#USStateBuysBTC Do Kwon Pleads Not Guilty to U.S. Fraud Charges After Extradition from Montenegro

Terraform Labs' Do Kwon pleads not guilty to U.S. fraud charges, including securities fraud and money laundering conspiracy, following extradition from Montenegro.

Federal prosecutors in Manhattan have charged Kwon, 33, with securities fraud, wire fraud, commodities fraud, conspiracy, and a newly added count of money laundering conspiracy.

These charges are rooted in allegations that he misled investors about the stability and security of TerraUSD, a stablecoin that was designed to maintain a value of $1.

Do Kwon and Fraud Charges: Allegations and Legal Proceedings

Prosecutors claim that Kwon falsely assured investors in May 2021 that an algorithm known as the “Terra Protocol” had successfully stabilized TerraUSD during a price slip.

However, the indictment alleges that Kwon secretly arranged for a high-frequency trading firm to inject millions into the ecosystem to sustain TerraUSD’s value artificially.

The collapse of TerraUSD in May 2022 triggered a domino effect, leading to the devaluation of Luna and widespread disruptions across the cryptocurrency market.

Bitcoin and other major tokens saw major declines as retail and institutional investors suffered heavy losses.

According to prosecutors, Kwon’s deception inflated Luna’s value, reportedly reaching $50 billion at its peak.

Thursday’s updated 79-page indictment revealed new details about the money laundering conspiracy charge, asserting that funds were transferred through various accounts to obscure the origins of illicit gains.

Internal communications cited by the Manhattan U.S. Attorney’s office suggest that when TerraUSD began destabilizing in 2022, an unidentified trading firm warned that restoring its value would be far more challenging than during the previous crash.

While the indictment does not explicitly name the trading firm, descriptions align with Jump Trading, a firm implicated in related civil cases filed by the U.S. Securities and Exchange Commission (SEC).