Do Kwon, the South Korean cryptocurrency entrepreneur and co-founder of Terraform Labs, pleaded not guilty Thursday to a series of criminal fraud charges in Manhattan federal court.
This comes just days after his extradition from Montenegro, where he had been detained for over a year. His case centers on the collapse of TerraUSD and Luna (LUNC), which collectively lost around $40 billion in 2022.
Ordered to remain in custody after court appearance
According to Reuters reportfederal prosecutors unsealed a nine-count indictment charging Kwon with several offenses, including securities fraud, wire fraud, commodities fraud and conspiracy to commit money laundering. ‘money.
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Wearing an olive green long-sleeved shirt and black sweatpants, Kwon appeared in court alongside his lawyer, Andrew Chesley, who indicated they would not seek bail at this time .
Following Kwon’s plea, U.S. Magistrate Judge Robert Lehrburger reportedly ordered him continued in detention. Do Kwon left the courtroom with a copy of the 79-page indictment and is expected to return for another hearing on January 8.
The aftermath of Do Kwon’s fraud and market manipulation allegations
In June, Kwon reached a civil settlement with the United States Securities and Exchange Commission (SEC), agreeing to pay an $80 million fine and accept a ban on participating in cryptocurrency transactions. This settlement was part of a broader $4.55 billion resolution related to allegations of misconduct in the management of Terraform Labs.
The indictment details how Kwon allegedly misled investors about the stability of TerraUSD, a stablecoin designed to maintain a value of $1. In May 2021, when the stablecoin’s value began to weaken, Kwon reportedly claimed that a computer algorithm known as “Terra Protocol” had successfully restored its peg.
In reality, prosecutors say Do Kwon orchestrated a scheme involving a high-frequency trading company to secretly purchase millions of dollars of TerraUSD to artificially inflate its price.
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This allegedly pushed retail and institutional investors to purchase Terraform products, significantly increasing the value of Luna, another TerraUSD-related token, to $50 billion by spring 2022. The indictment states: “A large Part of that growth followed Kwon’s boldness. deceptions about Terraform and its technology.
However, the situation got worse in May 2022 when the value of TerraUSD started to fall again. The trading company that previously backed him warned Kwon that maintaining his value “wasn’t so simple this time.”
The subsequent crash of TerraUSD and Luna sent shockwaves through the cryptocurrency market, leading to substantial losses for investors and contributing to a broader downturn that affected other digital assets, including Bitcoin (BTC) .
Although prosecutors did not disclose the identity of the trading company involved, SEC lawyers previously indicated that Jump Trading played a role in supporting TerraUSD during its peak in May 2021.
Featured image of DALL-E, chart by TradingView.com
