Do Kwon, a former cryptocurrency executive, is set to appear in a US court on criminal fraud charges

Do Kwon, the South Korean cryptocurrency entrepreneur behind two digital currencies that lost an estimated $40 billion in 2022, is scheduled to appear in a US court on Thursday to face criminal fraud charges following his extradition from Montenegro this week.

Federal prosecutors in Manhattan charged Kwon, who co-founded Singapore-based Terraform Labs and developed the software TeraUSD and Luna Coins, were charged in March 2023 with two counts of securities fraud, wire fraud, commodity fraud, and conspiracy.

An updated 79-page indictment filed Thursday charges him with an additional count of conspiracy to launder money.

Kwon, 33, denied any wrongdoing. Last June, he agreed to pay an $80 million civil fine and be banned from cryptocurrency transactions as part of a $4.55 billion settlement he and Terraform reached with the U.S. Securities and Exchange Commission.

He is scheduled to appear at 12:30 pm (1730 GMT) before US Judge Robert Lerberger in Manhattan Federal Court.

In the indictment released Thursday, the US Attorney’s Office in Manhattan alleged that Kwon misled investors in 2021 about TerraUSD, a so-called stablecoin designed to maintain the value of $1.

Kwon allegedly told investors that a computer algorithm known as “Terra Protocol” had restored the value of the coin when it fell below its peg in May 2021, when in fact he arranged for a high-frequency trading firm to secretly buy millions of dollars of the token by artificially raising its price.

The false and other claims prompted retail and institutional investors to buy Terraform products and boosted the value of Luna, a more traditional token developed by Kwon whose value fluctuated but was closely tied to TerraUSD, to $50 billion by spring 2022, prosecutors said.

“Much of this growth came after Kwon’s brazen deception about Terraform and its technology,” the indictment said.

When TerraUSD’s value began to decline again in May 2022, the trading company warned that supporting it “wasn’t so simple this time,” according to the indictment.

TerraUSD and Luna crashed that month, causing other cryptocurrencies to fall in value, including… Bitcoinand caused wider chaos in the cryptocurrency market.

Prosecutors did not identify the trading company, but it matches the description of Jump Trading, which SEC lawyers said in their civil case backed TerraUSD in May 2021.

In a trial over the SEC’s allegations, a federal jury in Manhattan found Kwon and Terraform liable last April for defrauding cryptocurrency investors.

One of Terraform’s lawyers said in closing arguments in that trial that Terraform and Kwon were honest about their products and how they worked, even when they failed.

Kwon did not attend that trial because he had been detained in Montenegro since March 2023. Terraform declared bankruptcy last January.

Kwon is one of several cryptocurrency tycoons facing federal charges after a decline in digital token prices in 2022 led to the collapse of a number of companies in the space.