Do Kwon, co-founder of Terraform Labs, appeared in a U.S. court on Jan. 2, 2025, where he pleaded not guilty to charges stemming from the collapse of the Terra ecosystem.
Do Kwon, co-founder of Terraform Labs, appeared in a U.S. court on Jan. 2, 2025, where he pleaded not guilty to charges stemming from the collapse of the Terra ecosystem, which led to a loss of $40 billion. Kwon faces nine charges, including wire fraud, securities fraud, and money laundering. These charges relate to the downfall of TerraUSD (UST), an algorithmic stablecoin, and its linked cryptocurrency, LUNA, which crashed in May 2022. The collapse played a major role in the broader crypto market downturn, also contributing to the collapse of FTX.
Kwon’s appearance in the Southern District of New York followed his extradition from Montenegro, where he had been arrested in March 2023 after attempting to board a private jet with fake documents. Initially, Kwon fought extradition, wanting to be sent to South Korea where financial crime penalties are generally less severe. However, Montenegrin authorities decided to extradite him to the United States after considering the seriousness of the charges against him and the role of the U.S. in his case. He was transferred into U.S. custody on Dec. 31, 2024.
The U.S. charges against Kwon are linked to accusations that he misled investors about the stability and functionality of the Terra blockchain and its products, including UST. According to prosecutors, Kwon’s actions were part of a scheme to deceive investors into believing Terra was a viable and functioning decentralized financial system. The collapse of the UST stablecoin led to Terra’s ecosystem imploding, causing substantial losses for investors and marking one of the most significant failures in the crypto market.
In addition to the criminal charges, Kwon and Terraform Labs faced a civil fraud lawsuit brought by the U.S. Securities and Exchange Commission (SEC), resulting in a $4.47 billion settlement in June 2024. Terraform Labs has since filed for bankruptcy. The U.S. Attorney’s Office in New York will handle Kwon’s prosecution, and a status conference in the case is scheduled for Jan. 8, 2025.
Kwon’s legal troubles have been ongoing since the collapse of Terra. He had been a fugitive from South Korean authorities before his arrest in Montenegro. Both U.S. and South Korean prosecutors have pursued charges against him, leading to a legal tug-of-war over his extradition. Despite the challenges, Kwon’s court appearance marks a significant step in holding him accountable for his role in the collapse of Terra, one of the most high-profile failures in the cryptocurrency space.
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