Do Kwon, the South Korean cryptocurrency entrepreneur behind two digital currencies that lost an estimated $40 billion in 2022, pleaded not guilty on Thursday to US criminal fraud charges after being extradited from Montenegro this week.
Federal prosecutors in Manhattan charged Kwon, who co-founded Singapore-based Terraform Labs and developed the coins TerraUSD and Luna, in March 2023 with two counts each of securities fraud, wire fraud, commodity fraud and conspiracy.
An updated 79-page indictment filed Thursday added one count of money laundering conspiracy.
Kwon, 33, entered his plea before US Magistrate Judge Robert Lehrburger in Manhattan federal court.
He had agreed last June to pay an $80 million civil penalty and be banned from crypto transactions as part of a $4.55 billion settlement he and Terraform reached with the Securities and Exchange Commission.
In Thursday’s indictment, the Manhattan U.S. Attorney’s office alleged that Kwon defrauded investors in 2021 about TerraUSD, a so-called stablecoin designed to hold a value of $1.
Kwon allegedly told investors a computer algorithm known as the “Terra Protocol” had restored the currency’s value when it slid below its peg in May 2021, when in fact he arranged for a high-frequency trading firm to secretly buy millions token dollars. artificially support its price.
Prosecutors said the false claim and others induced retail and institutional investors to buy Terraform products and drive up the value of Luna, a more traditional token developed by Kwon that fluctuated in value but was closely tied to TerraUSD, to 50 billion dollars by spring 2022.
“Much of this increase followed Kwon’s brazen misrepresentations of Terraform and its technology,” the indictment said.
When the value of TerraUSD began to fall again in May 2022, the trading firm warned that its support “wasn’t so simple this time,” according to the lawsuit.
TerraUSD and Luna crashed that month, dragging down the value of other cryptocurrencies, including bitcoin, and wreaking havoc on the broader crypto market.
Prosecutors did not identify the trading firm, but it fits the description of Jump Trading, which SEC lawyers said in their civil case had backed TerraUSD in May 2021.
Jump did not immediately respond to requests for comment.
In a trial over the SEC’s claims, a federal jury in Manhattan found Kwon and Terraform liable last April for defrauding cryptocurrency investors.
A lawyer for Terraform said in closing arguments in that trial that Terraform and Kwon had been honest about their products and how they worked, even when they failed.
Kwon did not attend that trial because he had been detained in Montenegro since March 2023.
Terraform filed for bankruptcy last January.
Kwon is one of several cryptocurrency tycoons facing federal charges after the 2022 crash in digital token prices caused a number of companies to collapse.
Sam Bankman-Fried, who founded the FTX exchange, is appealing his conviction and 25-year sentence last March for stealing $8 billion from clients.
Alex Mashinsky, the founder and former CEO of cryptocurrency lender Celsius Network, pleaded guilty last month to two counts of fraud.
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