Do Kwon Pleads Not Guilty to Fraud Charges in U.S. Court

Do Kwon, co-founder of Terraform Labs, has denied criminal fraud charges in a Manhattan federal court following his extradition from Montenegro. The charges are linked to the 2022 collapse of the TerraUSD (UST) and Luna cryptocurrencies, an event that wiped out around $40 billion in market value.

Misleading Investors About TerraUSD’s Stability

According to federal prosecutors, Kwon misled investors about the stability of TerraUSD, claiming that its value was protected by a proprietary algorithm. However, authorities argue that Kwon secretly relied on a high-frequency trading firm to artificially maintain the stablecoin’s $1 peg. The indictment, which includes multiple serious charges such as securities fraud, wire fraud, conspiracy, and money laundering, paints a picture of deliberate mismanagement and manipulation.

These charges stem from the dramatic downfall of the Terra blockchain, which led to the bankruptcies of major firms, including the high-profile Three Arrows Capital. Kwon fled the scene as the crisis unfolded, triggering a global manhunt. Interpol eventually issued a Red Notice for his capture, and Kwon was arrested in March 2024 in Montenegro while attempting to board a flight with forged documents.

Following months of legal proceedings, Montenegro’s Justice Minister approved Kwon’s extradition to the United States, resolving the dispute between the U.S. and South Korea, both of which had sought to prosecute him. South Korean authorities continue their investigation, which could lead to a 40-year prison sentence if Kwon is convicted.

Despite facing significant legal hurdles in the U.S., Kwon’s case remains a focal point in the debate surrounding accountability within the cryptocurrency space. His next court appearance will provide more clarity on the direction of the case.