🌋 Do Kwon Pleads Not Guilty in $40 Billion Terra Collapse Case
posted 3 Jan 2025
Terraform Labs co-founder Do Kwon, the figure behind the Terra blockchain and its collapsed cryptocurrency ecosystem, pleaded not guilty to criminal fraud charges during his first U.S. court appearance on January 2.
The hearing, held in the Southern District of New York, marks a pivotal moment in the ongoing legal battle surrounding one of the cryptocurrency industry's most infamous collapses.
According to the legal charges, from at least 2018 up to 2022, 33-year-old Kwon and his associates were accused of deliberately misleading investors by falsely claiming TerraUSD was algorithmically backed and stable. The token lost its dollar peg in 2022 and couldn’t recover.
Prosecutors also assert that Kwon moved significant funds offshore to evade accountability as the project unraveled.
Charges against Do Kwon. Source: courtlistener.com
The collapse of TerraUSD and its companion token LUNA in May 2022 wiped out an estimated $40 billion in market value, triggering ripple effects across the broader cryptocurrency market.
Kwon was arrested in Montenegro in March 2023 while attempting to travel using falsified documents. After months of legal proceedings in Montenegro, which resulted in a conviction for document forgery, he was extradited to the United States.
The Terraform Labs co-founder now faces multiple charges, including wire fraud, securities fraud, and conspiracy. U.S. prosecutors accuse him of orchestrating a multi-billion-dollar scheme to mislead investors about the stability and legitimacy of TerraUSD, a so-called stablecoin that was central to Terraform's operations.
During the hearing, Kwon's legal team argued that he acted in good faith and that the charges lack substantive evidence of intentional wrongdoing. Kwon's plea sets the stage for a protracted legal battle as the court examines the evidence, including internal communications and financial records.
If convicted on all charges, he faces a maximum penalty of 130 years in prison. His next court appearance is set for January 8.
