueling extradition requests by prosecutors in Seoul and New York. 

The ruling is a win for Kwon, whose lawyers have expressed a preference for him to go to South Korea. Penalties for white-collar crimes are lower there than in the US.

Kwon’s fellow former crypto mogul Sam Bankman-Fried is now facing potentially decades in prison after he was convicted of fraud in New York in November. The FTX co-founder was prosecuted by the Manhattan US attorney’s office, which also indicted Kwon on fraud charges.

A spokesman for that office declined to comment on Thursday.

But it’s unclear if this ruling is the final word. The Montenegrin court last month ordered that Kwon be sent to the US, a decision that was overturned this week.

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Court spokeswoman Marija Rakovic said Kwon could be extradited soon unless prosecutors appeal. Goran Rodic, a lawyer for Kwon in the Montenegrin capital of Podgorica, said extradition could proceed after Kwon finished serving his sentence on the passport charges later this month. 

On the other hand, the geopolitical situation facing the tiny Balkan nation, a Nato member, favour extradition to the US, and it’s possible the government is contemplating measures to ensure that happens.

Terraform chief financial officer Han Chang-joon, who was arrested with Kwon in Montenegro, was extradited to South Korea last month.

The collapse of Terra was a seismic event in the crypto markets, and set off a downturn that went on to engulf other players like FTX.

Meant to keep a constant value of US$1 via a complex mix of algorithms and trader incentives involving its free-floating sister token Luna, Terra was designed as a refuge from the volatility of other cryptocurrencies. But both Luna and Terra unravelled when confidence in Kwon’s project evaporated during a few chaotic days in early May 2022.

Losses from Terra’s collapse caused a public outcry in South Korea, where Kwon was charged breaching capital markets law a few months later. Manhattan federal prosecutors didn’t file their charges against Kwon until after his arrest. According to their indictment, he misled investors about the blockchain technology behind Terra. 

Even if Kwon is extradited to South Korea, the government there could still reach a deal to have him tried in New York first. The US could argue that it has a stronger ability to seize Kwon’s assets around the world and agree to share them with South Korea. 

In the 1MDB case, Malaysia released ex-Goldman Sachs Group Inc. banker Roger Ng from custody so he could be prosecuted — and sentenced — in New York first.

Despite receiving a 10-year prison term, Ng is currently free in Malaysia assisting in that country’s investigation into the looting of the sovereign wealth fund.

Kwon and Terraform are also facing a US Securities and Exchange Commission lawsuit over Terra’s collapse.

Such civil cases are often put on hold while prosecutions go forward, but with Kwon’s extradition still uncertain, the SEC suit is going to trial in Manhattan federal court at the end of the month. Unlike in a criminal trial, Kwon’s presence in the courtroom isn’t required. BLOOMBERG