Do Kwon, The South Korean founder of Terraform Labs pleaded not guilty to a nine-count Criminal indictment at a United States Court.
Do Kwon the founder of Terra USD and another crypto asset that lost an estimated $40 billion is facing charges bordering on securities fraud, wire fraud, commodities fraud, and money laundering conspiracy.
The court proceedings were held in Manhattan yesterday following the extradition of Do Kwon from Montenegro last week.
The U.S. Magistrate Judge Robert Lehrburger in Manhattan federal court ordered that Do Kwon be detained after his lawyer Andrew Chesley said he would not seek 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.
$80 Million Civil Fine
Do Kwon agreed last year in June to pay an $80 million civil fine and be banned from crypto transactions as part of a $4.55 billion settlement that he and Terraform reached with the U.S. Securities and Exchange Commission.
Do Kwon’s travails mirror that of Changpeng Zhao of Binance who paid a $50 million personal fine with his company Binance paying a $4 billion settlement.
Do Kwon is the second high-profile Asian in the crypto space to run it troubles with the law and face possible prison time.
The Great Deception
The US federal court in Manhattan revealed details of Do Kwon’s alleged deception misleading his investors and costing them money.
The Manhattan U.S. Attorney’s office alleged Kwon misled investors in 2021 about TerraUSD, a stablecoin designed to maintain a value of $1.
Kwon allegedly told investors a computer algorithm known as “Terra Protocol” restored the coin’s value when it slipped below its $1 peg in May 2021.
In reality, Do Kwon arranged for a high-frequency trading firm to secretly buy millions of dollars of the token to prop up its price artificially.
TerraUSD unpegged from $1 again in May 2022 but could not be propped up by the trading from.
Both crypto assets crashed that month losing $40 billion and dragging down the value of other cryptocurrencies, including bitcoin.
Prosecutors were not able to unveil the trading firm that collaborated with Do Kwon in the deception.
Reuters reported that SEC lawyers believe it was Jump Trading that propped up Terra back in 2021.
Jump Trading has not confirmed or denied this.
