Do Kwon, the 33-year-old co-founder of Terraform Labs Pte., has pleaded not guilty to US fraud charges related to the catastrophic $40 billion collapse of the TerraUSD stablecoin, according to a Bloomberg report. The plea was entered before US Magistrate Judge Robert Lehrburger in Manhattan, where Kwon also agreed to be detained without bail. He faces a comprehensive set of charges, including wire, securities, and commodities fraud, totaling nine counts.
This legal battle marks the culmination of a nearly two-year international pursuit to prosecute Kwon, who was finally extradited from Montenegro to the US this week. His arrest in Montenegro back in March 2023 stemmed from an attempt to travel using a fake passport, leading to a conviction for document forgery and a subsequent four-month prison sentence in that country.
The collapse of TerraUSD in the spring of 2022 had significant repercussions across the cryptocurrency market, contributing to the downfall of FTX and other entities within the sector. Kwon, holding a 92% stake in Terraform, is now being prosecuted by the same Manhattan US attorney’s office that handled the case against FTX co-founder Sam Bankman-Fried, who was sentenced to 25 years for his crimes.
US prosecutors allege that Kwon misled investors regarding the technology and adoption of the Terra blockchain, essentially orchestrating a scheme that misled the market. His lawyer chose not to comment post-hearing, and a case conference is slated for January 8.
The drama surrounding Kwon’s extradition involved a tug-of-war between the US and South Korea, where he also faces charges. Despite his preference to be tried in South Korea, where penalties might be less harsh, Montenegro’s justice system initially leaned towards the US due to strategic security partnerships. However, the process was muddled by various court rulings favoring South Korea’s extradition request.
During his time in Montenegro, Kwon was already found liable in a civil fraud suit by the US Securities and Exchange Commission in New York. Following this verdict, Terraform Labs agreed to a massive $4.47 billion settlement to resolve the civil case, although the company later declared bankruptcy, highlighting the severe financial and legal toll of the TerraUSD debacle.
Kwon’s case underscores the challenges and complexities of prosecuting international figures in the fast-evolving world of cryptocurrency, where regulatory oversight, technological innovation, and investor protection intersect with significant legal and financial consequences.
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