Co-founder of Terraform Labs, Do Kwon, appeared in court in the U.S. on January 2 and pleaded not guilty to fraud related to the $40 billion collapse of the TerraUSD (UST) stablecoin, Bloomberg News reported.

Kwon appeared before U.S. District Judge Robert Lehrburger in Manhattan and agreed to continue being held without bail. He faces nine charges, including wire fraud, securities, and commodities fraud, stemming from his alleged role in the collapse of Terraform Labs after the prices of the company's LUNA and UST tokens plummeted.

After being arrested in Montenegro in March 2023 while attempting to travel on a fake passport, Kwon remained in the country amid a standoff between U.S. and South Korean authorities over where he would face charges. Both countries have accused Kwon of fraud, with South Korea seeking extradition due to his nationality.

Meanwhile, Kwon is appealing to avoid extradition to the U.S., as the penalties for financial crimes in South Korea are generally less severe.

The Constitutional Court of Montenegro rejected the appeal on December 26, and the country's Minister of Justice subsequently signed the extradition order for the co-founder of Terraform Labs a few days later.

On December 31, the Montenegrin police transferred Kwon to U.S. authorities at Podgorica International Airport.

Awaiting trial

Prosecutors in New York accused Kwon of misleading investors about the capabilities and adoption rates of the Terra blockchain, claiming that his actions directly contributed to the catastrophic collapse of the platform.

The U.S. Attorney's Office in Manhattan, which successfully prosecuted FTX co-founder Sam Bankman-Fried last year, is now handling the case against Kwon.

Moreover, Kwon has faced legal consequences. A U.S. jury has found him and Terraform Labs liable in a civil fraud lawsuit brought by the Securities and Exchange Commission (SEC), resulting in a settlement of $4.47 billion. Terraform subsequently filed for bankruptcy.

Kwon's lawyer declined to comment after the hearing. A subsequent trial is scheduled to take place on January 8, paving the way for a potentially high-profile cryptocurrency trial in the Southern District of New York.

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