Do Kwon, the South Korean cryptocurrency entrepreneur and co-founder of Terraform Labs, pleaded not responsible on Thursday to a sequence of felony fraud prices in a Manhattan federal courtroom.
This comes simply days after his extradition from Montenegro, the place he had been detained for over a yr. His case facilities across the collapse of TerraUSD and Luna (LUNC), which collectively misplaced an estimated $40 billion in 2022.
Ordered To Stay In Custody Following Courtroom Look
In response to a Reuters report, federal prosecutors unsealed a nine-count indictment accusing Kwon of a number of offenses, together with securities fraud, wire fraud, commodities fraud, and conspiracy to commit cash laundering.
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Wearing an olive inexperienced long-sleeved shirt and black sweatpants, Kwon appeared in courtroom alongside his lawyer, Andrew Chesley, who indicated that they might not search bail at the moment.
Following Kwon’s plea, US Justice of the Peace Choose Robert Lehrburger reportedly ordered him to stay in custody. Do Kwon left the courtroom with a replica of the 79-page indictment, and he’s scheduled to return for an additional listening to on January 8.
The Fallout From Do Kwon Alleged Fraud And Market Manipulation
In June, Kwon reached a civil settlement with the US Securities and Alternate Fee (SEC), agreeing to pay an $80 million fantastic and settle for a ban from taking part in cryptocurrency transactions. This settlement was a part of a broader $4.55 billion decision associated to alleged misconduct within the administration of Terraform Labs.
The indictment particulars how Kwon allegedly misled traders concerning the stability of TerraUSD, a stablecoin designed to keep up a price of $1. In Could 2021, when the stablecoin’s worth started to falter, Kwon reportedly claimed that a pc algorithm often called “Terra Protocol” had efficiently restored its peg.
In actuality, prosecutors allege that Do Kwon orchestrated a scheme involving a high-frequency buying and selling agency to secretly buy tens of millions of {dollars} of TerraUSD to artificially inflate its value.
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This reportedly drove each retail and institutional traders to purchase Terraform merchandise, considerably boosting the worth of Luna, one other token linked to TerraUSD, to as excessive as $50 billion by the spring of 2022. The indictment states, “A lot of this development adopted Kwon’s brazen deceptions about Terraform and its know-how.”
Nonetheless, the scenario took a flip for the more serious in Could 2022 when TerraUSD’s worth started to say no once more. The buying and selling agency that had beforehand propped it up warned Kwon that sustaining its worth “wasn’t so easy this time.”
The following crash of each TerraUSD and Luna despatched shockwaves by means of the cryptocurrency market, resulting in substantial losses for traders and contributing to a broader downturn that affected different digital belongings, together with Bitcoin (BTC).
Whereas prosecutors haven’t disclosed the id of the buying and selling agency concerned, SEC legal professionals beforehand indicated that Leap Buying and selling had performed a task in supporting TerraUSD throughout its peak in Could 2021.
Featured picture from DALL-E, chart from TradingView.com
