Do Kwon Pleads Not Guilty to Multiple Fraud Charges in US Court
Terraform Labs co-founder Do Kwon, known for his involvement in the $40 billion TerraUSD collapse, appeared in a US court and pleaded not guilty to multiple fraud charges, including securities, wire, and commodities fraud. His court session in Manhattan marks a pivotal moment in a situation that has engaged the cryptocurrency community for nearly two years.
Kwon's plea was made before Magistrate Judge Robert Lehrburger, and he agreed to remain in custody without bail. The allegations involve misleading investors about Terraform Labs' Terra blockchain technology and the stablecoin TerraUSD, which collapsed in 2022, impacting notable firms such as FTX.
Prosecutors claim Kwon orchestrated a multibillion-dollar fraud that adversely affected investors. As the public face of TerraUSD and the Luna cryptocurrency, he gained both notoriety and recognition. Terraform Labs controlled 92% of the Terra ecosystem at its peak, which lost 99% of its value within 48 hours in May 2022.
From Montenegro to Manhattan: Road to Extradition
Kwon's extradition to the US followed a complex legal process across several countries. He was arrested in Montenegro in March 2023 while attempting to travel to Dubai using false identification. Kwon and Terraform's former CFO received four-month prison sentences for using forged documents.
A legal battle ensued between the US and South Korea, where Kwon faced additional charges. Montenegro approved his extradition to the US in December 2024 after its Supreme Court confirmed all conditions were satisfied. Kwon consented to the extradition, resulting in his transfer at Podgorica airport.
While in custody in Montenegro, a New York jury found Kwon and Terraform liable in a civil fraud case initiated by the SEC. Terraform settled for $4.47 billion, but subsequently filed for bankruptcy.
Terraform's Fallout
The downfall of TerraUSD and Luna instigated significant turmoil in the cryptocurrency market. Major cryptocurrencies like Bitcoin and Ethereum experienced substantial declines, while smaller entities ceased operations. Terraform Labs' collapse was a key factor in the broader downturn of 2022, which also included FTX's failure and founder Sam Bankman-Fried's eventual 25-year sentence.
US prosecutors argue that Kwon misrepresented the stability of TerraUSD, causing severe losses for investors. TerraUSD, intended to maintain parity with the US dollar, instead fell sharply. Supporters of the "Lunatic" vision, a term Kwon endorsed, witnessed the near-total collapse of Terraform Labs.
Kwon faces numerous federal charges and is at a critical juncture in his legal proceedings. His plea sets the stage for a high-stakes trial, with a pretrial conference scheduled for January 8. This case may significantly influence regulatory frameworks within the digital asset sector.