At a hearing in Manhattan today, Terraform Labs co-founder Do Kwon denied allegations related to TerraUSD’s collapse.
According to Reuters, Do Kwon, the co-founder of Terraform Labs, pleaded not guilty to criminal fraud charges in Manhattan federal court on Thursday after being extradited from Montenegro.
The charges stem from his role in the collapse of cryptocurrencies TerraUSD and Luna, which wiped out an estimated $40 billion in market value in 2022.
Do Kwon “misled” investors.
Federal prosecutors allege Kwon misled investors about TerraUSD’s stability, claiming in 2021 that its value was maintained by a proprietary algorithm. According to Reuters, prosecutors allege that Kwon secretly used a high-frequency trading firm to artificially maintain the stablecoin’s $1 peg.
The indictment includes charges of securities fraud, commodities fraud, wire fraud, conspiracy and money laundering.
The charges follow a tumultuous year for Kwon, who fled when the collapse of the Terra blockchain sparked a wave of bankruptcies, including big-name firms like Three Arrows Capital.
Interpol issued a Red Notice for his arrest and he was arrested in Montenegro in March 2024 while attempting to board a flight using fake passports.
Montenegro’s justice minister recently agreed to extradite Kwon to the United States, ending months of legal battles between the United States and South Korea, both of which sought to prosecute him. Although Kwon now faces significant legal challenges in the United States, South Korean authorities are continuing their investigation, which could result in a 40-year prison sentence…
