Kwon Do-hyung, the former CEO of Terraform Labs and a key figure in the collapse of the cryptocurrencies Terra and Luna, has pleaded not guilty in his first trial at the Southern District of New York Federal Court. The prosecution has added money laundering charges to the eight charges previously filed against Kwon in 2023 and has expanded the indictment sixfold, seeking severe punishment.
According to legal sources on the 3rd, Kwon recently appeared at the Southern District Federal Court in Manhattan. This was his first trial after being extradited from Montenegro to the United States on December 31st. The Southern District Federal Court was the venue for the “FTX cryptocurrency exchange fraud” trial early last year, where the court sentenced FTX founder Sam Bankman-Fried to 25 years in prison and ordered the forfeiture of $11.02 billion (approximately 16 trillion won) in assets.
It has been reported that the prosecution added money laundering charges when submitting the indictment. Initially, the prosecution’s indictment in March 2023 was a 12-page document with seven charges, but it has since expanded to a 79-page document with eight charges, including securities fraud, market manipulation, and conspiracy to commit fraud.
The prosecution criticized Kwon’s actions in the indictment submitted that day. The prosecution stated, “In May 2021, Kwon told investors that the coin’s value could recover through computer algorithms even if it fell, yet a frequently trading company secretly purchased millions of dollars’ worth of tokens to artificially inflate the price.”
Kwon claimed that Terra was an algorithm-based stablecoin (a type of cryptocurrency designed to minimize price volatility by pegging its value to a fiat currency), but the prosecution implied this was not true. In the indictment, the prosecution asserted, “Most of Terra’s growth was due to Kwon’s blatant deceit,” and mentioned that when Terra’s value fell in May 2022, a coin trading company warned, “This time, it’s not that simple.”
Terraform Labs, founded by Kwon, developed the algorithm-based stablecoin Terra and its accompanying coin Luna in 2019. However, from May 2022, the values of Terra and Luna plummeted suddenly, causing investors worldwide to incur losses exceeding 50 trillion won. He had been living in hiding after leaving Korea in April 2022, was arrested in Montenegro for possessing a counterfeit passport in March 2023, and was extradited to the United States at the end of last month, 1 year and 9 months later.