South Korea’s Do Kwon pleads not guilty to US fraud charges in $55 billion crypto crash World News

NEW YORK – Do Kwon, the South Korean cryptocurrency entrepreneur behind two digital currencies that have lost an estimated US$40 billion (S$54.6 billion) in 2022, pleaded not guilty on Thursday (Jan 2) to criminal fraud. USA after being extradited from Montenegro this year. week.

Federal prosecutors in Manhattan on Thursday unsealed a nine-count indictment charging Kwon, who co-founded Singapore’s Terraform Labs and developed the TerraUSD and Luna currencies, with securities fraud, bank account fraud, commodity fraud and money laundering conspiracy.

Kwon, 33, wore an olive green long-sleeved shirt and black sweatpants as his attorney, Andrew Chesley, entered the plea at a hearing before U.S. Magistrate Robert Lehrburger in Manhattan federal court.

A judge ordered Kwon remanded in custody after Chesley said he would not seek bail at this time. Kwon carried a copy of the 79-page indictment with him as U.S. Marshals led him out of the courtroom. He is expected back in court on January 8.

Last June, Kwon agreed to pay an $80 million civil penalty and be barred from cryptocurrency transactions as part of a $4.55 billion settlement he and Terraform reached with the U.S. Securities and Exchange Commission.

In an indictment filed Thursday, the U.S. Attorney’s Office in Manhattan alleged that Kwon misled investors in 2021 about TerraUSD, a so-called stablecoin designed to maintain a value of $1.

Kwon allegedly told investors that a computer algorithm known as the “Terra Protocol” restored the coin’s value when it fell below a peg in May 2021, when in fact he arranged for a high-frequency trading firm to secretly buy millions of dollars in the token to artificially inflate its price.

Prosecutors said the false statements and others induced retail and institutional investors to buy Terraform products and inflate the value of Luna, a more traditional token developed by Kwon that has fluctuated in value but has been closely linked to TerraUSD, to $50 billion in spring 2022. .

“In large part, this increase occurred after Kwon’s brazen deception about Terraform and its technology,” the indictment said.

When the value of TerraUSD began to fall again in May 2022, the trading firm warned that supporting it “was not so easy this time,” according to the indictment.

That month, TerraUSD and Luna collapsed, depressing the value of other cryptocurrencies, including Bitcoin, and causing even more chaos in the cryptocurrency market.

The prosecutor’s office did not establish the trading firm. SEC lawyers said in their civil case that Jump Trading backed TerraUSD in May 2021.

Jump did not immediately respond to requests for comment.

Montenegro detention

In a lawsuit over SEC claims, a Manhattan federal jury convicted Kwon and Terraform last April of defrauding cryptocurrency investors.

Terraform’s attorney said in closing arguments that the company and Kwon were honest about their products and how they worked, even when they failed.

Kwon was not present at this court hearing as he has been held in Montenegro since March 2023 on charges of forging documents. He was handed over to US law enforcement on Tuesday at the airport in Podgorica, the capital of Montenegro.

Last January, Terraform filed for bankruptcy.

Kwon is one of several cryptocurrency tycoons facing federal charges after a 2022 plunge in the digital token’s price caused a string 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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