Terraform Labs co-founder Do Kwon, 33, appeared before a US magistrate on 2 January 2025, pleading not guilty to charges linked to the $40 billion collapse of TerraUSD, a stablecoin developed by his Singapore-based company.
During the hearing before Judge Robert Lehrburger of the Southern District of New York, Kwon agreed to remain in custody without bail.
The charges include securities fraud, wire fraud, money laundering, and commodities fraud, stemming from his role in the Terra ecosystem's downfall.
The hearing marks a pivotal moment in Kwon's legal journey, which has captured global attention since his extradition from Montenegro, where courts debated sending him to the US or South Korea.
Prosecutors from the Manhattan US Attorney's Office have not indicated whether a plea deal is on the table or if they intend to proceed with a criminal trial.
A case conference is scheduled for 8 January 2025, allowing both sides to exchange evidence and discuss pre-trial motions.
As the legal battle unfolds, Kwon remains at the center of one of the most high-profile cryptocurrency fraud cases to date.
Montenegro's legal authorities had determined Kwon was eligible for extradition to either the US or South Korea to face trial.
However, on 27 December, Justice Minister Bojan Božović formally approved his extradition to the US.
The transfer took place earlier this week following Kwon's detention in Montenegro for traveling with a fake passport.
He was arrested at Podgorica Airport in March 2023 while attempting to board a private jet to Dubai.
Although Montenegro's courts initially favoured South Korea's extradition request, the US secured his transfer, leveraging its security partnership with Montenegro.
In a translated statement, Montenegro's Ministry of Justice cited multiple factors in its decision to extradite Kwon to the US:
“The gravity of the criminal acts, the place of execution, the order of submission of the request, the citizenship of the requested person, the possibility of further extradition to another country, as well as other circumstances.”
On 31 December, Prime Minister Milojko Spajić confirmed Kwon was in US custody after being handed over to American authorities.
This development follows Terraform Labs' settlement with the US Securities and Exchange Commission in June 2024.
The company agreed to pay $4.47 billion, including $204 million in penalties tied to Kwon's actions as its executive, further solidifying the gravity of the allegations against him.
Kwon faces serious charges from the US Justice Department, including financial fraud and the use of falsified passports in an attempt to evade arrest.
These offenses carry significant prison time.
US prosecutors allege that Kwon orchestrated a "financial world" built on deception, employing manipulative tactics to mislead investors, users, business partners, and regulators, according to a filing released Thursday.
The prosecutors said:
"Behind the scenes, core Terraform products did not work as Kwon advertised, and were manipulated to create the illusion of a functioning and decentralised financial system in order to lure investors."
Meanwhile, Kwon's legal troubles extend to his native South Korea, where authorities have also sought to prosecute him, with a potential sentence of 40 years if convicted.
Kwon, now faces nine criminal charges following his extradition from Montenegro.
The latest addition—a conspiracy to commit money laundering charge—was unveiled in a superseding indictment unsealed on 2 January by the US District Court for the Southern District of New York.
US Attorney Damian Williams alleges Kwon knowingly facilitated transactions exceeding $10,000, aware they represented proceeds from unlawful activities.
These charges accompany eight counts already filed in March 2023, including securities fraud, wire fraud, commodities fraud, and conspiracy to commit money laundering, all linked to Terraform Labs' collapse following the crash of its tokens, LUNA and UST.
Prosecutors initially filed the superseding indictment under seal in May 2024, with its disclosure aligning with Kwon’s recent court appearance.
Kwon entered the courtroom wearing a gray-green sweater, his demeanour notably calm, even punctuated by a smile.
This composure stands in stark contrast to the gravity of his situation.
A local reporter in the courtroom stated:
“Do Kwon is chatting with one of his lawyers, smiling- apparently in good spirits. In Montenegro on December 31 at 10 AM local, FBI took [him into] custody. Kwon plead not guilty through legal counsel, who added: 'We consent to detention without prejudice.'”
Once riding high on the success of LUNA, Kwon amassed vast wealth rapidly and controversially mocked those less fortunate on X (formerly known as Twitter).
His relaxed courtroom presence invites speculation: is it a display of unshakable confidence, or does it reflect an unrepentant attitude amidst the fallout of his actions?
The highly anticipated South Korean film Crypto Man inspired by real events surrounding a $50 billion Won cryptocurrency crash is set to hit theatres in Jan 2025.
XingChiDespite his imprisonment, it is reported that Do Kwon, the disgraced founder of Terra, managed to make multiple cryptocurrency payments while in custody in Montenegro.
XingChiThe Terra blockchain suffered a security breach due to a missed patch, resulting in a significant loss of tokens. The platform is implementing emergency measures to prevent future attacks.
Cheng YuanBillion-dollar bombshell: Do Kwon and Terraform Labs embroiled in $4.5 billion SEC penalty! Explosive new evidence suggests a shocking conspiracy behind the catastrophic collapse of Terra, LUNA, and UST. Could Do Kwon and Daniel Shin orchestrate the fall of Terra from the beginning?
ZoeyThe federal regulator established that the stablecoin issuer and its founder provided misleading information to investors.
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