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

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

[Do Kwon is flipping through the superseding indictment – then tutns to his second lawyer]
Judge: How do you plead?
Not guilty [through counsel Chesley who adds, We consent to detention 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 he misled investors about the stability and functionality of TerraUSD, a stablecoin designed to maintain a $1 peg, and its companion token Luna.

His defense team argued that the tokens’ collapse resulted from market dynamics rather than fraudulent activity, emphasizing that Kwon had been transparent about investment risks.

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

Prosecutors highlighted instances where Kwon’s public statements allegedly contradicted Terraform Labs’ operational realities, while emphasizing the substantial losses suffered by investors.

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

In April 2024, a New York jury 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 over civil fraud charges resulting from the TerraUSD collapse, which includes financial penalties and operational restrictions for Kwon.

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

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