Do Kwon Enters Not Guilty Plea in $40 Billion Cryptocurrency Collapse Case

TLDR:

• Do Kwon pleaded not guilty in Manhattan federal court to multiple charges including fraud and a newly added money laundering charge, following his extradition from Montenegro
• The indictment alleges Kwon deceived investors from 2018-2022, leading to a $40 billion crash of Terraform Labs’ cryptocurrency
• Prosecutors claim Kwon facilitated transactions over $10,000 knowing they involved proceeds from unlawful activity
• The money laundering charge was added in May 2024 through a superseding indictment that was unsealed on January 2, 2025
• Kwon was arrested in Montenegro in 2023 for using falsified travel documents before being extradited to the US

In his first appearance before a Manhattan federal court, former cryptocurrency executive Do Hyeong Kwon entered a not guilty plea to multiple criminal charges, including a newly revealed money laundering count. The court appearance on January 2, 2025, marked Kwon’s first formal response to charges stemming from the $40 billion collapse of his company, Terraform Labs.

Kwon arrived in the United States following his extradition from Montenegro, where he had been held since March 2023 after being arrested for using falsified travel documents. The transfer to US custody came after months of competing extradition requests from both American and South Korean authorities.

The US Attorney’s Office unsealed a superseding indictment that expanded the scope of charges against the cryptocurrency entrepreneur. While Kwon already faced eight felony counts from a March 2023 indictment, prosecutors added a money laundering conspiracy charge, filed under seal in May 2024.

According to court documents, prosecutors allege that between 2018 and 2022, Kwon orchestrated a scheme to deceive investors through false claims about Terraform Labs’ capabilities and products. The indictment states that Kwon promoted the company’s cryptocurrency as a stable and reliable investment vehicle while knowing that core products were manipulated to create an illusion of functionality.

The new money laundering charge stems from allegations that Kwon knowingly facilitated transactions exceeding $10,000 involving proceeds from unlawful activities. This addition brings the total number of felony charges against him to nine.

During the court appearance, Kwon spoke only to confirm his understanding of English. His defense team, led by attorneys Andrew Chesley and David Patton, entered not guilty pleas to all charges, including conspiracy, commodities fraud, securities fraud, and wire fraud.

Terra Collapse

The prosecution’s case centers on the May 2022 collapse of TerraUSD, a cryptocurrency that Terraform Labs marketed as a “stablecoin.” Despite company claims of reliability, the digital currency’s value plummeted, causing widespread losses for investors globally.

Prosecutors maintain that behind Terraform’s public image of innovation and technological advancement, the company’s products were fundamentally flawed and manipulated. The indictment alleges that Kwon misled not only investors but also business partners and government regulators about the true nature of Terraform’s operations.

The superseding indictment details how Kwon allegedly portrayed Terraform as having developed novel financial technologies that would transform blockchain technology into a self-contained decentralized financial ecosystem. This system supposedly included its own currency, payment network, stock market, and banking services.

The case draws parallels to other high-profile cryptocurrency prosecutions, including that of former FTX CEO Sam Bankman-Fried, who was convicted of seven felony counts and received a 25-year prison sentence, though he has filed an appeal.

Following the court appearance, Kwon returned to federal detention after his lawyers consented to his continued holding. His defense team declined to comment on the proceedings as they left the courthouse.

“Years of Deceptive Practices”

The prosecution represents a pivotal moment in the ongoing scrutiny of cryptocurrency industry practices. The charges against Kwon span multiple years of alleged deceptive practices, from 2018 through the dramatic collapse of Terraform Labs in 2022.

Kwon’s case emerged amid increased regulatory attention to cryptocurrency operations. His arrest in Montenegro and subsequent extradition to the United States followed an international manhunt, highlighting the global reach of cryptocurrency-related law enforcement actions.

The unsealing of the new indictment and Kwon’s court appearance mark the beginning of what could be a lengthy legal process. As the case moves forward, prosecutors will need to prove their allegations about the complex cryptocurrency operations that they claim were fundamentally deceptive.

The case remains active in the US District Court for the Southern District of New York, with future proceedings expected to delve deeper into the technical and financial aspects of Terraform Labs’ operations and collapse.