During a hearing in Manhattan today, Terraform Labs co-founder Do Kwon refuted charges related to the collapse of TerraUSD.
Do Kwon, the co-founder of Terraform Labs, entered a not guilty plea to criminal fraud allegations at a federal court in Manhattan on Thursday after being extradited from Montenegro, as reported by Reuters.
The allegations are linked to his involvement in the downfall of the TerraUSD and Luna cryptocurrencies, which resulted in a staggering $40 billion loss in market capitalization in 2022.
Do Kwon ‘misled’ investors
Prosecutors claim that Kwon misled investors regarding the stability of TerraUSD, asserting in 2021 that its value was supported by a proprietary algorithm. They further allege that Kwon covertly utilized a high-frequency trading firm to artificially maintain the stablecoin’s $1 value peg, according to Reuters.
The indictment encompasses charges of securities fraud, commodities fraud, wire fraud, conspiracy, and money laundering.
This legal turmoil follows a challenging year for Kwon, who went into hiding as the collapse of the Terra blockchain initiated a series of bankruptcies, affecting prominent firms such as Three Arrows Capital.
Interpol issued a Red Notice for his arrest, and he was detained in Montenegro in March 2024 while attempting to board a flight with counterfeit passports.
The Justice Minister of Montenegro recently approved Kwon’s extradition to the United States, concluding months of legal battles between the U.S. and South Korea, both of which aimed to prosecute him. Despite the major legal hurdles he now faces in the U.S., South Korean officials are still conducting their investigation, which could culminate in a maximum 40-year prison sentence if Kwon is convicted.
His upcoming court appearance is anticipated to detail next steps in the proceedings. Kwon’s case continues to be a significant point of discussion regarding accountability in the cryptocurrency sector.
