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Cryptocurrency News Articles

Do Kwon Pleads Not Guilty in Manhattan Federal Court, Case Enters Trial Process

Jan 05, 2025 at 08:04 am

On January 2, local time in the United States, Do Kwon, the former founder of Terra and co-founder of Terraform Labs, officially appeared in the public eye of the U.S. court.

Do Kwon Pleads Not Guilty in Manhattan Federal Court, Case Enters Trial Process

Terra co-founder Do Kwon has officially appeared in a US court following his extradition from Montenegro. At a hearing in the Manhattan Federal Court on Monday, Kwon pleaded not guilty to the charges against him, setting the stage for the upcoming trial.

As reported by Odaily, Montenegrin Prime Minister Milojko Spajic announced on Tuesday that the country has completed the extradition process of Terraform Labs co-founder Do Kwon to the United States.

"This extradition demonstrates our unwavering commitment to international justice and the rule of law," Spajic wrote in a post on the X platform.

Kwon is facing prosecution in both New York and Seoul for the 2022 collapse of the TerraUSD stablecoin, which was valued at $40 billion at the time. He was arrested in Montenegro last year for traveling on a fake passport.

In April, Terraform and its founder Do Kwon were found guilty of fraud following a civil trial over charges brought by the U.S. Securities and Exchange Commission (SEC). Terraform has agreed to pay $4.5 billion to settle with the SEC.

Background: Terra collapse, Do Kwon extradition and trial preview

Terra's Collapse

The Terra ecosystem experienced an unprecedented collapse in May 2022, with the value of its two core cryptocurrencies, TerraUSD (UST) and LUNA, nearly dropping to zero, resulting in a loss of approximately $40 billion.

At the time, UST was the leading representative of algorithmic stablecoins, maintaining a 1:1 peg to the US dollar through algorithms and market incentives. Meanwhile, LUNA was the governance token that supported UST's stability.

However, early in May, with Terra's protocol upgrade and capital flight, UST lost its peg to the US dollar, and its price fell rapidly, causing market panic. In response to this crisis, Terraform Labs attempted to support the price of UST through reserves, but failed.

Concurrently, the dual-currency mechanism of the Terra protocol led to the minting of a large number of new LUNA, further driving down the price of LUNA and creating a vicious cycle.

Ultimately, the price of LUNA plummeted from a high of about $119 to almost zero, and the entire ecosystem collapsed. The failure of Terra also triggered a chain reaction in the market, affecting other cryptocurrencies like Bitcoin and causing the funds of millions of investors to vanish completely.

Since then, algorithmic stablecoins have nearly disappeared from the market, which has also directly led to subsequent primary market crashes such as 3AC.

Extradition to the United States or South Korea?

Do Kwon became the subject of a tug-of-war in the first half of this year, as both the United States and South Korea sought to extradite him for trial in their respective countries.

In March, it was reported that Do Kwon would ultimately be extradited to South Korea, but the decision was postponed by the Supreme Court of Montenegro and finally confirmed in December that he would be extradited to the United States.

Earlier, there were rumors circulating in the market that when Do Kwon was arrested by Montenegrin police, a Trezor hardware cold wallet was found in his rectum, which allegedly contained more than 10,000 Bitcoins. Today, these Bitcoins are worth over $1 billion.

A look ahead to the trial process

In court, Do Kwon pleaded not guilty to the charges against him. So, what happens next?

A plea of not guilty is a formal statement made by the defendant in a criminal case within the US judicial system, indicating that they deny committing the crime in question.

This does not directly result in the defendant being found not guilty but instead requires the prosecution to present sufficient evidence to prove the charges. The case will then proceed to the trial stage, where the court will determine the defendant's guilt after the trial.

The next hearing in the case is scheduled for January 8.

In essence, we will witness a court drama similar to the one that unfolded earlier this year with SBF. Many insider details of Terra's collapse will be revealed, from the appearance of witnesses to the final verdict. Odaily will continue to follow up and report on the case for you.

He could be sentenced to 130 years, but he smiled

Do Kwon has been charged with multiple offenses. According to a press release from the U.S. Department of Justice's Office of Public Affairs, the main charges against Do Kwon are as follows:

False Statements Made by Do Kwon:

Stablecoin Misrepresentation: Kwon falsely advertised the effectiveness of the “Terra Protocol” system, which purportedly used a computer algorithm to maintain the value of Terraform’s so-called “stablecoin” TerraUSD (UST) at $1-1 UST. But Kwon knew that after the Terra Protocol failed to restore UST’s $1 peg in May 2021

News source:www.panewslab.com

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