Do Kwon Pleaded Not Guilty to All Charges at First US Court Hearing
Do Kwon, the founder of Terra Luna and the TerraUSD stablecoin, has officially entered a US courtroom after a two-year saga. This marks his first court appearance since being extradited from Montenegro, where he had been detained since March 2023 for attempting to travel with falsified documents.
JUST IN: Do Kwon pleads not guilty to 9 US fraud charges over $40B Terra collapse. 🇺🇸
— Crypto Threads (@CryptoThread_) January 3, 2025
Federal prosecutors in Manhattan unsealed a nine-count indictment accusing Kwon of securities fraud, wire fraud, commodities fraud, and conspiracy to commit money laundering.
Kwon, 33, wore an olive-green shirt and black sweatpants as did his attorney, Andrew Chesley. They appeared in a New York courtroom on Thursday before Judge Robert Lehrburger. The court ordered Kwon detained, with no bail request made at this time. Kwon was given a copy of the 79-page indictment before being led out by US marshals. Kwon’s next court appearance is slated for January 8.
The indictment alleges that Kwon misled investors in 2021 by claiming that TerraUSD, a stablecoin pegged to the U.S. dollar, had its value restored through a computer algorithm known as the “Terra Protocol.” Prosecutors argue that Kwon secretly enlisted a high-frequency trading firm to purchase millions of dollars of TerraUSD to artificially stabilize its price.
These false claims reportedly spurred retail and institutional investment in Terraform Labs’ products, boosting the value of Luna, a token closely tied to TerraUSD, to $50 billion by early 2022. However, when TerraUSD lost its peg in May 2022, the trading firm allegedly warned that further intervention would be much more difficult. The resulting crash of TerraUSD and Luna caused widespread turmoil in the cryptocurrency market, affecting other tokens like Bitcoin.
Kwon had previously agreed in June 2024 to pay an $80 million civil fine and accept a ban from crypto transactions as part of a $4.55 billion settlement with the U.S. Securities and Exchange Commission (SEC). Despite this, the SEC had already found Kwon and Terraform Labs liable for defrauding investors in a separate civil trial in April 2024.
The indictment also mentions a trading firm—identified in the SEC case as Jump Trading—that allegedly propped up TerraUSD in 2021. Jump Trading has not commented on the allegations.
Kwon’s legal troubles are among several high-profile cases involving cryptocurrency executives following the market’s sharp downturn in 2022. Other notable figures include FTX founder Sam Bankman-Fried, who is appealing a 25-year sentence for embezzling $8 billion, and Alex Mashinsky, former CEO of Celsius Network, who recently pleaded guilty to fraud charges.
Terraform Labs filed for bankruptcy in January 2024, marking the downfall of a once-prominent player in the cryptocurrency space. Kwon’s case adds another chapter to the scrutiny and regulatory action intensifying in the wake of the digital asset market’s volatility.
