A police officer escorts Terraform Labs co-founder Do Kwon after he served a sentence for doc forgery in Podgorica, Montenegro, March 23, 2024.
Stevo Vasiljevic | Reuters
Do Kwon, the South Korean cryptocurrency entrepreneur behind two digital currencies that misplaced an estimated $40 billion in 2022, pleaded not responsible on Thursday to U.S. prison fraud costs, after being extradited from Montenegro this week.
Federal prosecutors in Manhattan charged Kwon, who co-founded Singapore-based Terraform Labs and developed the TerraUSD and Luna currencies, in March 2023 with two counts every of securities fraud, wire fraud, commodities fraud and conspiracy.
An up to date 79-page indictment filed on Thursday added a depend of cash laundering conspiracy.
Kwon, 33,entered his plea earlier than U.S. Justice of the Peace Decide Robert Lehrburger in Manhattan federal courtroom.
He had agreed final June to pay an $80 million civil superb and be banned from crypto transactions as a part of a $4.55 billion settlement that he and Terraform reached with the U.S. Securities and Trade Fee.
In Thursday’s indictment, the Manhattan U.S. Lawyer’s workplace alleged Kwon misled buyers in 2021 about TerraUSD, a so-called stablecoin designed to keep up a worth of $1.
Kwon allegedly instructed buyers a pc algorithm generally known as “Terra Protocol” had restored the coin’s worth when it slipped under its peg in Could 2021, when the truth is he organized for a high-frequency buying and selling agency to secretly purchase thousands and thousands of {dollars} of the token to artificially prop up its worth.
Prosecutors mentioned that false declare and others drove retail and institutional buyers to purchase Terraform merchandise and enhance the worth of Luna, a extra conventional token developed by Kwon that fluctuated in worth however was carefully linked to TerraUSD, to $50 billion by the spring of 2022.
“A lot of this development adopted Kwon’s brazen deceptions about Terraform and its know-how,” the indictment mentioned.
When TerraUSD’s worth started sliding once more in Could 2022, the buying and selling agency warned that propping it up “wasn’t so easy this time,” in line with the indictment.
TerraUSD and Luna crashed that month, dragging down the worth of different cryptocurrencies, together with bitcoin, and triggered wider havoc within the crypto market.
Prosecutors didn’t establish the buying and selling agency, but it surely matches the outline of Soar Buying and selling, which SEC attorneys mentioned of their civil case had propped up TerraUSD in Could 2021. Soar didn’t instantly reply to requests for remark.
In a trial on the SEC’s claims, a federal jury in Manhattan discovered Kwon and Terraform liable final April for defrauding cryptocurrency buyers.
A lawyer for Terraform mentioned in closing arguments in that trial that Terraform and Kwon had been truthful about their merchandise and the way they labored, even after they failed.
Kwon didn’t attend that trial as a result of he had been detained in Montenegro since March 2023. Terraform declared chapter final January.
Kwon is one in all a number of cryptocurrency moguls to face federal costs after a droop in digital token costs in 2022 prompted the collapse of quite a few firms.
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