Kwon Do-hyeong, the 33-year-old co-founder of Terraform Labs, appeared in a Manhattan federal court on Thursday, pleading not guilty to charges of fraud, conspiracy, and other crimes.
The U.S. Justice Department stated that Kwon could face a maximum sentence of 130 years if convicted on all counts.
According to reports from the Associated Press and Reuters, Kwon is accused of orchestrating schemes from 2018 to 2022 to defraud investors and inflate the value of Terraform’s cryptocurrencies through false claims.
These allegations include misleading statements about the stability of Terraform’s cryptocurrency stablecoin protocol and its use of blockchain technology.
The collapse of Terraform’s cryptocurrencies, TerraUSD and Luna, in May 2022 led to over US$40 billion in losses, affecting investors in the United States and globally. The indictment lists multiple charges against Kwon, including commodities fraud, securities fraud, wire fraud, and money laundering conspiracy.
Attorney General Merrick Garland emphasised the gravity of the case in a press release, stating, “Do Hyeong Kwon will now be held accountable in an American courtroom for, as alleged in court documents, his elaborate schemes involving Terraform’s cryptocurrencies, which resulted in over $40 billion in investor losses.”
Garland further noted Kwon’s efforts to evade justice, including laundering proceeds from the schemes and using a fraudulent passport to travel to a country without an extradition treaty with the United States. These actions ultimately led to his extradition after his arrest in Montenegro in March 2023.
Kwon’s legal troubles are not confined to the United States. He was also sought by South Korean authorities in connection with the collapse of TerraUSD and Luna coins, cryptocurrencies managed by Terraform Labs.
Kwon’s attempts to be repatriated to South Korea were denied by Montenegrin courts following his initial indictment in March 2023 in New York’s Southern District.
His case is assigned to U.S. District Court Judge John Cronan, and an initial conference is scheduled for Wednesday. Legal experts suggest that the trial will likely focus on the extent of investor deception and the financial damage caused by Terraform’s collapse.
This development marks a significant step in the ongoing scrutiny of the cryptocurrency industry and its major players. Prosecutors have highlighted Kwon’s case as emblematic of the risks associated with digital asset markets when transparency and accountability are absent.
With billions of dollars lost and countless investors affected, the trial is expected to attract widespread attention, serving as a pivotal moment for legal precedent in cases involving cryptocurrency fraud.
