Do Kwon Faces Fraud Charges Over $40B Collapse, Pleads Not Guilty

Do Kwon, co-founder of Terraform Labs, now faces serious fraud charges tied to the $40 billion collapse of TerraUSD. His appearance in a Manhattan court on Thursday marked a major development in this high-stakes case.

The Charges Against Kwon

Kwon pleaded not guilty to charges including securities, wire, and commodities fraud. Prosecutors claim he misled investors about TerraUSD's stability and Terraform Labs’ blockchain technology. 

TerraUSD, a stablecoin designed to hold its value against the US dollar, collapsed dramatically in May 2022. Within 48 hours, its value dropped by 99%, triggering a series of failures across the crypto market.

The collapse of TerraUSD led to the downfall of several major firms, including FTX. Kwon, once at the helm of Terraform Labs, was the public face of the disaster. At its height, Terraform Labs controlled 92% of the Terra ecosystem.

Kwon's Legal Journey: Extradition and Trial

Kwon’s legal struggles span several countries, culminating in his extradition to the US. Arrested in Montenegro in March 2023, he was attempting to flee with a fake passport. His extradition was fought by both the US and South Korea. 

In December 2024, Montenegro’s Supreme Court approved the transfer. Kwon agreed to go, and the authorities handed him over. While detained, Kwon and Terraform Labs faced a civil fraud suit brought by the SEC. 

Terraform Labs filed for bankruptcy afterward. Kwon’s trial is set to begin with a pretrial conference on January 8. As one of the most significant fraud cases in cryptocurrency, this trial could set a major precedent for the industry.