Do Kwon Pleads Not Guilty to Fraud Charges as US Prosecutors Estimate Over $40 Billion Lost in Terra-LUNA Collapse

A New York prosecutor has estimated that more than one million investors worldwide lost about $40 billion in the collapse of Terra-LUNA, according to court documents filed in the criminal case against Terraform Labs co-founder Do Kwon.

In a notice filed on January 6, Acting US Attorney Daniel Gitner outlined steps to notify victims about their rights in the case, which is being heard in the US District Court for the Southern District of New York.

Given the large number of individuals and entities that were impacted by the alleged fraud, the government is planning to launch a dedicated website for public proceedings, as other methods are impractical.

“While it is difficult to precisely quantify the number of Kwon’s victims, given the nature of the transactions, many of which occurred on foreign exchanges or through crypto wallets that may not contain personally identifiable information, the Government estimates that the number of victims […] exceeds hundreds of thousands […] and potentially totals more than one million,” Gitner wrote in the filing.

Prosecutors have estimated that more than one million investors worldwide lost approximately $40 billion in the collapse of Terra-LUNA, according to court documents filed in the criminal case against Terraform Labs co-founder Do Kwon.

On January 6, Acting US Attorney Daniel Gitner filed a notification in the US District Court for the Southern District of New York, outlining steps to inform victims about their rights. Given the vast number of impacted individuals and entities, the government plans to launch a dedicated website for public proceedings, considering other methods impractical.

Gitner explained the difficulties of quantifying victims due to the nature of transactions, often conducted on foreign exchanges or through crypto wallets lacking identifiable information. Still, authorities estimate hundreds of thousands of individuals and entities could be among those affected.

“While it is difficult to precisely quantify the number of Kwon’s victims […] the Government estimates that the number of victims […] exceeds hundreds of thousands […] and potentially totals more than one million,” said Gitner

Kwon’s Extradition Saga Ends — He Pleaded Not Guilty

Do Kwon faced a New York judge for the first time on January 2, following his extradition from Montenegro. He pleaded not guilty to nine felony fraud charges tied to Terraform and agreed to remain in detention. His extradition marked the culmination of a legal saga spanning multiple countries.

Montenegrin authorities apprehended Kwon in March 2023 when he attempted to board a flight to Dubai with a forged passport. After a four-month prison sentence for document fraud, Montenegro approved his extradition to the US in December 2024, ending a tug-of-war with South Korea, where Kwon also faces charges.

The collapse of the Terra ecosystem in May 2022 triggered an unprecedented crisis across the cryptocurrency market. TerraUSD (UST), designed as an algorithmic stablecoin meant to maintain a 1:1 peg with the US dollar through its symbiotic relationship with the LUNA token, catastrophically failed when it lost its dollar parity.

The depegging sparked a death spiral that erased over $40 billion in market value within days. This event shattered confidence throughout the cryptocurrencie industry, contributing to a broader market downturn that saw Bitcoin plunge below $20,000 and Ethereum lose more than 70% of its value.

Critical Pretrial Conference Set for Jan. 8

While detained in Montenegro, a New York jury found Kwon and Terraform liable in a $4.47 billion civil fraud suit filed by the SEC. The case, later tied to Terraform’s bankruptcy, highlighted how the ecosystem’s implosion fueled broader financial chaos, including FTX’s collapse.

Do Kwon faces a pivotal moment in his legal battle as he confronts multiple criminal charges in the United States. A crucial pretrial conference scheduled for January 8, 2025, marks the beginning of what prosecutors describe as a landmark cryptocurrency fraud case. Prosecutors allege that Kwon deliberately misled investors about the stability of TerraUSD (UST), the algorithmic stablecoin at the heart of the Terra ecosystem.

The collapse particularly devastated the project’s most devoted supporters, known in the crypto community as “Lunatics,” many of whom had invested significant portions of their savings based on Kwon’s public assurances about the protocol’s reliability.

With over 3 years of crypto writing experience, Bena strives to make crypto, blockchain, Web3, and fintech accessible to all. Beyond cryptocurrencies, Bena also enjoys reading books in her spare time.

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