Terraform Labs' Do Kwon Pleads Not Guilty to US Fraud Charges

Do Kwon, the co-founder of the bankrupt Terraform Labs, pleaded not guilty to fraud charges brought against him by US prosecutors for his role in the $40 billion TerraUSD stablecoin collapse, according to Bloomberg.

Another High-Profile Crypto Trial

Kwon is facing nine charges, including wire, securities, and commodities fraud. Despite his not-guilty plea, he agreed to remain in custody without bail.

His trial may become another major crypto trial following the conviction of Sam Bankman-Fried, the former CEO of FTX, who received a 25-year prison sentence. Notably, Kwon is being prosecuted by the Manhattan US attorney’s office, the same team that handled Bankman-Fried’s case.

Before the trial began, Kwon’s extradition from Montenegro was eventful, as both the US and South Korea sought custody. A Montenegro court initially granted extradition to South Korea, but the decision was later overturned due to legal technicalities. After a year-long dispute, Kwon was eventually extradited to the US.

In 2023, Kwon and an associate were arrested in Montenegro while attempting to travel to Dubai using fake travel documents.

The Collapse of Do Kwon’s Crypto Empire

Kwon was known for founding Terraform Labs. However, the project’s two cryptocurrencies, TerraUSD and Luna, collapsed in 2022, erasing approximately $37 billion in value. The fall of the algorithmic stablecoin caused the closure and downfall of several other cryptocurrency companies.

In June, Terraform Labs and Kwon agreed to a settlement with the US Securities and Exchange Commission (SEC), committing to pay around $4.5 billion in recovery and civil penalties. Kwon personally agreed to pay at least $204.3 million.

Initially, the US regulator sought $5.3 billion in settlement. However, the defendants’ legal representatives countered with an offer of $1 million in civil penalties and no recovery or injunction.

Additionally, Kwon and Terraform Labs were permanently banned from buying or selling crypto asset securities, including tokens in the Terra ecosystem.

Earlier this year, Terraform Labs declared bankruptcy in Delaware, United States. In the court filing, the now-defunct company reported liabilities ranging between $100 million and $500 million, with estimated assets in the same range.