new york: Do Kwon, the South Korean cryptocurrency entrepreneur behind two digital currencies that are expected to lose an estimated $40 billion in 2022, pleaded not guilty to US criminal fraud charges on Thursday after being extradited from Montenegro this week.
Federal prosecutors in Manhattan on Thursday unsealed a nine-count indictment charging Kwan, who co-founded Singapore-based Terraform Labs and developed the TerraUSD and Luna currencies, with securities fraud, wire fraud, commodity fraud and money laundering conspiracy.
Kwon, 33, wore an olive green long-sleeved shirt and black sweatpants as his lawyer Andrew Chesley entered the plea deal before U.S. Magistrate Judge Robert Lehrberger in Manhattan federal court.
The judge ordered Kwon detained after Chesley said he would not ask for bail at this time. Kwon took a copy of the 79-page indictment with him as U.S. Marshals led him out of the courtroom. He is expected back in court on January 8.
Kwon agreed last June to pay an $80 million civil penalty and a ban on crypto transactions as part of a $4.55 billion settlement that he and Terraform reached with the U.S. Securities and Exchange Commission.
In Thursday’s indictment, the Manhattan US Attorney’s Office alleged that Kwon misled investors in 2021 about TerraUSD, a so-called stablecoin designed to maintain a value of $1.
Kwon allegedly told investors that a computer algorithm called the “Terra Protocol” had restored the coin’s value when it slipped below the peg in May 2021, when in fact he had secretly worked for a high-frequency trading firm. Arrangements were made to buy tokens worth millions of dollars. Its price has been artificially increased.
Prosecutors said the false claims and others induced retail and institutional investors to buy Terraform products and drive up the value of LUNA, a more traditional token developed by Kwan, whose value fluctuated but was higher than TerraUSD. , reaching $50 billion by the spring of 2022.
“The majority of this increase occurred following Kwon’s brazen deception regarding Terraform and its technology,” the indictment says.
According to the indictment, when TerraUSD’s value began to fall again in May 2022, the trading firm warned that increasing it “was not so easy this time.”
TerraUSD and Luna crashed that month, causing a decline in the value of other cryptocurrencies including Bitcoin and widespread havoc in the crypto market. Prosecutors did not identify the trading firm. SEC lawyers said in their civil case that Jump Trading promoted TerraUSD in May 2021.
Jump did not immediately respond to requests for comment.
montenegro custody
In a trial over the SEC’s claims, a federal jury in Manhattan found Quon and Terraform liable for defrauding cryptocurrency investors last April. Terraform’s attorney said in closing arguments that the company and Kwon were truthful about their products and how they worked, even when they failed. Kwon did not attend that trial because he had been detained in Montenegro since March 2023 on counterfeiting charges. He was handed over to US law enforcement officials on Tuesday at an airport in Podgorica, the capital of Montenegro.
Terraform declared bankruptcy last January.
Kwon is one of several cryptocurrency moguls to face federal charges in 2022 after multiple companies collapsed due to the collapse of digital token prices.
Sam Bankman-Fried, who founded the exchange FTX, is appealing his conviction and 25-year sentence for stealing $8 billion from clients last March.
Alex Mashinsky, the founder and former CEO of cryptocurrency lender Celsius Network, pleaded guilty to two counts of fraud last month.
