Do Kwon Pleads Not Guilty to Fraud Charges in $40 Billion Crypto Case
Do Kwon, co-founder of Terraform Labs, pleaded not guilty to criminal fraud charges in a Manhattan federal court following his extradition from Montenegro. His case involves the collapse of TerraUSD and Luna (LUNC), which lost approximately $40 billion in 2022.
Ordered To Remain In Custody Following Court Appearance
A nine-count indictment was unsealed, accusing Kwon of securities fraud, wire fraud, commodities fraud, and conspiracy to commit money laundering. Kwon appeared in court without seeking bail and is ordered to remain in custody. He is scheduled for another hearing on January 8.
The Fallout From Do Kwon Alleged Fraud And Market Manipulation
Kwon previously reached a civil settlement with the US Securities and Exchange Commission (SEC), paying an $80 million fine and accepting a ban from cryptocurrency transactions as part of a broader $4.55 billion resolution regarding Terraform Labs' management practices.
The indictment alleges that Kwon misled investors about TerraUSD's stability, claiming that the “Terra Protocol” algorithm restored its value. Prosecutors assert Kwon coordinated with a trading firm to buy large amounts of TerraUSD, artificially inflating its price and attracting investors, which boosted Luna's value to $50 billion by spring 2022.
However, in May 2022, TerraUSD began to decline again, leading to warnings from the trading firm about the difficulty of maintaining its value. The subsequent crash of TerraUSD and Luna affected the broader cryptocurrency market, causing significant investor losses and impacting other digital assets, including Bitcoin (BTC).
While the identity of the trading firm remains undisclosed, SEC lawyers indicated that Jump Trading supported TerraUSD during its peak in May 2021.
Featured image from DALL-E, chart from TradingView.com