In a Manhattan federal court hearing, Do Kwon, the co-founder of Terraform Labs, pleaded not guilty to criminal fraud charges linked to the collapse of the TerraUSD and Luna cryptocurrencies. Extradited from Montenegro, Kwon’s charges arise from his alleged involvement in wiping out approximately $40 billion in market value in 2022. Prosecutors accuse him of misleading investors about TerraUSD’s stability, citing claims that its value was maintained by an algorithm, while secretly using a high-frequency trading firm to sustain the stablecoin’s $1 peg. The indictment includes accusations of securities fraud, commodities fraud, wire fraud, conspiracy, and money laundering.
The proceedings come after Kwon fled the aftermath of the Terra blockchain collapse, which caused several high-profile bankruptcies, including Three Arrows Capital. Interpol had issued a Red Notice for his arrest, leading to his capture in Montenegro with fraudulent passports in March 2024. Montenegro recently approved Kwon’s extradition to the United States, where he now faces significant legal challenges, while South Korean authorities continue their investigation, potentially paving the way for a lengthy prison sentence if he is convicted.
Kwon’s upcoming court appearance is expected to address further proceedings. His case continues to spotlight accountability issues within the cryptocurrency industry.
