A former cryptocurrency executive on Thursday pleaded not guilty to fraud charges in Manhattan federal court. The South Korean entrepreneur Do Kwon, co-founder of Terraform Labs, was charged with leading one of the most spectacular frauds of the modern era when his two digital currencies, TerraUSD and Luna, collapsed and created $40 billion in losses at the start of 2022.
Do Kwon was extradited from Montenegro earlier this week to face the charges in the US. Federal prosecutors in Manhattan have charged him with a series of crimes, including securities fraud, wire fraud, commodities fraud, and conspiracy. In a separate development, prosecutors filed a revised indictment Thursday adding a new count of money laundering conspiracy.
Right at the heart of the charges is Do Kwon’s involvement in deceiving investors about the stability of TerraUSD, a stablecoin supposed to maintain its value at $1. Prosecutors assert that Do Kwon misled investors when he assured them that an algorithm called the “Terra Protocol” had worked and restored the value of the coin in May 2021, while in reality, he had organized a high-frequency trading firm to inflate its price artificially.
These false statements, among other things, caused investors to buy Terraform products and made the value of Luna, which is another token pegged to TerraUSD, reach $50 billion by spring 2022. Upon the decrease in the price of TerraUSD in May 2022, the trading firm warned that it no longer could maintain the coin, which further led to the eventual crash of both TerraUSD and Luna.
The market suffered a lot of damage during this collapse. Bitcoins and other cryptocurrencies also were among the heavy victims. Even though Do Kwon denies any wrongs, earlier this year he settled with the SEC and agreed to pay $80 million as a civil fine and would not be able to make crypto transactions.
To Read More: Finance