Do Kwon Denies Allegations Related to TerraUSD Collapse
Do Kwon, the co-founder of Terraform Labs, rejected the charges brought against him regarding the $40 billion collapse of TerraUSD during a court hearing in the United States on January 2, 2025. Kwon faces nine separate charges, including fraud, securities fraud, and money laundering. The charges are based on the collapse of the algorithmic stablecoin TerraUSD (UST) and the LUNA cryptocurrency, which are tied to the Terra ecosystem in May 2022. This collapse led to a significant downturn in the cryptocurrency market and contributed to the fall of FTX as well.
The hearing for Kwon took place in the U.S. District Court for the Southern District of New York after he was arrested in Montenegro in March 2023 while attempting to board a private plane with forged documents. After his arrest in Montenegro, Kwon sought to be extradited to South Korea, fighting against extradition to the U.S. However, Montenegrin authorities decided to extradite Kwon to the U.S., considering the seriousness of the charges. Kwon was handed over to U.S. authorities on December 31, 2024, and subsequently sent to the U.S. for trial.
According to U.S. prosecutors, Do Kwon misled investors about the stability and functionality of the Terra blockchain and its products. The allegations are based on claims that Kwon orchestrated a deliberate scheme to convince investors that Terra was a viable decentralized financial system. The collapse of the stablecoin TerraUSD led to the complete unraveling of the Terra ecosystem and caused investors to lose billions of dollars. This event is recorded as one of the greatest failures in the cryptocurrency market.
Kwon and Terraform Labs also faced a fraud lawsuit filed by the U.S. Securities and Exchange Commission (SEC). In a case that concluded in June 2024, the company was required to pay $4.47 billion in damages. During this process, Terraform Labs filed for bankruptcy. Kwon's trial will be conducted by the U.S. Attorney's Office for the Southern District of New York, with the next status conference regarding the case scheduled for January 8, 2025.
Do Kwon's legal troubles have continued since the collapse of Terra. Wanted in South Korea, Kwon lived as a fugitive for a long time before his arrest in Montenegro. The extradition battle between U.S. and South Korean authorities highlighted the international dimensions of the charges. With his extradition to the U.S., a significant step has been taken toward determining Kwon's responsibility.
This case is part of the pursuit of justice for the Terra collapse, which is one of the largest failures in the cryptocurrency sector. Kwon's arraignment is seen as an important step in enhancing trust in the cryptocurrency market and combating financial crimes.