Do Kwon, co-founder of Terraform Labs, has been charged with multiple fraud offenses stemming from the dramatic collapse of the TerraUSD (UST) stablecoin and its sister cryptocurrency, Luna (LUNA), in May 2022. This event led to a massive $40 billion loss in market value and significantly impacted the broader cryptocurrency market, contributing to other high-profile collapses like that of the FTX exchange.
Charges and Plea:
- Kwon faces nine counts including securities fraud, wire fraud, commodities fraud, and conspiracy to commit money laundering among others.
- He entered a not guilty plea to these charges during a hearing in Manhattan federal court following his extradition from Montenegro.
Background and Legal Proceedings:
- The U.S. Securities and Exchange Commission (SEC) had previously found Kwon and Terraform Labs liable for civil fraud in April 2024, leading to a $4.47 billion settlement and a ban on cryptocurrency transactions for Kwon.
- The criminal charges allege that Kwon misled investors about the stability of TerraUSD, claiming it could maintain a $1 peg through a computer algorithm known as the “Terra Protocol.” However, it is alleged that he secretly arranged for a high-frequency trading firm to purchase millions of dollars worth of the token to artificially support its price.
- Kwon’s legal troubles also include charges in South Korea, though his extradition from Montenegro was to the U.S. following a complex legal battle over jurisdiction.
Trial Details:
- The trial is set for January 26, 2026, in the Southern District of New York, with an expected duration of four to eight weeks.
- Prosecutors are dealing with a vast amount of evidence, including six terabytes of data, which includes translations from Korean, indicating the complexity and international scope of the case.
Implications:
- Kwon’s trial marks another significant legal event in the cryptocurrency industry, following in the footsteps of other high-profile cases like that of Sam Bankman-Fried of FTX.
- The outcome could have broad implications for how cryptocurrency projects are regulated and could set precedents for legal accountability in the blockchain and crypto space.
This case continues to unfold, highlighting ongoing regulatory and legal challenges within the cryptocurrency sector.
Do Kwon to go to trial in 2026 on criminal fraud charges tied to the $40 billion collapse of TerraUSD stablecoin.