Terraform Labs co-founder Do Kwon is back in the news. He has pleaded not guilty to several fraud charges in the United States. These charges are connected to the huge collapse of TerraUSD and Luna. In 2022, this collapse caused a loss of around $40 billion.
Terraform Labs co-founder Do Kwon has pleaded not guilty to fraud charges in the United States. The charges are related to the collapse of TerraUSD, a stablecoin created by his company, Terraform Labs. This collapse caused a $40 billion loss in 2022. It has become one of the biggest stories in the cryptocurrency world. The case is being handled by the Manhattan US Attorney’s Office.
Terraform Labs Co-Founder Pleads Not Guilty to Fraud Charges
The legal proceedings against Terraform Labs co-founder Do Kwon have intensified following his extradition to the United States earlier this week. Kwon was arrested in Montenegro in March 2023 for using a fake passport. He was trying to board a private jet to Dubai. He was first going to be sent to South Korea. However, the U.S. managed to have him transferred, using its security ties with Montenegro.
On Thursday, Kwon appeared before US Magistrate Judge Robert Lehrburger in Manhattan, where he entered his plea of not guilty to charges of wire fraud, securities fraud, commodities fraud, and conspiracy. Despite the gravity of the charges, Terraform Labs’ founder agreed to remain in custody without bail. A key conference for the case has been scheduled for January 8, 2025.
Terraform Labs Accused of Fraud in TerraUSD and Luna Collapse
Do Kwon and Terraform Labs are facing serious charges, with nine counts of fraud. Prosecutors say Kwon misled investors about the stability of TerraUSD, the stablecoin created by his company to keep its value at $1. According to the indictment, Kwon worked secretly with a high-frequency trading firm to manipulate TerraUSD’s value when it slipped below its intended peg in 2021. This alleged manipulation played a critical role in boosting the valuation of Luna, another token closely tied to TerraUSD.
By the spring of 2022, the value of Luna and TerraUSD had soared to $50 billion. However, their collapse in May 2022 caused a major shock in the cryptocurrency market. This led to huge losses, including sharp drops in Bitcoin and other big digital currencies.
Terraform Labs Hit with $4.47 Billion Judgment in SEC Lawsuit
Terraform Labs faces more legal trouble beyond the criminal case in the U.S. In 2022, the U.S. Securities and Exchange Commission (SEC) sued Do Kwon and Terraform Labs for fraud. In April 2024, a jury in Manhattan found them guilty. The jury ruled that they must pay a huge $4.47 billion judgment.
Despite settling the case with the SEC in June 2024, agreeing to pay a civil fine of $80 million, Terraform Labs filed for bankruptcy in January 2025. The legal action has hurt Terraform’s finances badly, and the company now faces a long and uncertain future.
Do Kwon, co-founder of Terraform Labs, has pled not guilty to a series of fraud charges in connection with the collapse of TerraUSD and Luna, which caused an estimated $40 billion loss in 2022. The charges, brought by the US government, include wire fraud, securities fraud, and conspiracy, stemming from allegations that Kwon misled investors about the stability of the stablecoin, TerraUSD. The collapse of TerraUSD and Luna in 2022 devastated the cryptocurrency market, and Kwon’s manipulation of TerraUSD’s value is believed to have played a key role in inflating the worth of Luna.
In addition to facing criminal charges, Terraform Labs and Kwon are involved in a separate lawsuit with the US Securities and Exchange Commission (SEC), which resulted in a judgment of $4.47 billion in damages. Terraform Labs filed for bankruptcy in January 2025, marking a further setback. Kwon is still in custody in the United States and faces ongoing legal proceedings. A key conference is set for January 2025. This case has become one of the biggest in the cryptocurrency world, showing the risks of acting without proper oversight in this fast-changing industry.
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