Do Kwon Pleads Not Guilty to US Fraud Charges over $40 Billion Terra Collapse

Do Kwon, the co-founder of Terraform Labs, faces multiple criminal charges in the United States, including conspiracy to commit fraud and market manipulation.

Terraform Labs co-founder Do Kwon has pleaded not guilty to U.S. fraud charges over the $40 billion collapse of the firm’s cryptocurrencies.

A federal grand jury in Manhattan indicted Kwon last September on charges of commodities fraud, securities fraud, and wire fraud. He also faces a conspiracy to commit money laundering charge.

The charges stem from the May 2022 failure of Terraform’s flagship digital tokens, luna and the related stablecoin terraUSD (UST). The fraud and crash wiped out over $40 billion in investor assets.

Prosecutors said Kwon misled investors about the stability and functionality of Terra’s blockchain technology and stablecoin protocol over several years.

They also accused him of making false statements about how major South Korean crypto exchange Upbit handled luna trading during a market downturn in May 2021.

Prosecutors said Kwon and Terraform Labs also misled investors about the role that the Luna Foundation Guard, a Singapore-based nonprofit, played in defending UST’s $1 peg.

After luna and UST crashed, Terraform Labs laid off staff and filed for Chapter 11 bankruptcy protection in the United States.

In parallel civil charges, the U.S. Securities and Exchange Commission (SEC) last year charged Kwon and Terraform Labs with defrauding investors.

Kwon settled those charges with the SEC for $44.45 million without admitting or denying the allegations.

Terraform Labs co-founder Do Kwon arrives at the Manhattan federal courthouse in New York City, March 22, 2023. Eduardo Munoz / Reuters

Kwon, a South Korean citizen, 33, faces a maximum sentence of 130 years in prison if convicted on all the criminal charges.

He was arrested in March 2023 in Montenegro while attempting to flee with a forged passport, according to prosecutors.

After a lengthy extradition battle, Kwon was flown back to the United States on March 21.

His case is now before Judge John P. Cronan in the U.S. District Court in Manhattan.

a court session is scheduled for Jan. 8, 2025, to determine the next steps in the trial, which is expected to draw great attention within the crypto industry.