Terraform Founder Do Kwon Pleads Not Guilty in $40B Collapse

Do Kwon, co-founder of Terraform Labs Pte., pleaded not guilty to U.S. fraud charges linked to the $40 billion collapse of the TerraUSD stablecoin. 

Kwon entered his plea before U.S. Magistrate Judge Robert Lehrburger in Manhattan and agreed to remain in custody without bail. The 33-year-old former crypto executive faces nine criminal charges, including wire, securities, and commodities fraud.

The charges stem from allegations that Kwon misled investors about the Terra blockchain’s technology and adoption levels. His court appearance in New York concluded a prolonged legal battle between the U.S. and South Korea over extradition rights. Authorities in Montenegro arrested Kwon in March 2023 for attempting to travel using a falsified passport, triggering extradition requests from both nations.

Legal Drama Spanning Multiple Jurisdictions

Kwon made a U.S. court appearance upon his arrest in Montenegro alongside Terraform’s former chief financial officer, who was also arrested at the same time. Both individuals were apprehended for attempting to board a private jet bound for Dubai using fake documents. After their arrest, Montenegro sentenced them to four months for document forgery.

Meanwhile, New York and Seoul prosecutors filed charges related to Terraform’s collapse in 2022. The implosion of TerraUSD, an algorithmic stablecoin, and its companion token, LUNA, had devastating effects on the crypto market.

LUNA’s value plummeted from over $100 to nearly zero, causing significant investor losses. The downturn contributed to broader market instability.

Kwon’s extradition was finalized on December 28, 2024, when Montenegro’s Minister of Justice approved the U.S. request. Although South Korea sought custody of Kwon, Montenegro opted to send him to the U.S., citing its strong security partnership with the nation. Notably, Kwon had argued for extradition to South Korea.

Broader Fallout and Related Legal Actions

In addition to the criminal charges, Kwon faced civil actions from the U.S. Securities and Exchange Commission (SEC). A jury found Kwon and Terraform liable for fraud in 2024, leading to a $4.47 billion settlement agreement. However, Terraform Labs subsequently filed for bankruptcy, complicating the settlement’s enforcement.

The Manhattan U.S. Attorney’s Office will handle Kwon’s prosecution, adding him to a growing list of major cryptocurrency figures facing legal action. This includes FTX co-founder Sam Bankman-Fried, who received a 25-year prison sentence after being convicted on fraud charges. The next hearing in Kwon’s case is scheduled for January 8.