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 US felony fraud fees, 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 rely of cash laundering conspiracy.
Kwon, 33, entered his plea earlier than US Justice of the Peace Decide Robert Lehrburger in Manhattan federal courtroom.
He had agreed final June to pay an $80 million civil high quality and be banned from crypto transactions as a part of a $4.55 billion settlement that he and Terraform reached with the Securities and Change Fee.
In Thursday’s indictment, the Manhattan US Legal professional’s workplace alleged Kwon misled traders in 2021 about TerraUSD, a so-called stablecoin designed to keep up a worth of $1.
Kwon allegedly instructed traders a pc algorithm referred to as “Terra Protocol” had restored the coin’s worth when it slipped under its peg in Could 2021, when in reality he organized for a high-frequency buying and selling agency to secretly purchase tens of millions of {dollars} of the token to artificially prop up its worth.
Prosecutors stated that false declare and others drove retail and institutional traders to purchase Terraform merchandise and increase the worth of Luna, a extra conventional token developed by Kwon that fluctuated in worth however was intently linked to TerraUSD, to $50 billion by the spring of 2022.
“Much of this growth followed Kwon’s brazen deceptions about Terraform and its technology,” the indictment stated.
When TerraUSD’s worth started sliding once more in Could 2022, the buying and selling agency warned that propping it up “wasn’t so simple this time,” in response to the indictment.
TerraUSD and Luna crashed that month, dragging down the worth of different cryptocurrencies, together with bitcoin, and precipitated wider havoc within the crypto market.
Prosecutors didn’t determine the buying and selling agency, nevertheless it matches the outline of Leap Buying and selling, which SEC legal professionals stated of their civil case had propped up TerraUSD in Could 2021.
Leap 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 traders.
A lawyer for Terraform stated in closing arguments in that trial that Terraform and Kwon had been truthful about their merchandise and the way they labored, even once 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 fees after a stoop in digital token costs in 2022 prompted the collapse of quite a few firms.
Sam Bankman-Fried, who based the alternate FTX, is interesting his conviction and 25-year sentence final March for stealing $8 billion from clients.
Alex Mashinsky, the founder and former CEO of cryptocurrency lender Celsius Community, pleaded responsible final month to 2 counts of fraud.
