In a pivotal Manhattan hearing, Terraform Labs co-founder Do Kwon has denied charges linked to the catastrophic collapse of TerraUSD.
Do Kwon appeared in a Manhattan federal court today, where he pleaded not guilty to criminal fraud charges following his extradition from Montenegro. These charges arise from his involvement in the devastating fall of the TerraUSD and Luna cryptocurrencies, which collectively erased an estimated $40 billion in market value in 2022.
Allegations of Investor Deception
Federal prosecutors accuse Kwon of misleading investors regarding the stability of TerraUSD, asserting that he falsely claimed its value was secured by a proprietary algorithm in 2021. According to prosecutors, Kwon covertly employed a high-frequency trading firm to artificially maintain the stablecoin’s $1 peg.
The indictment includes serious charges such as securities fraud, commodities fraud, wire fraud, conspiracy, and money laundering.
Kwon’s tumultuous year followed the collapse of the Terra blockchain, which triggered a series of bankruptcies, impacting high-profile companies such as Three Arrows Capital. His escape led to an Interpol Red Notice, ultimately resulting in his arrest in Montenegro in March 2024 while attempting to flee with counterfeit passports.
Montenegro’s Justice Minister has recently sanctioned Kwon’s extradition to the United States, concluding months of legal disputes involving both the U.S. and South Korea. As Kwon faces daunting legal battles in the U.S., South Korean authorities continue their investigation, which could result in a 40-year prison sentence if he is convicted.
Kwon’s upcoming court appearance is anticipated to shed light on future proceedings, keeping his case at the forefront of discussions regarding accountability within the cryptocurrency sector.
