In a hearing today in Manhattan, Do Kwon, co-founder of Terraform Labs, refuted allegations related to the collapse of TerraUSD.

Do Kwon, the co-founder of Terraform Labs, entered a not guilty plea to criminal fraud charges in a Manhattan federal courtroom on Thursday following his extradition from Montenegro, as reported by Reuters.

The allegations arise from his involvement in the downfall of the TerraUSD and Luna cryptocurrencies, which collectively wiped out around $40 billion in market capitalization in 2022.

Do Kwon ‘deceived’ investors

Federal prosecutors assert that Kwon deceived investors regarding the stability of TerraUSD, declaring in 2021 that its value was upheld by a proprietary algorithm. Prosecutors claim that Kwon covertly employed a high-frequency trading firm to artificially maintain the stablecoin’s $1 peg, according to Reuters.

The indictment includes charges of securities fraud, commodities fraud, wire fraud, conspiracy, and money laundering.

The accusations follow a tumultuous year for Kwon, who fled the scene after the collapse of the Terra blockchain instigated a series of bankruptcies, including prominent firms such as Three Arrows Capital.

Interpol issued a Red Notice for his apprehension, and he was detained in Montenegro in March 2024 while attempting to board a flight with counterfeit passports.

The Justice Minister of Montenegro recently sanctioned Kwon’s extradition to the United States, concluding months of legal disputes between the U.S. and South Korea, both vying to prosecute him. While Kwon now confronts formidable legal challenges in the U.S., South Korean authorities are still conducting their investigation, which might lead to a 40-year prison term if he is found guilty.

Kwon’s upcoming court appearance is anticipated to further detail subsequent proceedings. His case continues to be a pivotal issue in discussions on accountability in the cryptocurrency sector.