Terraform Labs Founder Do Kwon Pleads Not Guilty To US Fraud Charges

Terraform Labs co-founder Do Kwon has entered a plea of not guilty to fraud charges in the United States. The charges are linked to the $40 billion collapse of TerraUSD, a stablecoin developed by Kwon’s Singapore-based company. The case, which has drawn global attention, is being prosecuted by the Manhattan US Attorney’s Office.

Do Kwon Pleads Not Guilty To US Fraud Charges

Terraform Labs Co-Founder Do Kwon, 33, was extradited to the US earlier this week after being detained in Montenegro for traveling on a fake passport. He had been arrested at Podgorica Airport in March 2023 while attempting to board a private jet bound for Dubai.

Montenegro’s courts initially ruled in favor of South Korea’s extradition request, but the US ultimately secured his transfer due to its security partnership with Montenegro.

On Thursday, Kwon appeared before US Magistrate Judge Robert Lehrburger in Manhattan, where he entered a not guilty plea. Through his attorney, Terraform Labs Co-Founder Do Kwon agreed to remain in custody without bail while the legal proceedings unfold. A conference for the case is scheduled for January 8, 2025.

Fraud Allegations Surrounding TerraUSD and Luna

The charges against Kwon include nine counts, such as wire fraud, securities fraud, commodities fraud, and conspiracy. Prosecutors allege that Do Kwon misled investors about the stability of TerraUSD, a stablecoin designed to maintain a $1 value.

According to the indictment, Terraform Labs Co-Founder Do Kwon secretly worked with a high-frequency trading firm to artificially maintain TerraUSD’s value when it slipped below its peg in 2021. This claim, along with others, allegedly convinced investors to purchase Terraform’s products, boosting the valuation of Luna, another token closely tied to TerraUSD.

By the spring of 2022, Luna and TerraUSD were valued at $50 billion. However, their collapse in May 2022 triggered widespread losses across the cryptocurrency market, including declines in Bitcoin and other major digital assets.

SEC Civil Case and Terraform’s Bankruptcy

The legal troubles for Kwon and Terraform Labs extend beyond criminal charges. In 2022, the US Securities and Exchange Commission (SEC) filed a civil fraud lawsuit against Kwon and the company. A federal jury in Manhattan found Kwon and Terraform liable in April 2024, leading to a $4.47 billion judgment against the firm.

While Terraform Labs settled with the SEC in June 2024, agreeing to pay an $80 million civil fine, the company filed for bankruptcy in January 2025. Kwon had not attended the SEC trial as he was detained in Montenegro at the time.

Concurrently, Terraform Labs Co-Founder Do Kwon is one of several cryptocurrency executives facing legal consequences after the dramatic decline in digital token prices in 2022. The collapse of Terraform’s products is seen as a key event that destabilized the market, contributing to the bankruptcy of major firms like FTX.

Other high-profile cases include Sam Bankman-Fried, the FTX founder sentenced to 25 years for defrauding investors of $8 billion, and Alex Mashinsky, the former Celsius Network CEO who pleaded guilty to fraud in December 2024.