Do Kwon, the South Korean cryptocurrency entrepreneur and co-founder of Terraform Labs, pleaded not guilty to a series of criminal fraud charges in Manhattan federal court on Thursday.
This comes just days after he was extradited from Montenegro, where he was held for more than a year. His case revolves around the collapse of TerraUSD and Luna (LUNC), which lost a combined $40 billion in 2022.
Order to remain in custody after appearing in court
According to Reuters reportfederal prosecutors released a nine-count indictment charging Cowen with several crimes, including securities fraud, wire fraud, commodities fraud and conspiracy to commit money laundering.
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Wearing an olive green long-sleeved shirt and black sweatpants, Cowen appeared in court alongside his lawyer Andrew Chesley, who indicated they would not be seeking bail at this time.
Following Cowen's request, U.S. District Judge Robert Lehrberger reportedly ordered that he remain in custody. Du Quoin left court with a copy of the 79-page indictment and is due back for another hearing on January 8.
The result of Do Kwon's alleged market manipulation and fraud
In June, Kwon reached a civil settlement with the US Securities and Exchange Commission (SEC), agreeing to pay an $80 million fine and accept a ban from engaging in cryptocurrency trading. The settlement was part of a $4.55 billion settlement of misconduct by Terraform Labs management.
The indictment details how Kwon misled investors about the stability of TerraUSD, a stablecoin designed to maintain a value of $1. In May 2021, when the stablecoin's value began to fall, Kwon reported that a computer algorithm known as the “Terra Protocol” had successfully recovered its peg.
In fact, prosecutors allege that Do Kwon orchestrated a scheme involving a high-frequency trading firm to secretly buy millions of TerraUSD to artificially inflate its price.
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This has reportedly led both retail and institutional investors to buy Terraform products, and the value of Luna, another token linked to TerraUSD, will rise to $50 billion by spring 2022. Deception about Terraform and its technology.”
However, the situation worsened in May 2022 when the value of TerraUSD started to decline again. The trading firm that previously backed it warned Kwon that maintaining its value “wasn't that easy this time.”
The subsequent collapse of TerraUSD and Luna sent shockwaves through the cryptocurrency market, resulting in significant losses for investors and contributing to a broader downturn that affected other digital assets, including Bitcoin (BTC).
While prosecutors have not disclosed the identity of the trading firm involved, SEC lawyers have previously indicated that Jump Trading played a role in supporting TerraUSD at its peak in May 2021.
Featured image of DALL-E, chart from TradingView.com
