Terraform Labs co-founder Do Kwon appeared in the U.S. court on January 2, pleading not guilty to fraud charges related to the collapse of the TerraUSD (UST) stablecoin. The case involves over $40 billion in losses and has become one of the most high-profile legal cases in the cryptocurrency world.
First court appearance: Denies nine counts of fraud
Do Kwon appeared in the Manhattan federal court in New York, denying all charges before U.S. District Judge Robert Lehrburger. He agreed to be held without bail, facing nine charges including wire fraud, securities fraud, and commodities fraud. These charges stem from the collapse of Terraform Labs, triggered by the plummet in the prices of its cryptocurrencies LUNA and UST, which caused market turmoil.
International legal battle: U.S. and South Korea vie for jurisdiction
Do Kwon was arrested in Montenegro in March 2023 while attempting to leave the country using a fake passport. After his arrest, Montenegro became a battleground for the U.S. and South Korea in their fight for extradition rights. Both countries accused Do Kwon of fraud, with South Korea requesting extradition on the basis of his citizenship, while Do Kwon sought to avoid being sent to the U.S. because the penalties for financial crimes in South Korea are relatively light.
However, Montenegro's constitutional court rejected Do Kwon's appeal against extradition to South Korea on December 26, 2023, and days later, Montenegro's Minister of Justice signed the extradition order. On December 31, he was handed over to U.S. authorities by the Montenegrin police.
Prosecution claims: Misleading investors led to platform collapse
The New York prosecutors accused Do Kwon of intentionally misleading investors by exaggerating the technological capabilities and market adoption of the Terra blockchain, actions which are considered to be the direct cause of the catastrophic collapse of the platform. The Manhattan District Attorney's Office that indicted Do Kwon previously succeeded in prosecuting FTX co-founder Sam Bankman-Fried in 2024, making this trial particularly noteworthy.
SEC seeks $4.47 billion in damages
In addition to criminal charges, Do Kwon has been found liable for fraud in a civil case. The civil case brought by the U.S. Securities and Exchange Commission (SEC) resulted in Do Kwon and Terraform Labs being ordered to pay $4.47 billion in damages. Subsequently, Terraform Labs announced bankruptcy.
High-profile trial set to begin on January 8
Do Kwon's lawyer declined to comment on the case after the hearing. Currently, the next court session is scheduled for January 8, which will kick off what could become a high-profile cryptocurrency trial in the Southern District of New York.
This article Do Kwon denies fraud charges: Cryptocurrency collapse case of up to $40 billion enters U.S. proceedings first appeared in Chain News ABMedia.
