Kwon Do-hyeong, widely known as Do Kwon, co-founder of the cryptocurrency firm Terraform Labs and a central figure in the collapse of the TerraUSD (UST) stablecoin and its sister token, Luna, appeared in the United States District Court for the Southern District of New York on Jan. 2, where he pleaded not guilty to fraud charges.
According to reports from the Associated Press (AP) and other outlets, Kwon, currently in federal custody, was transported to the Manhattan courthouse in a corrections vehicle and entered through an underground entrance. This marked his first court appearance following his extradition from Montenegro to the U.S. on Dec. 31.
During the hearing, Kwon spoke only to confirm his understanding of English. He agreed to remain in custody without bail and was returned to a federal detention facility after the proceedings.
Kwon co-founded Terraform Labs in early 2019 and developed the algorithm-based stablecoin UST, a cryptocurrency pegged to fiat currencies to maintain price stability, along with its auxiliary token, Luna. However, in May 2022, the value of both UST and Luna plummeted, leading to over $34 billion (50 trillion won) in losses for investors worldwide.
In an indictment presented during the trial, prosecutors alleged that “Much of this growth followed Kwon’s brazen deceptions about Terraform and its technology.” They also filed new charges against him, including conspiracy to commit money laundering, adding to the eight charges initially filed in March 2023, which included securities fraud, market manipulation, and wire fraud.
Kwon previously lost a civil lawsuit brought by the U.S. Securities and Exchange Commission (SEC), which accused him and Terraform Labs of misleading investors about the stability of Terra, resulting in significant financial losses. Following the lawsuit, he reached a settlement with the SEC, agreeing to pay $4.47 billion ($6.5 trillion won) in restitution and fines. However, Terraform Labs filed for bankruptcy shortly thereafter.
