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Defendant Faces Charges for $40B in Investor Losses
Do Hyeong Kwon, 33, a citizen of the Republic of Korea, was extradited from Montenegro and appeared in court today in Manhattan to face federal fraud charges.
A superseding indictment unsealed against Kwon alleged that the co-founder and former chief executive officer of Terraform Labs PTE Ltd. (Terraform) engaged in multiple schemes to deceive investors in order to fraudulently inflate the value of Terraform’s cryptocurrencies.
Kwon arrived in the United States on Dec. 31, 2024, and made his initial appearance before U.S. Magistrate Judge Robert W. Lehrburger for the Southern District of New York. Kwon’s case is assigned to U.S. District Court Judge John P. Cronan, and will appear before Judge Cronan for an initial conference on Jan. 8 at 10:30 a.m ET.
“Do Hyeong Kwon will now be held accountable in an American courtroom for, as alleged in court documents, his elaborate schemes involving Terraform’s cryptocurrencies, which resulted in over $40 billion in investor losses,” said Attorney General Merrick B. Garland. “We secured this extradition despite Kwon’s alleged attempt to cover his tracks by laundering proceeds of his schemes and trying to use a fraudulent passport to travel to a country that did not have an extradition treaty with the United States. This extradition from Montenegro is an example of the Justice Department’s international partnerships, which enable the pursuit of criminals wherever they attempt to hide.”
A federal grand jury has indicted Do Kwon for misleading his investors in order to fraudulently inflate the value of Terraform’s cryptocurrencies, and laundering the proceeds of his crimes,” said Attorney for the United States Daniel M. Gitner for the Southern District of New York. “As we allege, this fraud and the crash of Terraform’s cryptocurrencies in May 2022 erased over $40 billion in investor assets, causing devastating losses to countless investors in the United States and around the world. Kwon will now face justice in a federal courtroom in Manhattan.”
“Do Kwon, co-founder and former CEO of Terraform, allegedly defrauded investors by falsely advertising the company’s blockchain products as decentralized, reliable, and effective, and by engaging in market manipulation, ultimately resulting in more than $40 billion in investor losses,” said Assistant Director in Charge James E. Dennehy of the FBI New York Field Office. “For at least four years, Kwon allegedly played puppet master to maintain this crafted illusion and ensnare investors. The FBI will tirelessly work to apprehend any individual who engages in fraudulent financial practices, even those who flee internationally to escape prosecution.”
As alleged in the superseding indictment, from at least in or about 2018, up to and including in or about 2022, Kwon orchestrated schemes to defraud purchasers of Terraform cryptocurrencies. Among other things, Kwon made false and misleading claims regarding the stability and efficacy of Terraform’s cryptocurrency stablecoin protocol, its use of blockchain technology, and its development of functioning and reliable financial technologies.
Kwon’s misrepresentations included the following:
The Stablecoin Misrepresentations: Kwon made misrepresentations about the effectiveness of the system that lay at the heart of Terraform’s cryptocurrency empire, the “Terra Protocol,” which purportedly used a computer algorithm to maintain the value of Terraform’s so-called “stablecoin” pegged to the U.S. dollar, TerraUSD (UST), at a value of $1 for one UST. But as Kwon knew, after the Terra Protocol failed, TerraUSD’s value plummeted to nearly zero, wiping out billions of dollars in investor assets.
Key Facts
- State: Federal
- Category: Fraud & Financial Crimes
- Source: DOJ Press Release â†â€â€
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