Do Kwon, a South Korean cryptocurrency entrepreneur and founder of Terraform Labs, pleaded not guilty Thursday to a series of felony fraud charges in Manhattan federal court.
This comes a few days after he was released from Montenegro, where he had been imprisoned for over a year. His case focuses on the collapse of TerraUSD and Luna (LUNC), which has lost an estimated $40 billion by 2022.
He was ordered to remain in custody after appearing in court
According to Reuters reportfederal prosecutors filed a nine-count indictment charging Kwon with multiple counts, including securities fraud, wire fraud, securities fraud, and conspiracy to commit money laundering.
Related Reading
Dressed in a green long-sleeved shirt and black trousers, Kwon appeared in court with his lawyer, Andrew Chesley, who said they would not seek bail at this time.
After Kwon’s plea, U.S. Magistrate Judge Robert Lehrburger reportedly ordered him into custody. Do Kwon walked out of court with a copy of the 79-page indictment, and is scheduled to return for another trial on January 8.
Do Kwon’s Fallout Accused of Fraud and Market Fraud
In June, Kwon reached a civil settlement with the US Securities and Exchange Commission (SEC), agreeing to pay an $80 million fine and accepting a ban from participating in cryptocurrency trading. The settlement was part of a broader $4.55 billion settlement related to alleged misconduct by Terraform Labs management.
The lawsuit details how Kwon misled investors about the stability of TerraUSD, a stablecoin designed to maintain a value of $1. In May 2021, when the value of the stablecoin began to decline, Kwon reportedly claimed that a computer algorithm known as the “Terra Protocol” had successfully restored its peg.
In fact, prosecutors allege that Do Kwon orchestrated a scheme involving a high-profile trading firm to secretly buy millions of dollars in TerraUSD to illegally inflate prices.
Related Reading
This reportedly prompted retail and institutional investors to buy Terraform products, greatly increasing the value of Luna, another token linked to TerraUSD, to $50 billion by spring 2022. lies about Terraform and its technology.”
However, the situation worsened in May 2022 when the value of TerraUSD started to decline again. The trading company that previously backed it warned Kwon that maintaining its value is “not so easy now.”
The subsequent crash of both TerraUSD and Luna sent shockwaves through the cryptocurrency market, leading to heavy losses for investors and contributing to a broader decline that affected other digital assets, including Bitcoin (BTC).
Although prosecutors did not disclose the identity of the trading company involved, SEC attorneys previously revealed that Jump Trading was involved in supporting TerraUSD during its peak in May 2021.
Featured image from DALL-E, chart from TradingView.com