
During a hearing in Manhattan today, Do Kwon, co-founder of Terraform Labs, rebutted accusations related to the TerraUSD debacle.
In a federal court in Manhattan, Do Kwon, the co-founder of Terraform Labs, entered a plea of not guilty to criminal fraud charges after his extradition from Montenegro, as reported by Reuters.
The allegations arise from his involvement in the failure of the TerraUSD and Luna cryptocurrencies, which collectively wiped out around $40 billion in market capitalization in 2022.
Do Kwon ‘deceived’ investors
Federal prosecutors claim that Kwon deceived investors regarding the stability of TerraUSD, asserting in 2021 that a proprietary algorithm maintained its value. Prosecutors allege that Kwon discreetly employed a high-frequency trading firm to artificially uphold the stablecoin’s $1 peg, according to Reuters.
The indictment encompasses charges of securities fraud, commodities fraud, wire fraud, conspiracy, and money laundering.
This legal action follows a tumultuous year for Kwon, who evaded authorities as the collapse of the Terra blockchain initiated a series of bankruptcies, including those of notable companies like Three Arrows Capital.
In September 2022, Interpol issued a Red Notice for his capture, leading to his arrest in Montenegro in March 2024 while he was attempting to board a flight with counterfeit passports.
Recently, Montenegro’s Justice Minister authorized Kwon’s extradition to the United States, concluding months of legal disputes between the U.S. and South Korea, both aiming to prosecute him. While Kwon now confronts substantial legal hurdles in the U.S., South Korean authorities are continuing their investigation, which may result in a 40-year prison sentence upon conviction.
His forthcoming court appearance is anticipated to delineate further legal proceedings. The case remains a significant point of discussion concerning accountability within the cryptocurrency sector.