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Do Hyeong Kwon to Face Justice for $40 Billion Terraform Labs Fraud in Manhattan Court
Do Hyeong Kwon, 33, a citizen of the Republic of Korea, was extradited from Montenegro to the United States and appeared in court today in Manhattan to face federal fraud charges.
As alleged in a superseding indictment unsealed against Kwon, 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. The alleged fraud resulted in over $40 billion in investor losses.
Kwon arrived in the United States on December 31, 2024, and made his initial appearance before U.S. Magistrate Judge Robert W. Lehrburger for the Southern District of New York. His case is assigned to U.S. District Court Judge John P. Cronan, and he will appear before Judge Cronan for an initial conference on January 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.
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. Do Kwon allegedly defrauded investors by falsely advertising the company’s blockchain products as decentralized, reliable, and effective, and by engaging in market manipulation.
The superseding indictment alleges that from at least 2018 up to and including 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.
As Kwon knew, however, core Terraform products did not work as Kwon had claimed. Rather, Kwon manipulated Terraform products to create the illusion of a functioning, stable, and decentralized financial system. Kwon’s conduct inflated the value of Terraform’s cryptocurrencies, which Kwon and entities he controlled possessed in large amounts and sold to investors in exchange for billions of dollars’ worth of other assets.
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 collapsed, the TerraUSD stablecoin crashed in value, causing massive losses to investors.
This case is being investigated by the Federal Bureau of Investigation and is being prosecuted by the United States Attorney’s Office for the Southern District of New York. As alleged in the superseding indictment, Do Kwon will now face justice in a federal courtroom in Manhattan for his alleged crimes.
Defendant Information: Do Hyeong Kwon, 33, a citizen of the Republic of Korea, was extradited from Montenegro to the United States and faces federal fraud charges. The charges against Do Kwon include multiple schemes to deceive investors in order to fraudulently inflate the value of Terraform’s cryptocurrencies, resulting in over $40 billion in investor losses.
Court Information: Do Kwon appeared in court today in Manhattan, New York, and his case is assigned to U.S. District Court Judge John P. Cronan. Do Kwon will appear before Judge Cronan for an initial conference on January 8 at 10:30 a.m ET.
Sentence/Outcome: Do Kwon is currently being held in custody and faces federal fraud charges. He will be held accountable for his alleged crimes in a federal courtroom in Manhattan.
Dollar Amounts: The alleged fraud resulted in over $40 billion in investor losses.
Date: December 31, 2024
Key Facts
- State: Federal
- Category: White Collar Crime
- Source: DOJ Press Release â†â€â€
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