Unsurprisingly, Do Kwon, co-founder of Terraform Labs, pleaded not guilty to nine US fraud charges related to Terra LUNA’s $40 billion collapse in 2022, after… Extradition From Montenegro.
According to A a report From Bloomberg, the charges include conspiracy to commit money laundering, commodity fraud, wire fraud and securities fraud.
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Do Kwon pleads not guilty
During a hearing held by US Magistrate Robert Lerberger on January 2, Kwon entered his plea through his lawyer while agreeing to remain in custody. It is unclear whether the case will proceed to a criminal trial or result in a plea agreement.
The US Attorney’s Office in Manhattan, which is prosecuting Do Kwon, had previously led the case against FTX co-founder Sam Bankman Fried, who is currently serving a 25-year prison sentence for his role in FTX’s 2022 collapse.
The prosecutor alleges that Kwon misled investors about the stability of the Terra blockchain and related products, including TerraUSD and LUNA. He secretly cooperated with a high-frequency trading firm to artificially inflate the price of UST in 2021 and manipulated LUNA’s market capitalization, which reached $50 billion by early 2022, the prosecutor added.
Since March 2023, Do Kwon has been facing allegations of financial misconduct, with US authorities accusing him of collaborating with multiple entities to commit money laundering crimes. In April 2024, a federal jury found Kwon and Terraform Labs liable for defrauding cryptocurrency investors.
Terraform Labs subsequently settled a civil fraud suit with the US Securities and Exchange Commission (SEC) in June 2024 for $4.47 billion. The company later filed for bankruptcy in Delaware, reporting liabilities between $100 million and $500 million.
A status conference for Kwon’s case is scheduled for January 8, 2025, where prosecutors and defense attorneys will share evidence and plan next steps for a potential trial. These actions could have far-reaching implications for cryptocurrency regulation, especially following the conviction of Sam Bankman-Fried, former CEO of FTX.