Terraform boss Do Kwon pleads not guilty in US court

The former head of the cryptocurrency company Terraform Labs, Do Kwon, pleaded not guilty in a US court on Thursday following his extradition from Montenegro to the US. This was reported by Bloomberg and Reuters. The South Korean is accused of committing securities fraud and money laundering. Kwon deceived investors about the true value of the two cryptocurrencies TerraUSD and Luna from Terraform. After the collapse of the cryptocurrency Terra in May 2022, he defrauded investors of more than 40 billion US dollars, approximately 38.8 billion euros.

Manipulation of his own cryptocurrency

Kwon acted in a targeted manner to attract new investors to the TerraUSD stablecoin. Stablecoins are currencies whose value is intended to remain constant at one dollar. After Terra slipped below this mark in May 2021, Kwon assured investors that the Terra Protocol, an alleged computer algorithm, would ensure that the value was restored and kept stable. In reality, however, Kwon is said to have covertly invested millions of dollars via a trading company in order to artificially inflate the value of the currency. Private and institutional investors were also encouraged to invest in Terraform's cryptocurrencies through targeted advertising. The fluctuating value of Luna was also increased to 50 billion dollars by spring 2022.

In May 2022, the value of Terra fell again and Kwon's trading firm issued a warning that it would no longer be so easy to support the currency. TerraUSD and Luna crashed as a result, taking other cryptocurrencies with them. Bitcoin also took a hit, damaging the cryptocurrency market as a whole.

Civil proceedings were then brought against Kwon by the US Securities and Exchange Commission (SEC), in which he and Terraform were found liable by a federal jury in Manhattan in April for cryptocurrency fraud against investors. Kwon was in Montenegro at the time. He had been imprisoned there since March 2023 on forgery charges. He had been arrested in Montenegro with a forged passport when he tried to fly out to Dubai.

In June 2024, Kwon accepted an 80 million dollar civil penalty and at the same time agreed to stop carrying out crypto transactions. Both were part of a 4.55 billion dollar settlement that Kwon and Terraform had reached with the SEC. On Tuesday, Kwon was then handed over by Montenegro to US prosecutors after he and his lawyers tried in vain to prevent his extradition.

Kwon has now confessed in Manhattan federal court through his lawyer. The former Terraform boss was then taken away and remanded in custody. His lawyer had waived bail. Kwon is due to appear in court again on January 8. Terraform filed for bankruptcy in January 2024. Kwon is also being prosecuted in his home country of South Korea.

(olb)