- Do Kwon pleads not guilty in US court to nine charges linked to TerraUSD collapse.
- He faces fraud charges over the $40 billion TerraUSD crash, affecting global crypto markets.
- Following his not-guilty plea, the next court appearance is scheduled for January 8, 2025.
Do Kwon, the 33-year-old co-founder of Terraform Labs, pleaded not guilty to fraud charges in a Manhattan courtroom concerning the infamous collapse of TerraUSD in May 2022. Kwon stands accused of misleading investors about the capabilities of the Terra blockchain, leading to a dramatic $40 billion crash that significantly impacted the cryptocurrency market. The fallout from the TerraUSD debacle was a key event that contributed to the subsequent collapse of the FTX exchange.
Kwon, who is facing charges of wire fraud, securities fraud, and commodities fraud, was represented by his legal team during the court session. U.S. Magistrate Judge Robert Lehrburger allowed Kwon to remain in detention without bail. Although Kwon’s defense team remained tight-lipped after the hearing, another appearance was scheduled for January 8, 2025.
Kwon’s arrest marked the end of a long pursuit by authorities. In March 2023, he was apprehended in Montenegro while using fake documents to flee to Dubai with Terraform’s former CFO. Later, he was extradited to the U.S. following his legal battle over his potential return to South Korea, where financial crime penalties are generally lighter.
In addition to the criminal charges, Kwon and Terraform Labs were also found liable in a civil fraud case filed by the U.S. Securities and Exchange Commission (SEC). Terraform Labs ultimately settled the case, agreeing to a hefty $4.47 billion payout, although the company filed for bankruptcy afterward.
Kwon, who held a 92% stake in Terraform Labs, now faces prosecution from the Manhattan U.S. Attorney’s Office, the same office that recently prosecuted FTX’s Sam Bankman-Fried. Bankman-Fried received a 25-year sentence after being convicted of seven charges, including fraud and money laundering. Kwon’s legal troubles are far from over, as he continues to face scrutiny from authorities in both the U.S. and South Korea.
The Nine Charges Against Kwon
The U.S. charges include nine distinct counts, each aimed at holding Kwon accountable for his alleged role in the TerraUSD crash. These include conspiracy, wire fraud, securities fraud, commodities fraud, and money laundering. The gravity of the charges reflects the scale of the collapse and the profound impact it had on the global cryptocurrency market, which still grapples with the aftermath of the event.
Terra Founder Do Kwon to Face Charges in South Korea: ReportTerraform’s Rise and Fall
Terraform Labs, founded by Kwon and Daniel Shin in 2018, aimed to revolutionize the cryptocurrency space with its stablecoin TerraUSD, pegged to the U.S. dollar. At its peak, the project was seen as a promising innovation within the decentralized finance (DeFi) sector. However, as the value of TerraUSD plummeted in May 2022, it triggered a chain reaction that led to massive losses for investors and a sharp decline in trust for algorithmic stablecoins. Kwon claimed that the crash was due to external market forces, which were disputed by regulators and investors alike.
Kwon, who remains a polarizing figure in the crypto world, faces a long and uncertain legal battle. As the U.S. prepares to prosecute him, the crypto community observes the case closely, which could have implications for cryptocurrency regulation and investor protection.
