Do Kwon Pleads Not Guilty to US Charges Over Terra LUNA, UST Crash

Alleged crypto crook Do Kwon pleaded pleaded not guilty in a New York court Thursday to U.S. criminal charges over the 2022 collapse of the Terra crypto ecosystem, following his extradition earlier this week from Montenegro.

Feds hit the 33-year-old disgraced tech entrepreneur with nine criminal counts, including securities fraud, wire fraud, commodities fraud, and conspiracy to commit money laundering. He agreed Thursday to be held without bail before U.S. Magistrate Judge Robert Lehrburger, Inner City Press reported.

Kwon founded Terra, a once-sizable crypto ecosystem with apps built around the LUNA token and the TerraUSD (UST) algorithmic stablecoin. The project was popular with investors, and rapidly grew to become the second-biggest blockchain in the sphere after Ethereum by early 2022.

Its native cryptocurrency, LUNA, was in its prime as one of the top digital assets by market cap. Kwon made a lot of money, very quickly, and even mocked "poor" people on X (formerly known as Twitter).

But Terra collapsed in May 2022, taking $40 billion of investors' money with it. The crash led to a brutal bear market, as many crypto projects with exposure to the project later declared bankruptcy.

The project's main product, the UST stablecoin, couldn't keep its stable peg to the dollar, resulting in the entire ecosystem collapsing and losing nearly all of its value in a matter of days.

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How Terra's UST and LUNA Imploded

Decrypting DeFi is Decrypt's DeFi email newsletter. Art: Grant Kempster Amid the craziest week in crypto ever, the collapse of Terra's UST stablecoin and governance token LUNA emerged as the biggest story. Amid the crash, LUNA, formerly a top 10 coin by market cap, fell 100% to fraction of a fraction of a cent, and UST, designed to stay pegged at $1, bottomed out at 13 cents. So what the hell happened? Grab your coffee, you're going to need it. There were several forces at work. The first is the...

Authorities in both the U.S. and South Korea now allege that the entrepreneur was a scammer who conned investors into buying his cryptocurrency.

"Behind the scenes, core Terraform products did not work as Kwon advertised, and were manipulated to create the illusion of a functioning and decentralized financial system in order to lure investors," Thursday's indictment reads.

Kwon was arrested in Montenegro last year for allegedly attempting to travel on a fake passport. His lawyers kept him in the country until Tuesday, when he was finally extradited to the United States.

Edited by Andrew Hayward