In a courtroom in Manhattan, 33-year-old Do Kwon, co-founder of Terraform Labs, pleads not guilty to all the charges brought against him for the terra crash in May 2022. Kwon claims he is innocent, and the $40 billion downfall of the TerraUSD stablecoin was not caused by him.
On Thursday, before US Magistrate Judge Robert Lehrburger, Kwon, through his legal representation, consented to detention without bail, facing a litany of charges including wire, securities, and commodities fraud.
This legal battle marks the end of a nearly two-year saga concerning whether Kwon would face justice in the US or South Korea first. After his arrest in Montenegro in March 2023 for using a counterfeit passport, he was extradited to the US just days ago.
Both New York and Seoul have filed charges against Kwon related to the dramatic failure of Terraform’s TerraUSD, an event that sent shockwaves through the cryptocurrency ecosystem in early 2022. The aftermath significantly contributed to the demise of the crypto exchange FTX.
Kwon, holding a substantial 92% stake in Terraform, now faces prosecution from the Manhattan US attorney’s office, the same entity that previously prosecuted FTX’s Sam Bankman-Fried, who received a 25-year sentence after conviction on seven counts.
Prosecutors allege that Kwon misled investors regarding the capabilities and adoption of the Terra blockchain. After the court session, his lawyer offered no comment, with the next conference set for January 8.
Before this, Kwon had been evading South Korean authorities for months until he and Terraform’s former CFO were apprehended at Podgorica airport in Montenegro, attempting to flee to Dubai. They were both sentenced to four months for using fraudulent documents.
The legal tug-of-war between the US and South Korea ensued right after his arrest in Montenegro, with Montenegro initially leaning towards US extradition due to strategic partnerships, despite several courts favoring South Korea’s extradition request. Kwon himself advocated for his return to South Korea, where financial crime penalties are generally lighter.
During his time in Montenegro, Kwon and Terraform were adjudged liable in a civil fraud case by the US Securities and Exchange Commission. Post-verdict, Terraform settled for a hefty $4.47 billion payment to resolve the SEC’s claims, although the company later declared bankruptcy.
