Terraform Labs co-founder Do Hyeong Kwon was extradited to the United States on December 31 of last year and now faces multiple federal fraud charges that could result in a prison sentence of up to 130 years.

Kwon, a South Korean citizen, was arrested in Montenegro after trying to flee on a fake passport and was brought to the United States to stand trial in Manhattan.

The Department of Justice (DOJ) alleges that from 2018 to 2022, Kwon directed one of the most sophisticated conspiracies ever seen.

The scheme involved false statements, market manipulation, and misappropriation of funds, resulting in more than $40 billion in losses for investors following the collapse of Terraform’s UST stablecoin and sister cryptocurrency Luna.

Do Kwon's Plan: Will He Get 130 Years in Prison?

Terraform Labs, co-founded by Do Kwon in 2018, is marketed as a revolutionary blockchain platform that aims to create a decentralized financial ecosystem through stablecoins and decentralized applications (dApps).

At the heart of Terraform's ecosystem is TerraUSD (UST), an algorithmic stablecoin that maintains a fixed rate with the US dollar through a mechanism involving Luna, another native cryptocurrency.

Investors are attracted by the promise of a stable, decentralized financial system that can compete with the traditional banking system.

However, cracks in the facade began to appear in May 2021 when UST temporarily lost its anchor position.

According to the DOJ press release, Kwon colluded with high-frequency trading firms to artificially stabilize UST during this time, concealing systemic flaws in Terraform's protocol.

Despite these interventions, by May 2022, the UST peg was broken again, causing a catastrophic collapse for both UST and Luna.

The crash wiped out more than $40 billion in market value and caused losses to countless investors globally.

Kwon then allegedly attempted to cover up his involvement by laundering money through multiple blockchains, exchanges, and Swiss bank accounts.

The Justice Department’s indictment lists multiple instances of Kwon’s wrongdoing, including false statements about the governance mechanism of the Luna Foundation Guard (LFG), the utility of the Mirror Protocol, and the alleged use of the Terra blockchain by South Korean payment processing app Chai.

These misrepresentations portray stability and practical applications, convincing investors of the viability of the Terraform ecosystem.

However, the Justice Department asserted that Kwon knew these statements were false and that he manipulated market figures to maintain investor confidence.

Upon arriving in the United States, Do Kwon appeared in court in Manhattan before Judge Robert W. Lehrburger.

His case has been assigned to U.S. District Court Judge John P. Cronan. The first hearing is scheduled for January 8, 2025.

Charges against Kwon include two counts of commodities fraud, two counts of securities fraud, two counts of wire fraud and two counts of conspiracy to commit fraud and market manipulation.

If convicted on all charges, Kwon faces a maximum prison sentence of 130 years.

Notably, Attorney General Merrick B. Garland emphasized the importance of Kwon's extradition in a press release, stating:

“We secured this extradition despite allegations that Kwon attempted to cover his tracks by laundering the proceeds of his schemes and attempted to use a false passport to travel to a country that does not have an extradition treaty with the United States.”

Garland also mentioned that financial crimes on this scale will not go unpunished, no matter where in the world they are.

The DOJ statement also described Terraform’s collapse as one of the largest financial losses in the cryptocurrency sector.

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