Do Kwon Pleads Not Guilty to US Fraud Charges Over $40 Billion Cryptocurrency Collapse

Kwon had agreed last June to pay an $80 million civil fine and would be prohibited from conducting crypto transactions as part of a $4.55 billion settlement he and Terraform reached with the U.S. Securities and Exchange Commission..

In Thursday’s indictment, the Manhattan U.S. Attorney’s office alleged that Kwon misled investors in 2021 about TerraUSD, a so-called stablecoin designed to maintain a value of $1.00.

Kwon allegedly told investors that a computer algorithm known as “Terra Protocol” had restored the currency’s value when it fell below its parity in May 2021, when in reality he arranged for a high-frequency trading company to secretly purchase millions of dollars of the token to artificially prop up its price.

Prosecutors said that false claim and others led retail and institutional investors to buy Terraform products and drive up the value of Luna, a more traditional token developed by Kwon whose value fluctuated but was closely tied to TerraUSD, to $50 billion. dollars by spring 2022. .

“Much of this growth was due to Kwon’s blatant deceptions about Terraform and its technology,” the indictment says.

When TerraUSD’s value began to fall again in May 2022, the trading company warned that shoring it up “was not so simple this time,” according to the indictment.

TerraUSD and Luna collapsed that month, dragging down the value of other cryptocurrencies, including bitcoin, and wreaking broader havoc on the cryptocurrency market.

Prosecutors did not identify the business company. SEC lawyers said in their civil case that Jump Trading had propped up TerraUSD in May 2021.

Jump did not immediately respond to requests for comment.