Terra Founder Do Kwon Contests All Charges in Manhattan Court

Do Kwon, the prominent co-founder of Terraform Labs, has formally declared his innocence in response to U.S. fraud allegations connected to the $40 billion Terra LUNA debacle of 2022. His extradition from Montenegro to the United States occurred mere days ago.

Bloomberg highlights that Kwon's legal battles now include nine financial charges, such as money laundering conspiracy, commodities fraud, as well as wire and securities fraud. Despite these serious accusations, Kwon has notably pleaded not guilty. On January 2nd, the hearing was overseen by U.S. Magistrate Judge Robert Lehrburger. Though Kwon asserts his innocence via legal counsel, he has consented to remain in detention. The judicial process may either entertain a plea deal or move towards a full criminal trial.

Interestingly, the Manhattan U.S. Attorney's Office — responsible for pursuing Kwon's case — also handled the prosecution of Sam Bankman-Fried (SBF) for his role in the FTX collapse in late 2022. SBF is currently serving a 25-year sentence for his part in the crypto crisis. By March 2023, charges against Kwon escalated to nine financial violations. U.S. Attorney Damian Williams articulated in court papers that Kwon engaged in money laundering conspiracies with several groups, surpassing Bankman-Fried's seven charges.

The roots of Kwon's legal predicaments trace back to May 2022, following the dramatic collapse of Terraform Labs' flagship initiatives, TerraUST and Terra LUNA, which resulted in a damaging $40 billion market meltdown. This triggered wider repercussions throughout the crypto sector, contributing to the demise of FTX later in 2022. Since then, Kwon has evaded capture. He was detained by Montenegro officials last year while attempting to fly to Dubai using a false passport, earning him a four-month sentence for identity fraud.

Amidst these developments, both South Korea and the U.S. sought Kwon's extradition, sparking a diplomatic tug-of-war. Ultimately, in December 2024, Montenegro's government confirmed his extradition to the U.S. to confront fraud charges.