Do Kwon denies fraud charges over $40 Billion Terra collapse

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Mikhail Vnuchkov

02.01.2025

Do Kwon denies fraud charges over $40 Billion Terra collapse — Over 100 years of prison time if convicted on all charges

Following his extradition to the U.S., Terraform Labs co-founder Do Kwon pleaded not guilty to multiple fraud charges during a hearing at a Manhattan federal court. The charges stem from the $40 billion collapse of digital assets TerraUSD and Luna in 2022.

The accusations against Kwon include various types of fraud, such as securities fraud, wire fraud, commodities fraud, conspiracy to commit fraud, and market manipulation.

Prosecutors highlighted instances where Kwon’s public statements allegedly contradicted the operational realities of Terraform Labs. They claim he misled investors about the stability and functionality of the TerraUSD stablecoin and its associated token Luna, emphasizing the significant losses incurred by investors.

Over 100 years of prison time if convicted on all charges

Meanwhile, Kwon's defense team argues that the collapse of the tokens was due to market dynamics rather than fraudulent actions, stressing that Kwon was transparent about investment risks.

If convicted on all counts, Kwon could face over 100 years in prison, though actual sentences are often less than the maximum penalties.

In May 2024, Terraform Labs’ legal team opposed allegations from the Securities and Exchange Commission (SEC), asserting that most token sales occurred outside the U.S. and that evidence did not support the alleged financial losses.

However, last month, Terraform Labs and Do Kwon reached a preliminary settlement with the SEC over civil fraud charges arising from TerraUSD's collapse. The settlement includes financial penalties and operational restrictions for Kwon.

At the time of writing, the date for the next court hearing has not yet been set.

The Constitutional Court of Montenegro has unanimously dismissed an appeal by Terraform Labs co-founder Do Kwon, effectively supporting his extradition to the United States or South Korea.

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Do Kwon denies fraud charges over $40 Billion Terra collapse

Over 100 years of prison time if convicted on all charges

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