A police officer escorts Terraform Labs co-founder Do Kwon after he served a sentence for doc forgery in Podgorica, Montenegro, March 23, 2024.
Stevo Vasiljevic | Reuters
Do Kwon, the South Korean cryptocurrency entrepreneur behind two digital currencies that misplaced an estimated $40 billion in 2022, pleaded not responsible on Thursday to U.S. felony fraud costs, after being extradited from Montenegro this week.
Federal prosecutors in Manhattan charged Kwon, who co-founded Singapore-based Terraform Labs and developed the TerraUSD and Luna currencies, in March 2023 with two counts every of securities fraud, wire fraud, commodities fraud and conspiracy.
An up to date 79-page indictment filed on Thursday added a rely of cash laundering conspiracy.
Kwon, 33,entered his plea earlier than U.S. Magistrate Judge Robert Lehrburger in Manhattan federal court docket.
He had agreed final June to pay an $80 million civil advantageous and be banned from crypto transactions as a part of a $4.55 billion settlement that he and Terraform reached with the U.S. Securities and Exchange Commission.
In Thursday’s indictment, the Manhattan U.S. Attorney’s workplace alleged Kwon misled traders in 2021 about TerraUSD, a so-called stablecoin designed to keep up a worth of $1.
Kwon allegedly instructed traders a pc algorithm often known as “Terra Protocol” had restored the coin’s worth when it slipped under its peg in May 2021, when in actual fact he organized for a high-frequency buying and selling agency to secretly purchase hundreds of thousands of {dollars} of the token to artificially prop up its worth.
Prosecutors stated that false declare and others drove retail and institutional traders to purchase Terraform merchandise and increase the worth of Luna, a extra conventional token developed by Kwon that fluctuated in worth however was carefully linked to TerraUSD, to $50 billion by the spring of 2022.
“Much of this development adopted Kwon’s brazen deceptions about Terraform and its know-how,” the indictment stated.
When TerraUSD’s worth started sliding once more in May 2022, the buying and selling agency warned that propping it up “wasn’t so easy this time,” in accordance with the indictment.
TerraUSD and Luna crashed that month, dragging down the worth of different cryptocurrencies, together with bitcoin, and triggered wider havoc within the crypto market.
Prosecutors didn’t establish the buying and selling agency, nevertheless it matches the outline of Jump Trading, which SEC attorneys stated of their civil case had propped up TerraUSD in May 2021. Jump didn’t instantly reply to requests for remark.
In a trial on the SEC’s claims, a federal jury in Manhattan discovered Kwon and Terraform liable final April for defrauding cryptocurrency traders.
A lawyer for Terraform stated in closing arguments in that trial that Terraform and Kwon had been truthful about their merchandise and the way they labored, even after they failed.
Kwon didn’t attend that trial as a result of he had been detained in Montenegro since March 2023. Terraform declared chapter final January.
Kwon is one among a number of cryptocurrency moguls to face federal costs after a hunch in digital token costs in 2022 prompted the collapse of quite a lot of corporations.
