Do Kwon pleads not guilty to US charges over Terra collapse

TERRAFORM Labs co-founder Do Kwon has pleaded not guilty to fraud charges in the United States related to the $40 billion collapse of the TerraUSD stablecoin.

Kwon, 33, pleaded guilty Thursday before Federal Judge Robert Lehrburger in Manhattan. Through his lawyer, Kwon agreed to remain detained without bail. He faces nine charges, including wire, securities and commodities fraud.

The former cryptocurrency mogul’s appearance in New York court capped a nearly two-year drama over whether Kwon would be prosecuted first in the U.S. or in his native South Korea. He was extradited to the United States earlier this week by authorities in Montenegro, where Kwon was arrested in March 2023 for traveling on a false passport.

Prosecutors in both New York and Seoul have charged Kwon in connection with the implosion of Singapore-based Terraform’s TerraUSD, which shook the cryptocurrency world in the spring of 2022. The ensuing recession played a role in the collapse of the FTX cryptocurrency exchange.

Kwon, who owned 92 percent of Terraform, will be prosecuted by the Manhattan U.S. attorney’s office, which also prosecuted FTX co-founder Sam Bankman-Fried and other top crypto figures. Bankman-Fried was found guilty of seven criminal charges and sentenced to 25 years in prison.

According to US prosecutors, Kwon misled investors about aspects of the Terra blockchain, including its technology and the extent to which it had been adopted by users.

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His attorney had no comment after the hearing. A conference on the case is scheduled for Jan. 8.

Kwon had already been a fugitive from South Korean charges for months when he and Terraform’s former chief financial officer were caught trying to board a private jet bound for Dubai at the airport in Podgorica, Montenegro’s capital. Both men were found guilty and sentenced to four months in prison for traveling with falsified documents.

He was charged in New York immediately after his arrest in Montenegro, triggering the tug-of-war with South Korea.

Although Montenegro’s Justice Minister attempted to send him to the United States, an important security partner for the small Balkan nation, several courts ruled in favor of South Korea’s request. Kwon himself argued that he should be sent to South Korea, where penalties for financial crimes are typically less severe.

While Kwon was confined in Montenegro, a jury in New York last year found him and Terraform liable in a civil fraud lawsuit brought by the U.S. Securities and Exchange Commission.

After the verdict, Terraform agreed to pay $4.47 billion to resolve the SEC case, although the company has since filed for bankruptcy. BLOOMBERG