Terra-Luna Collapse Figure Do Kwon Appears in U.S. Court for the First Time, Pleads Not Guilty to Fraud and Market Manipulation

Do Kwon, a central figure in the 2022 Terra-Luna cryptocurrency collapse, appeared in a U.S. court for the first time in nearly two years after being indicted by federal prosecutors. During the proceedings, he maintained his innocence.

Kwon appeared on Thursday at the U.S. District Court for the Southern District of New York in Manhattan. He confirmed to Magistrate Judge Robert W. Lehrburger that he understood English but remained largely silent. Through his attorney, Andrew C. Chesley, Kwon pleaded not guilty to the charges brought by U.S. prosecutors. He had spent approximately 21 months in Montenegro before departing for the United States last month.

A Stanford University graduate, Kwon co-founded Terraform Labs, which issued the cryptocurrencies TerraUSD and Luna. These digital assets gained significant traction, reaching a combined market capitalization of $40 billion by early 2022. However, Luna’s value crashed in May 2022, causing widespread financial damage. This event resulted in substantial investor losses and the collapse of Terraform Labs, triggering a domino effect that impacted major cryptocurrency firms globally. Kwon fled to Singapore in April 2022.

In September 2022, South Korean authorities issued an arrest warrant for Kwon, charging him with violating capital markets law. The U.S. Securities and Exchange Commission (SEC) also filed fraud charges against Kwon and Terraform Labs. Last March, federal prosecutors in the Southern District of New York indicted him on eight counts, including fraud.

Authorities apprehended Kwon on March 23, 2023, as he attempted to board a private jet to Dubai from Montenegro using a fake Costa Rican passport. He was sentenced to four months in prison for using forged travel documents and was transferred to an immigration detention center after completing his sentence on March 23, 2024.

Both South Korea and the United States requested Kwon’s extradition from Montenegro. Kwon engaged in legal battles, even filing a constitutional complaint, in an attempt to be sent to South Korea, where he could potentially face lighter sentences. However, his efforts were unsuccessful, and last week, Montenegrin Justice Minister Bojan Bozovic signed the order to extradite Kwon to the United States.

Upon his extradition to the U.S., Kwon agreed to be held without bail pending trial and was subsequently detained at the Metropolitan Detention Center in Brooklyn, New York. Federal prosecutors in New York allege that Kwon misled investors and disseminated false information about TerraUSD, conspired to manipulate market prices, and engaged in money laundering. In addition to the criminal charges, Kwon lost a civil lawsuit filed by the SEC, and Terraform Labs was granted bankruptcy approval in September of last year.