Do Kwon pleads not guilty to US fraud charges at Manhattan hearing

Key Takeaways

Do Kwon pleaded not guilty to US fraud charges related to the collapse of TerraUSD and Luna.
Kwon is facing charges of misleading investors about TerraUSD's stability and operations.

Do Kwon entered a not guilty plea to multiple fraud charges in Manhattan federal court after he was extradited from Montenegro to face criminal charges related to the collapse of $40 billion in digital assets TerraUSD and Luna in 2022.

(Do Kwon goes through the replacement lawsuit – then goes to his second lawyer)
Judge: How do you plead?
Not guilty (via Chesley's counsel who says, We agree to hold him without prejudice

– Inner City Press (@innercitypress) January 2, 2025

Kwon, who co-founded Terraform Labs, faces charges including securities fraud, wire fraud, commodities fraud, and conspiracy to defraud and engage in market manipulation.

Prosecutors allege that he misled investors about the stability and performance of TerraUSD, a stablecoin designed to hold a $1 peg, and its companion token Luna.

His defense team argued that the benchmarks fell as a result of market dynamics rather than fraudulent activity, stressing that Kwon had been transparent about investment risks.

The SEC and federal prosecutors in New York allege that Kwon misled investors by claiming that TerraUSD could “self-heal” or maintain its peg automatically through algorithmic methods, when it required significant outside intervention, including secret agreements with high-frequency trading firms to support it. price

Prosecutors raised issues where Kwon's public statements allegedly contradicted the operating realities of Terraform Labs, while emphasizing the huge losses suffered by investors.

If convicted of all counts, Kwon could face more than 100 years in prison, although actual sentences typically fall below the maximum penalties. His next court date has not been set.

In April 2024, a jury in New York found Terraform Labs and Do Kwon guilty of fraud in a case initiated by the SEC, related to misrepresenting the stability of TerraUSD.

Last month, Terraform Labs and Do Kwon reached a preliminary settlement with the SEC on civil fraud charges resulting from the collapse of TerraUSD, which includes financial penalties and operating restrictions for Kwon.

In May 2024, the lawyers for Terraform Labs argued against the SEC's allegations, claiming that the majority of their token sales were outside the US and that the evidence does not support for the alleged financial losses.