Do Kwon pleads not guilty to U.S. fraud charges after TerraUSD and Luna lost $40 billion in 2022. The charges stem from misleading investors.
Do Kwon, the South Korean founder of Terraform Labs, pleaded not guilty to U.S. fraud charges on Thursday. He was extradited from Montenegro earlier this week. Reuters reported that Kwon was charged in Manhattan. Both charges stem from the collapse of two cryptocurrencies, TerraUSD and Luna, that lost roughly $40 billion in 2022.
Kwon is charged with conspiracy, wire fraud, commodities fraud, and securities fraud. The complaint also got another money laundering charge added through an updated indictment. TerraUSD and Luna were founded by Kwon and co-founded Terraform Labs. The crypto market was widely ruined in May when both currencies collapsed.
In March 2023, federal prosecutors said Manhattan accused Do Kwon of misleading investors in 2021 about TerraUSD. Indeed, they say he lied to investors when he told them a ‘Terra Protocol’ computer algorithm had brought the $1 peg of TerraUSD back to life after it had plummeted below that price. According to Kwon, he passed off a trading firm to buy millions of dollars worth of the token in order to keep its price afloat.
Kwon Faced Legal Issues After $40B Crypto Collapse
Misleading information caused many investors to buy Terraform products, causing in the peak of spring 2022 of increasing Luna’s value to $50 billion. Kwon’s bogus claims are responsible for much of the massive growth TerraUSD and Luna enjoyed, prosecutors say. But when the value of TerraUSD began falling again a few months later, in May 2022, Kwon hit a wall. The trading firm said it warned Kwon it wasn’t easy to stabilize the value this time.
TerraUSD and Luna collapsed in May 2022. However, Bitcoin itself and the prices of all other cryptocurrencies also fell victim to the crash. The description of the trading firm involved matches the reported accounts of Jump Trading. TerraUSD had been helped by Jump Trading in 2021. The firm has yet to respond to inquiries about its role, however.
Kwon was previously settled to the U.S. Securities and Exchange Commission (SEC) in June 2023. Without admitting guilt, the Canadian agreed to pay an $80 million fine and was banned from crypto transactions. The $4.55 billion deal involving Terraform Labs also settled this part. But the criminal charges against Kwon have persisted.
Montenegro has detained Kwon since March 2023. Terraform Labs filed for bankruptcy in January 2023. The crypto industry is facing risks and controversies, as shown with Kwon case, especially after the market crash in 2022.
